Private equity heavyweight Blackstone Group said on Monday it agreed to buy Indian back-office firm Intelenet Global Services Ltd. for an undisclosed sum, its first management buyout in India.
U.S.-based Blackstone, which along with rival Carlyle has been grappling with stiff resistance from Indian companies unwilling to sell out, will own 80 percent of Intelenet, with the back office firm's management holding the remainder.
The Economic Times newspaper said the deal could be worth $200 million, quoting unidentified sources.
This would value the firm at more than double back-office rival Allsec Technologies Ltd., which has a market capitalisation of $77 million and is 28 percent owned by Carlyle.
British bank Barclays and Indian mortgage firm Housing Development Finance Corp. said separately they each were selling their 50 percent holding in Intelenet, without disclosing the price.
Intelenet Chief Executive Susir Kumar said the transaction would help retain talent as about 400 top executives would hold shares, but declined to reveal the value of the deal.
Intelenet, which has 18 centres in India and abroad with over 17,000 employees, plans to expand its operations in Britain and begin services out of the Philippines and Mauritius, Kumar said.
The presence of more shareholders also opens up the possibility of Intelenet, which owns 51 percent of Sparsh BPO Services Ltd., listing on stock exchanges.
“We will do it in due course, but it is more important for us to put certain strategic initiatives in place, and it also depends on the market conditions,” Kumar said.
Blackstone is preparing to go public later this month in the largest U.S. initial public offering so far this year, raising up to $4.13 billion.
Blackstone and Intelenet's management have offered to buy an additional 20 percent in Sparsh, under India's takeover rules, at 200 rupees a share, totaling 645.90 million rupees ($15.9 million).
Intelenet, which has gross assets worth $107 million, will continue to provide services to Barclays and also help the British bank to set up back-office operations in India, Housing Developing Finance Corp. said.
PRIVATE EQUITY DEALS
Back-office firms in India are struggling to retain staff because of rapidly rising outsourcing by Western companies which has pushed salaries sharply higher.
But private firms are eager to invest in them given the potential for above average growth in the technology sector.
Carlyle is reportedly bidding for another back-office firm, Cambridge Solutions Ltd., as private funds chase deals in Asia's third-largest economy that is expanding at about 9 percent a year..
Private equity investments in India so far this year have reached about $2.2 billion in 22 deals, compared with $3.2 billion in the whole of 2006, according to data from Thomson Financial.
Harit Shah, sector analyst with Angel Broking Ltd., said offering equity stakes to top managers would not halt job hopping, which is running at 15-20 percent annually.
“There is a lot of demand for quality talent in India and companies can do whatever they want but attrition levels will always remain high,” he said.
In January, Blackstone said it would buy a stake in unlisted Indian media firm Ushodaya Enterprises for $275 million. It had invested $50 million in privately held drug maker Emcure Pharmaceuticals Ltd. in July last year.
Shares in Housing Development ended down 1.4 percent at 1,759.75 rupees in a Mumbai market that dropped 0.6 percent. Sparsh fell 1.8 percent to 204 rupees.
Source : NDTV Profit