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Baring Asia to buy 42% stake in Hexaware for Rs.1,600 crore

Affiliates of Baring Private Equity Asia have agreed to pay as much as Rs.1,687 crore to buy a controlling stake inHexaware Technologies Ltd from the software services company’s founder-chairman Atul Nishar and GA Global Investments Ltd in one of the biggest transactions in India’s information technology (IT) sector.
Baring will buy Nishar’s 27.7% stake and 14.1% from GA Global, an affiliate of private equity (PE) firm General Atlantic, Hexaware said in a statement on Friday. Nishar will remain non-executive chairman of Hexaware and P.R. Chandrasekar as the chief executive officer (CEO) of the company.
Baring Asia will pay the promoter and GA Global a price of Rs.126 or Rs.135 per share, aggregating to Rs.1,575–1,687 crore, with the higher price of Rs.135 a share being payable on Baring Asia raising its stake in Hexaware to 50% or more, according to the statement.
Baring Asia will also offer to buy an additional 26% stake in Hexaware from public shareholders at a price of Rs.135 apiece, aggregating to Rs.1,058 crore. Hexaware will remain a public company, Nishar said.
The valuation is justified, said Ankita Somani, an analyst with Angel Broking Ltd. “What is important is to watch if the new promoter gets a new management in place and what strategy they use for the company going forward,” she said.
The Hexaware transaction is one of the biggest deals the IT sector has seen, Somani added.
Two of the biggest acquisitions in the last five years have been HCL Technologies Ltd’s purchase of Axon for around Rs.3,800 crore in October 2008 and Infosys Ltd’s acquisition of Lodestone for around Rs.1,950 crore in September 2102.
“The total potential investment of over $465 million will be the largest investment made by Baring Asia in India, and is one of the largest ever foreign investments in the IT services sector in India, a sector where India continues to have a strong global competitive advantage,” said Jean Salata, CEO and founding partner of Baring Private Equity Asia. “Baring Asia is excited about the growth opportunities that Hexaware offers.”
Hexaware posted a 10% increase in its June quarter net profit from the year-earlier period, in line with analysts’ expectations. The company forecast revenue in the September quarter is likely to be between $98.1 million and $100 million, a 3.5-5.5% increase from the preceding three months.
Its cash and cash equivalents at the end of the June quarter increased to Rs.587 crore from Rs.566 crore on 31 March. The Americas contributed 67.1% of the company’s revenue in the June quarter; 26.3% came from Europe, and the remaining 6.6% from the Asia-Pacific region.
Hexaware has 8,700 employees and reported revenue of $364 million in the year ended 31 December 2012.
Shares of Hexaware Technologies rose 1.6% to Rs.120.75 on BSE on Friday, while the exchange’s benchmark Sensex rose 1.13% to 18,519.44 points. The transaction was announced after the close of trading.
Since January, the Hexaware stock has risen 41.98% against the Sensex’s 4.67% loss. The BSE IT index rose 32.73% in the same period.
Source: Livemint

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