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Kotak PE eyes 20% stake in Hyderabad-based SemanticSpace Technologies

Kotak Private Equity is in talks to pick up an over 20% stake in Hyderabad-based SemanticSpace Technologies (SST), marking its return to the IT/ITeS sector, said multiple sources briefed on the transaction.

The investment will see Kotak buy out the 18% stake held by financial investors Ascent Capital and New Vernon, besides acquiring some primary shares. The deal values SemanticSpace, founded by serial entrepreneur Satya Bolli, at $75 million or about Rs 500 crore.

SST provides application services, independent verification and validation services, and systems integration solutions in the middleware space. The latest deal comes after the company’s IPO plans failed to materialize last year.
In 2008, SST had acquired US-based Prolifics, a systems integrator in IBM technologies, and its testing solutions subsidiary, Arsin Corporation. The SST group is in the midst of re-branding itself Prolifics currently.

Ascent Capital declined to comment, while a Kotak official said the deal was “still in the works”. SST founder Bolli could not be reached immediately. Investment bank MAPE is advising on the deal.

Kotak’s PE portfolio largely consists of biotech and healthcare companies such as Indus Biotech and investments in stock exchanges like the National Stock Exchange. The company had earlier made investments in Sasken, Allsec Technologies and Hurix Systems, but exited most of these about five years ago.

Kotak’s investment also tracks investor appetite for IT/ITeS companies as the rupee depreciation has a favorable impact on the services sector, which has exposure to large dollar-denominated billings. Traditionally, the IT/ITeS sector has also been extremely lucrative for private equity investments.

According to data shared by global consultancy firm PwC, in the April to June quarter of the ongoing calendar year, the IT/ITeS sector clocked PE investments worth $453 million across 31 deals. The sector was the leader in terms of PE volume and ranked second in terms of value after the manufacturing sector.
Source: Times of India

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