Apax buys 23% stake in Zensar from Electra for $129M

Private equity firm Apax Partners has bought a 23 per cent stake in mid-cap software services firm Zensar Technologies Ltd from private equity investor Electra Partners for £84 million (Rs 833 crore, or $128.6 million), as per a press statement.

Electra Partners said inclusive of dividends and proceeds from the share sale, the deal will generate a return of 19 times on original cost over the 18 years of the investment; an internal rate of return of 18 per cent.

Pune-based Zensar is part of Harsh Goenka-led RPG Enterprises. It caters to clients in the manufacturing, retail and hi-tech verticals. It has capabilities in Oracle implementation and maintenance and is a strong player in e-commerce solutions. The company employs more than 8,000 people at 29 locations around the globe.

Zensar promoters own 48.15 per cent of the firm as of June 30, 2015.

Electra had originally invested $9 million in 1997 in the equity of an unquoted subsidiary of a Mumbai-listed manufacturer of computer hardware. In 2001 the listed parent closed down its operations and the unlisted subsidiary performed a reverse merger and was then renamed Zensar Technologies. This resulted in Electra owning shares in the listed entity. Electra Partners has held a board seat since 1997.

Hugh Mumford, managing partner of Electra Partners, said: “In 1997, when we first invested in Zensar, the company was uniquely positioned in the 'software as a service' market with strong growth potential having established effective customer relationships and a good reputation. Since the original investment, the company has grown considerably supported by an acquisition strategy and a strong focus on innovation embracing new technologies.”

For Apax, which has a history of backing IT companies related to India, this is the third deal this year. Early this year, it acquired TPG's stake in Shriram City Union Finance in another secondary PE transaction. It also bought a stake in Hinduja Global Solutions through a direct secondary market transaction. Besides, it sold its stake in IGATE to Capgemini.