Baring Asia to buy 42% in Hexaware from promoter, General Atlantic for over $260M

By Madhav A Chanchani

  • 23 Aug 2013
Baring Asia to buy 42% in Hexaware from promoter, General Atlantic for over $260M

In what will be one of the largest buyout transactions in the Indian information technology space, Baring Private Equity Asia is buying 41.8 per cent stake in Hexaware Technologies Ltd for $242 million to $260 million. Baring Asia said the total investment, including the open offer, could be as much as $465 million for the transaction.

According to a statement, Baring Asia will buy 27.7 per cent stake in the company from promoter group led by Atul Nishar and another 14.1 per cent stake from General Atlantic, aggregating to 41.8 per cent.

Under the terms of the deal, Baring Asia will pay Nishar and General Atlantic Rs 126 or Rs 135 per share aggregating Rs 1,575–1,687 crore (approximately $242-260 million based on INR/USD rate of 65).


The higher price will be paid if Baring Asia's stake reaches 50 per cent or above in the transaction.

In accordance with SEBI regulations, Baring Asia has made an open offer to purchase up to an additional 26 per cent stake at a price of Rs 135 per share aggregating Rs 1,058 crores (approximately $160 million).

Shares of Hexaware closed at Rs 120.75, up by 1.6 per cent on Friday in a Mumbai market up by 1.13 per cent. Private equity firm ChrysCapital is one of the largest institutional shareholders with 9.6 per cent stake in the company.


Nishar will continue as non-executive chairman of Hexaware and PR Chandrasekar will continue as CEO of Hexaware.

"Baring Asia is excited about the growth opportunities that Hexaware offers and we look forward to working with Sekar and his management team to develop the group further. 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, chief executive and founding partner of Baring Private Equity Asia.

For Baring Asia, which has total committed capital of over $5 billion, this would be the second major deal in India after it invested $260 million in the India unit of the French cement maker Lafarge SA in May this year.


General Atlantic to make modest returns

General Atlantic's return from the deal could be 1.9x in rupee terms and 1.3x in dollar terms at the upper end, according to VCCircle analysis. The PE firm picked up 14.71 per cent stake in the Mumbai-based firm for $67.6 million in 2006 and will get either $81.5 million or $87.7 million.

The deal would mark the third major exit by General Atlantic from one of its IT services portfolio firms in India. In 2011, it sold its stake in Patni Computers along with promoters to iGate with modest returns followed by blockbuster exit from Genpact last year.


The firm has been diversifying from the IT sector over the last few years though still holds two more investments in the sector—IBS Software and Infotech Enterprises.

Promoter Nishar is expected to make $160 million or $173 million from the transaction, depending upon the final share price.

The deal would also be second business exit for Hexaware's founder Atul Nishar, who sold his IT training institute Aptech to Chennai-based SSI 10 years ago in 2003.


Hexaware's revenues

Hexaware reported a 5.7 per cent increase in Q2CY13 revenues to Rs 536 crore with profit after tax rising 23.1 per cent to Rs 97.9 crore. The company’s clients are mainly in the BFSI and travel and transportation industries.

According to Angel Broking, the company is expected to end CY13 with revenues of Rs 2,213 crore with PAT of Rs 365 crore.


Morgan Stanley acted as primary financial advisor and Credit Suisse as co-advisor to the promoter and General Atlantic. AZB & Partners acted as legal counsel for the sellers. In addition J Sagar Associates acted as legal advisors for the promoter. Khaitan & Co and Allen & Overy LLP acted as legal advisors to Baring Private Equity Asia.

(Edited by Joby Puthuparampil Johnson)

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