Baring Private Equity Asia has signed pacts to acquire a 30% stake in NIIT Technologies Ltd and made an open offer to buy up to 26% more in the Indian software services company.
The PE firm is buying 30% of NIIT Technologies from its parent NIIT Ltd for about Rs 2,627 crore ($381 million), according to stock-exchange filings.
It has also made an open offer to buy a stake of up to 26% more from public shareholders for as much as Rs 2,262.35 crore.
Assuming full acceptance in the open offer, Baring would shell out as much as Rs 4,890 crore ($709 million) for a 56% stake in NIIT Technologies.
Baring is acquiring the stake at a price of Rs 1,394 per share. That's 3.3% higher than the Rs 1,349.50 price at which shares of NIIT Technologies closed on the BSE on Friday.
The transaction is conditional upon customary conditions and receipt of required regulatory approvals, including from the Competition Commission of India.
The transaction increases Baring's exposure to the Indian IT services sector. The PE firm, which operates separately from Baring PE India, owns a 62.66% stake in Hexaware Technologies Ltd, stock-exchange data show.
Media reports have previously said that Baring PE Asia might merge Hexaware and NIIT Technologies. If that were to happen, it would be another sign of consolidation among mid-sized Indian IT services companies. Last month, engineering giant Larsen & Toubro Ltd, which also has a software unit, mounted a hostile bid to take control of Mindtree Ltd in a transaction that could go up to $1.56 billion.
In fact, Baring PE Asia had also shown interest in acquiring VG Siddhartha’s stake in Mindtree that was eventually bought by L&T.
Baring PE Asia had acquired a majority stake in Hexaware in 2013. It first bought 41.8% from then promoter Atul Nishar and PE firm General Atlantic, and picked up another 9-10% from homegrown PE firm ChrysCapital. It then raised its holding to 71% by acquiring an additional 20% stake through an open offer to public investors for Rs 816 crore in November 2013. Last year, Baring sold part of its stake in Hexaware.
Meanwhile, NIIT Technologies has also announced the signing of a definitive agreement to acquire WHISHWORKS IT Consulting, an IT services and consulting company specializing in MuleSoft and Big Data technologies.
NIIT Technologies will acquire a 53% stake in WHISHWORKS initially and the remaining over the next two years through payouts linked to financial performance.
Separately, NIIT Technologies signed a definitive agreement to sell its entire 88.99% stake in Esri India Technologies Ltd to existing shareholder Environmental Systems Research Institute, Inc (Esri, Inc). Esri India Technologies is in the field of Geographic Information System (GIS) using the distributionship rights of Esri, Inc.
Credit Suisse acted as the exclusive financial adviser to NIIT and other promoter group entities for the transaction with Baring. Law firm Shardul Amarchand Mangaldas & Co acted as the legal adviser to NIIT while J. Sagar Associates and Ropes & Gray acted as legal advisers to Baring.
Baring PE Asia
The deal for NIIT Technologies is the PE firm's first major Indian investment since it raised a $6 billion fund in November 2017.
The buyout firm had reportedly submitted a bid to acquire a controlling stake in Aadhar Housing Finance Ltd but lost out to eventual winner Blackstone in February. Baring was also vying to acquire a stake in Lakshmi Vilas Bank, which agreed to merge with Indiabulls Housing Finance Ltd on Friday.
Over the past couple of years, Baring PE Asia has largely focussed on exiting its previous investments in India. In addition to its partial exit from Hexaware last year, it has also been attempting to sell part of its stake in CMS Info Systems, which offers cash management services as well as ATM products and services. Baring had acquired a controlling stake in CMS in 2015 for about Rs 2,000 crore. The company abandoned its IPO plan last year due to market volatility.
Baring's previous major exits include stake sales in cement maker Lafarge’s India arm and stock broking firm Sharekhan in 2015. The Sharekhan transaction was closed in late 2016.
In the last few years, keeping with the rising opportunities in debt and stressed assets, Baring has focussed on building its India credit vertical. It launched an India-dedicated credit fund in 2017 and is on the road to raise a larger $500 million credit fund.
Baring PE Asia operates from eight offices located in Hong Kong, Singapore, Tokyo, Shanghai, Beijing, Jakarta, Mumbai and Delhi.