Baring India Private Equity has struck its third part-exit from IT solutions firm Mphasis by selling almost a seventh of its total 8.6% holding for Rs 135 crore (~$30 million). The firm had begun selling shares in September 2009 and had also sold a small chunk early this year. This is the third tranche of sale by the PE firm.

After selling out almost two-thirds of its 35% holding to EDS in 2006, the PE firm had bought more shares from the market during September 2008-March2009 and held 10.1% as of December 2009. It sold around 2.3% since the beginning of the year before the latest stake sale. In the latest transaction, it sold around 1%, most of which was bought over by Deutsche Securities.

Although Baring had reportedly cashed out by selling out all its holding in Mphasis when EDS acquired the company in mid-2006, the shareholding structure shows Baring continued to own around 10% stake post the EDS deal. Baring’s stake fell from 34.79% in March’06 to 11.3% as of June 30 that year. It sold some shares in the September-December’06 quarter and again in January-March’07 period.

Thereafter it had been holding on to its shares and in fact bought more shares between September’08-March’09 (when the markets had bottomed out and the shares were trading around Rs 130-150 a piece) apparently through its new fund. 

As of March ‘09, it owned as much as 12.53% in Mphasis, through two investment entities, which comes down to around 7.5% after the latest stake sale. 

The latest share sale was struck at Rs 564 a piece, translating into net gains of over 3x in its one-year-old investment.

The PE firm had begun part exit in the June-September’09 quarter when prices ranged between Rs 350 and Rs 660. This means Baring netted anywhere between 3-4x returns for its less than one-year-old fresh investments when the market had crashed. It also sold a quarter of shares held by another entity which has been holding on to the shares for much longer and could have earned an even bigger multiple.

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