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Fairfax-backed Quess Corp to raise $180 mn for acquisitions

10 August, 2017

Fairfax-controlled business services provider Quess Corp Ltd said on Thursday it plans to raise Rs 1,150 crore ($180 million) through an institutional private placement.

The amount will be used for acquisitions, other strategic initiatives and working capital requirements, Quess Corp said in a red herring prospectus filed for the share sale.

The company will make the share placement on 14 August. It has fixed a price band of Rs 800-820 apiece, it said in a separate filing to stock exchanges. That translates into a 7.76% discount to Thursday’s close price of Rs 888.95 apiece on the BSE.

At the upper end of the price band, the company will sell 14.02 million shares, representing an 11.06% stake. After the placement, the promoters’ stake will decline to 77.89% from 88.95% at the end of June, stock-exchange data showed.

Bangalore-based Quess Corp has time till July 2019 to bring its promoter stake to 75% or below as per regulatory requirements for a minimum public float of 25% for listed company.

Axis Capital, ICICI Securities and IIFL Holdings are managing the placement, as per the prospectus.

Cyril Amarchand Mangaldas is the legal adviser to Quess Corp on this private placement. The merchant bankers have hired J. Sagar Associates as their domestic legal counsel and Squire Patton Boggs Singapore LLP as their international legal counsel.

Quess Corp, earlier known as IKYA Human Capital Solutions Ltd, was founded by serial entrepreneur Ajit Isaac, who previously sold PeopleOne Consulting to Swiss staffing giant Adecco in 2004.

The firm was acquired by travel and tour company Thomas Cook in early 2013 for Rs 256 crore. The deal marked an exit for India Equity Partners, which had invested in IKYA in 2008. It was then rebranded as Quess.

Thomas Cook itself was acquired in 2012 by Fairfax, which is controlled by Canadian billionaire Prem Watsa. India-born Watsa is the founder, chairman and chief executive of Fairfax Financial Holdings based in Toronto.

Going public, focus on acquisitions
The company went public in July 2016 through an initial public offering (IPO) of Rs 400 crore. The IPO was subscribed a whopping 144 times, making it the most attractive primary market offering in more than eight years. Its shares jumped 57% on debut, valuing the company around Rs 6,335 crore (about $945 million). At present, its market capitalisation stands at Rs 11,271.08 crore.

Quess has an active acquisition strategy, and it has acquired stakes in close to two dozen companies since 2008. It has closed five deals since the company went public in July last year.

In an August 2016 interaction with VCCircle, Quess founder and CEO Ajit Isaac said the company was open to both ‘string of pearls M&A strategy’ and larger transformative deals. The company has an inclination towards value-based investing, where it sees a clear payback within three-five years of investment, he had said.

Isaac had also said that segments such as payroll, compliance, finance and accounting, and security services were areas of interest for the company as far as acquisitions go.

In January this year, Quess Corp announced the acquisition of a 26% stake in Coimbatore-based software development company Heptagon Technologies Pvt. Ltd for Rs 5.55 crore in cash. In May, Quess Corp increased its stake in Heptagon to 46%.

In 2016, it entered Singapore by acquiring a 64% stake in IT staff augmentation solutions company Comtel Solutions Pte. Ltd.

In November last year, Quess had acquired the facility management and catering business of Manipal Integrated Services Pvt. Ltd for Rs 220 crore and an additional stock component.

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Fairfax-backed Quess Corp to raise $180 mn for acquisitions

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