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iGate-Patni Deal Undervalued, Say Analysts

10 January, 2011

The much awaited iGate- Patni deal is undervalued to some extent, analysts said today. The consortium of iGate Corporation and private equity major Apax Partners has picked up a 63% stake in Patni at Rs 503.5 per share.

According to Kishore Ostwal, CMD of CNI Research, the valuation expected was above Rs 540 per share.  This deal would be more beneficial to iGate.

“The deal is certainly undervalued. According to our understanding,  Patni management had been trying for such deal for over two years and the expected price was between Rs 540 and Rs 650,” he said.

Arun Kejriwal, Director of Krejriwal Research & Investment Services, also said that the deal was undervalued to some extent.

“It can be considered as net to net a great deal for both. Patni had no other choices other than selling the company as nothing new was moving in the company,” he said. Issues like disinterest among the Patni family members to run the company played a great part in the selling, he added.

Ostwal said that the deal could be a benchmark for triggering many M&A deals in the IT sector. “In 2000, we had $4 billion IT industry with less than 1 lakh employment which has now grown to $62 billion which employed two million people. By 2020, it could be $250-billion market which can employ over 10 million people. Therefore, M&As are inevitable in this sector,” Ostwal said.

Kejriwal also echoed the same view, saying that consolidation is already happening in this sector. “Quite a few deals are already happening and a few are in the pipeline. There is an appetite for consolidation. Small and medium level companies would be the targets,” he said. According to him, large deals like this are unlikely to happen. “More PE interest in this field can be expected. But chances for PE buyouts are rare,” he said.


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iGate-Patni Deal Undervalued, Say Analysts

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