Travel services company Thomas Cook (India) has said it is acquiring 74 per cent stake in human resources staffing firm Ikya Human Capital Solutions for Rs 256 crore. Sources familiar with the development said the deal would mark complete exit for India Equity Partners (IEP), which invested in Ikya Human Capital back in 2008.
The deal will value Ikya Human Capital at Rs 346 crore, as per back-of-the-envelope calculations by VCCircle. According to Thomas Cook (India), owned by the India affiliate of the Canadian investment firm Fairfax Financial Holdings Ltd, the transaction remains subject to customary closing conditions and regulatory approvals.
Sources also said that the deal worth Rs 256 crore would include a combination of primary investment and secondary purchase of India Equity Partners’ stake, which stands at 59 per cent. According to them, the deal has valued Ikya at a price to earning (PE) multiple in single digit, which could be highly accretive to shareholders of Thomas Cook (India). Shares of Thomas Cook currently trade at a PE ratio of around 25.
One source said IEP’s asking price was more than double the final deal price. Only last month, IEP sold a quarter of its stake in the gold loan firm Manappuram Finance even as it is currently raising its second fund, which made a first close in 2011.
Ikya was founded by serial entrepreneur Ajit Isaac, who sold his PeopleOne Consulting to Swiss staffing giant Adecco in 2004. India Equity Partners invested $8 million in Ikya in 2008 and also infused more cash over the years. The Bangalore-based firm has an aggressive inorganic strategy, buying Avon Facility Management in 2008 and Coachieve Solutions in 2009. Ikya's largest deal came when it acquired Hyderabad-based tech staffing firm Magna Infotech for Rs 100 crore in 2010.
Ikya offers human resource services including search, recruitment, project-based hiring, general and professional staffing, skill development and facility management to more than 500 corporate houses. It has 32 offices and 1,400 team members.
Thomas Cook (India) said that its controlling shareholders, Fairfax and affiliate Fairbridge Capital, actively assisted in discussions around the acquisition of Ikya. Fairbridge Capital is also a party to the investment agreement.
Shares of Thomas Cook (India) closed at Rs 55.25 a unit on the BSE on Wednesday, up 2.6 per cent, giving the firm a market capitalisation of Rs 1,178 crore.
“This combination embodies our investment philosophy of long-term value creation through a strategy of friendly acquisitions of cashflow-generative businesses at fair valuations. In Thomas Cook's travel services business line, we will continue to allocate capital towards organic and inorganic growth opportunities as they arise,” said Prem Watsa, chairman & founder of Fairfax.
(Edited by Sanghamitra Mandal)