Pune-based software development firm Persistent Systems Ltd, which is coming out with an initial public offering, is not likely to see any exits by its investors–Norwest Venture Partners, Gabriel Venture Partners, Intel Capital, and Hewlett Packard Company—who together hold about 25% in the firm.
Persistent Systems filed the red herring prospectus with market regulator SEBI on December 30, 2009. The company could be looking at diluting 13.5% stake in the company.
The investor quartet–Norwest Venture Partners (15%), Gabriel Venture Partners (5%), Intel Capital (4%), and Hewlett Packard Company (1%)—has invested a sum of Rs 96.8 crore in the firm. Surprisingly, none of the investors are looking at exiting the company through the IPO.
The company will use the IPO proceeds to fund the expansion of its existing development facilities at Nagpur and Pune and to procure hardware. Established in 1990 by Dr Anand Deshpande, Persistent Systems Ltd provides outsourced software product development services to its clients.
Persistent Systems employs over 4,400 people of which 3,500 are software engineers. It has centres in Pune, Nagpur, Hyderabad, and Goa. For the year ended March 2009, PSL clocked revenue of Rs 594 crore and a net profit of Rs 67 crore. The company draws a significant portion (85-90%) of its revenue from the US.
Intel and HP invested $1 million in Persistent Systems way back in April 2000, through Intel 64 Fund – a $250 million venture fund created in 1999 by Intel along with HP and few others. Sometime later, when the fund was liquidated, the PSL shares held by the fund were divided among the investors. HP did not invest further in PSL but Intel, through Intel Mauritius, again bought shares in PSL in November 2005.
The other two investors – Norwest Venture Partners and Gabriel Venture Partners–invested in PSL in November 2005 by way of cumulative optionally convertible preference shares or CCPS. Norwest paid Rs. 63.1 crore while Gabriel paid Rs 22.7 crore for their share. The CCPS were duly converted into equity shares in September 2007.
Intel Capital and Hewlett Packard Company have invested Rs 10.3 crore and Rs 0.8 crore respectively in the company.