Former CEO of Patni Computer Systems and Mphasis K. Jeya Kumar has teamed up with Advent Capital in a bid to buy out HP’s entire stake in Bangalore-based MphasiS.
Further, according to sources in the industry, private equity companies Carlyle Group and Blackstone Group are in the process of teaming up with some Indian companies to acquire HP’s 60.5 per cent stake. Kumar could not be reached for a comment.
The entities concerned are negotiating the quantity of work that HP will commit over the long term. They are trying to get HP to commit outsourcing projects for 5-7 years, which, in turn would decide the amount they are willing to fork out, said a source.
When contacted, an MphasiS spokesperson said, “No comments.” Ankita Somani, IT and Telecom Analyst, Angel Broking, said that buyout of HP’s stake with substantial revenue guarantees could be good news for MphasiS shareholders.
Bids in June
Reports of a potential sale emerged a month ago from the Palo Alto headquarters of HP. It is learnt that the first round of bids is likely to be made by June and subsequently a deal could be finalised in the quarter ending September, according to sources.
MphasiS gets around 50 per cent of its revenues from HP and has a market capitalisation of $1.8 billion.
As per HP’s recent quarterly numbers, the company has struggled on all fronts – from revenue and profitability to margin growth. This, combined with an $8.9-billion write-down due to an accounting fraud, has resulted in a piling up of debt, which industry watchers peg at $2.9 billion. This has prompted the company to look at an exit route. Jeya Kumar, a former CEO of MphasiS, succeeded founder Jerry Rao who sold MphasiS to Electronic Data Systems (EDS) in 2006, which was later acquired by HP.
The deal, if it happens, will be the largest in the $108-billion Indian IT industry after iGATE bought out Patni for $1.2 billion in 2011. MphasiS stock ended the day at Rs 492 or 0.5 per cent up when compared to the previous close.