Private equity player Blackstone India announced that it will buy Bengaluru-based Mphasis for ₹7,100 crore, making it the largest deal in India and bringing to a close speculation over the future of Mphasis.

The PE major will acquire Hewlett-Packard’s 60.5 per cent stake in the company at ₹430 per share, which will trigger an open offer for acquiring 26 per cent from Mphasis’ other shareholders. The open offer is priced at ₹457.50 per share.

Also, HP will commit a minimum of $990 million in outsourcing business to Mphasis over five years, and extend it to another six years, provided it meets certain conditions, Blackstone India’s Senior Managing Director, Amit Dixit said. He made it clear that Blackstone is backing the Mphasis management team, and no changes are planned as yet.

The market, however, was not enthused and Mphasis shares closed at ₹454, down 2.7 per cent in the exchanges as investors felt that the sale was a discounted one.

Blackstone’s buyout of Mphasis signals consolidation in the Indian tier II companies, as they struggle to scale up their business.

The deal follows a series of buyouts in the mid-tier segment of the $143-billion Indian IT industry — Barings picking up a majority stake in Hexaware, iGATE selling out to Capgemini, and just a couple of days back HCL Tech snapping up Geometric.

Mid-size squeeze According to industry watchers, mid-size IT companies are increasingly struggling to achieve scale in the backdrop of clients demanding differentiated outsourcing offering. According to Arup Roy, Research Director, Gartner, this deal will give Mphasis an opportunity to come out of the shadows.

Mphasis CEO Ganesh Ayyar in some ways agrees and calls it a moment of “swagger and confidence” arising out of accelerated growth, continuity and stability. As the company is in a silent period, he did not spell out financial targets but said that even in normal course, its direct business was growing at 14 per cent and will continue to do so this fiscal.

“The deal is a win-win for both parties as finally Mphasis gets access to not only HP but even Blackstone’s portfolio, which will be sizeable,” said Sanchit Vir Gogia, an Analyst at Greyhound Research.

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