Four firms in the fray to pick up Blackstone’s stake in Mphasis

Our Bureau. Bengaluru | Updated on February 22, 2021

The race to pick up PE fund Blackstone’s stake in IT services firm Mphasis is hotting up, with at least four key international funds and a few minor ones now left in the fray.

Those in the fray include Carlyle Group, Bain Capital, Brookfield, and UK private equity fund Permira. Some of the minor funds are expected to joinlty bid to pick up Blackstone’s 56.21 per cent stake in MPhasis.

If any of these funds were to buy Blackstone’s stake of 56.21 per cent, they will have to shell out close to ₹16,000 crore. It will then trigger off an open offer to buy another 26 per cent, which will eventually lead the successful bidder to part with another ₹7,280 crore. This would take the total amount to around ₹23,280 crore.

Final decision

It is learnt that Blackstone had initiated the process to seek bids in December last year, and has now received four bids so far. “The entire process is at an exploratory stage right now,” sources told BusinessLine. It is likely that a final decision regarding these bids will be taken next month.

Blackstone, it is learnt, wants to exit Mphasis as part of its move to rejig its portfolio on a regular basis. Early last year, the PE fund had increased its holding in Mphasis by 4.01 per cent to 56.21 per cent. The value of the deal, according to various reports, was ₹525 crore. In 2016, Blackstone had acquired a 60.5 per cent stake in the IT services company from HP Enterprise for $1 billion. Later, in 2018, it had offloaded an 8 per cent stake in the company, reducing its stake to 52 per cent.

Blackstone declined to comment on the new developments. It is one of the largest foreign investors in Indiawith a current market value of assets at $50 billion. It is also among the top 10 business houses in the country with exposure to IT ITeS, Real Estate, Financial services, manufacturing, retail and logistics. Some noted investments of Blackstone in the recent past include Aadhar Housing Finance, Aakash Education, Sona Comstar, Prestige Assets, Essel Propack, Mphasis, TaskUs, Embassy REIT, and Mindspace REIT, among others. Some IT investments include Intelenet, Mphasis, TaskUs, and Aakash edtech, among others.

When Blackstone acquired a majority stake in Mphasis, its core account DXC had committed to providing a minimum revenue of $990 million for the next five years to the IT services firm. This year will see the end of the five-year term. According to analysts at Emkay Research, uncertainties in the DXC business remain. DXC revenues declined 17.9 per cent q-o-q to ₹3,200 crore. DXC revenue run-rate fell below MRC (minimum revenue commitment) in Q3, which was 12 per cent lower. However, management expects a catch-up in revenue in the next three quarters (annual MRC $200 million).

Mphasis has fall-back provisions in place if the revenue falls short of the MRC. Mphasis remains committed to ensuring its relationship with DXC and has reaffirmed its strategic partner status with DXC. The focus remains on building visibility beyond the MRC tenure, the report said.

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Published on February 22, 2021
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