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Baring Private Equity Asia is set to take control of Mumbai-headquartered IT and BPO services firm Hexaware, in a deal that sees founding chairman Atul Nishar and leading investor General Atlantic sell their aggregate 42% stake to Baring Asia for around $250m. Baring will make a mandatory open offer to acquire up to a further 26% of Hexaware stock. The top end of the offer, at Rs135 per share, represents a 12% premium on Hexaware’s share price just before the rumours were confirmed, and more like a 50% premium to the shares’ trading range in the months leading up to the deal. Hexaware had revenues of $364m in 2012 with net earnings of $61.5m (and see Profits rebound at Hexaware).
Nishar founded Hexaware in 2000 and built a substantial part of its business based on its relationship with PeopleSoft until its acquisition by Oracle at the beginning of 2005. At the time Hexaware’s revenues were around $120m. But whereas Hexaware’s revenues barely trebled over the next eight years, larger peers grew at least twice as fast, leaving Hexaware very much a mid-tier, and increasingly niche player.
Baring Asia specialises in the Asian mid-market and this deal is reportedly its largest in India and among the largest by an external investor in Indian IT. It’s hard to see this deal causing any major ripples in the Indian offshore services landscape unless this turns out to be the first step in a consolidation play by Baring in the richly populated Indian mid-tier IT services sector, an idea that General Atlantic must have had in its mind in the early days (GA was a prolific investor in Indian IT/BPO) but never realised.