Bain in bumper $1b deal for India’s Genpact

Warburg Pincus and ICICI Bank are looking to offload their interests in WNS and Firstsource, respectively.

Now are a more mature stage - gradually consolidating rather than rapidly growing - the BPO industry is no longer a prime target. But Genpact is an exception.

Last week, the Indian BPO company, which is listed on the New York Stock Exchange, announced a 57% year-on-year increase in second-quarter net profit to $61.1 million and revenue growth of 18%. The combination of a strong balance sheet and an international presence explains why Bain Capital was willing to pay $1 billion to Oak Hill Capital and General Atlantic (GA) for a 30% stake in the business.

It on course to be the largest Indian private equity transaction since Bharti Infratel received $1 billion from a consortium of investors led by Temasek Holdings in 2007.

"Genpact has earned its leadership position by partnering with global companies to improve business outcomes," Bain said in a statement. "Their relentless focus on the client and moving up the value chain has resulted in impressive revenue and client growth since becoming a public company in 2007."

The private equity firm will acquire 68 million shares at $14.76 apiece, subject to a two-and-a-half year lock-up period. The investment is expected to close later this year once stockholders - including Oak Hill and GA - receive a special dividend of $2.24 per share. As part of the deal, Bain can name four directors to Genpact's board, while Robert Scott will continue to serve as chairman of Genpact and N.V. Tyagarajan will retain his role as president and CEO.

Oak Hill and GA originally invested $500 million in Genpact in 2004, taking a 60% stake. Following the company's IPO in 2007, which generated another $500 million, the private equity firms' interest has fallen to its current level of 41%. The two investors were expected to complete a full exit from the asset, which analysts valued at $1.4 billion. Bain and Apax Partners were reportedly among the interested buyers.

"GA and Oak Hill had been searching potential buyers for most of the summer," a source with direct knowledge on the transaction tells AVCJ. "Bain wanted to get as much as 40% at a fixed price of $1 billion, but GA and Oak Hill didn't agree."

The investment will be made via Bain affiliate South Asia Private Investments, which will in turn draw capital from the private equity firm's second Asia fund - a $2.3 billion vehicle that closed in July - and its 10th global fund, the source adds. The debt portion of the transaction is expected to be no more than $300 million.

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