Baring pursues $1.1b privatization of India's Hexaware

The GP is willing to buy the 112 million shares it doesn’t own – equivalent to a 37.6% interest – for INR285 apiece, according to a filing. This represents a 9.8% premium to the June 4 closing price. Baring said a delisting would mean greater operational flexibility to support the business and cost savings, while allowing public shareholders to realize their positions at a time of market volatility.

Hexaware’s stock rose nearly 20% on June 5 to close at INR311.30, its highest level in three months. During the first three weeks of March, Hexaware lost 42% in value, reaching as low as INR207.45. It staged a recovery in April but fell back again in May after the company declined to provide earnings guidance for the 2020 financial year, citing uncertainty created by the coronavirus pandemic.

During the three months ended March, revenue rose 17% year-on-year to $210.5 million and net profit increased 18.3% to $23.4 million. However, revenue, EBITDA and net profit were all down on the previous quarter due to declining utilization rates. This is expected to continue through the second quarter. As of late April, 99% of Hexaware’s IT work and 80% of its business process outsourcing (BPO) operations were being executed by staff working from home.

Baring first invested in Hexaware in 2013, acquiring a 42% stake from the founders and General Atlantic for around INR16.9 billion. It bought an additional 20% for INR8.2 billion through an open offer and then raised its holding to 71% by taking out ChrysCapital.

The private equity firm has sought to reposition Hexaware – primarily a BPO player at the time of investment – as a digital analytics provider that also offers remote network management services. These efforts included the bolt-on acquisition of US-based digital consultancy firm Mobiquity for $182 million last year. Mobiquity develops user interfaces for next-generation devices.

Hexaware focuses on automation, cloud computing, and customer experience management. More than 40% of revenue comes from moving applications to the cloud, with digital assurance, infrastructure management services, business intelligence and analytics, and business process services accounting for most of the rest. Banking and financial services customers contribute more than one-third of revenue and nearly three-quarters of overall revenue comes from North America.

Revenue reached INR55.8 billion in the 12 months ended December 2019, up from INR46.5 billion the previous year. Over the same period, net profit rose from INR5.8 billion to INR6.8 billion.

Baring has interests in several other IT services businesses with India operations, among them NIIT Technologies, CitiusTech, and AGS Health. The private equity firm closed its seventh Asia fund at $6.5 billion at the end of 2019.

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• Topics
• South Asia
• Buyouts
• Technology
• India
• Baring Private Equity Asia