Buyout private equity giant Kohlberg Kravis Roberts & Co (KKR) is chasing probably its first pure-play India deal, eyeing BT's stake in the Indian telecom services company Tech Mahindra, sources close to the development said. KKR is preparing a potential bid, even as four other global PE peers - Apax Partners, Texas Pacific Group, Temasek and Carlyle - have also shown early interest in a formal process which will start in 10 days. ET had reported on the possibility of PE firms entering the fray for the stake. BT is putting an over-$800 million tag on its 31% stake, valuing Tech Mahindra at nearly $3 billion. The current market cap of the company is around $2.2 billion. The Tech Mahindra scrip closed at Rs 757.70 on the NSE on Friday.
The 22-year-old Tech Mahindra, with a focus on the telecom vertical, is a joint venture between BT and Mahindra & Mahindra, with latter owning 44.25%. The company reported a revenue of $934.7 million during FY08, a 44% year-on-year growth. It employs some 24,000 workers. In 2006, KKR paid $900 million to acquire an 85% stake in the software unit of Singapore-headquartered Flextronics, with operations in Bangalore and New Delhi. The other big fund actions in India's IT/ITeS sector include Blackstone's buyout of Intelenet and Warburg Pincus' play in back-office firm WNS Holdings. KKR, with operations in Hong Kong and Japan, initiated plans to set up a fairly large India team last year, but the ongoing global market turmoil may have prompted the scaling down of plans, or the scope of local operations. In this context, KKR's interest in Tech Mahindra assumes significances. The divestment of the BT stake - preparations for which have been on for almost a year now - may trigger an open offer, but the transaction will not impact management stability. "The stake sale process was being planned for some time, and it is taken forward factoring in the continuation of existing management at Tech Mahindra," a source said. It is believed that formal consultations with potential suitors - scheduled to begin next week - will be for the entire BT stake. However, BT may consider retaining between 5% and 10%. But a firm, strategic call will be taken at a later stage depending on the progress of the sale process. Tech Mahindra president Sanjay Kalra said: "BT does not comment on rumours and speculation. BT has operations and investments worldwide which we regularly review. India remains a critical market both for BT and our customers, and we expect to continue developing both the operational network and service that we have established over a number of years." According to sources, the private equity players are keen on picking up BT's stake as they see good opportunities for growth in the foreseeable future. PE players might be looking at a "cost out" opportunity in this investment as it provides them the window of cashing out after some time. And funds like TPG and Carlyle have been scouting for a big play in India's IT sector, with valuations sobering significantly in the wake of softening IT spends in the US and to some extent, in Europe. However, none of the large Indian IT services majors are there in the fray. This is primarily because BT provides around 63% of Tech Mahindra's business and for any Indian player, this would too much of a risk. Source: Economic Times ekamber The greatest lesson in life is to know that even fools are right sometimes. ---Churchill --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
