Baring Private Equity Asia has taken one step closer to selling software services company Hexaware Technologies Ltd that it acquired seven years ago, starting with buying out shareholders to take it private.
Baring has been looking to exit Hexaware for several years, but every time, the private equity firm tried to sell, the company’s valuation soared, deterring potential buyers.
HT Global IT Solutions, the holding company for Baring that owns 62.4% in Hexaware, on Friday offered ₹285 per share to purchase the remaining shares to take its shareholding to 90%, and then go private. After the announcement, Hexaware shares surged the maximum permitted limit of 20% to hit ₹311.30 apiece, where it stayed for the rest of the day. The delisting paves the way for Baring to finally sell Hexaware.
“Baring perhaps has decided to delist as it is always easier to sell a completely promoter-owned, unlisted firm. In that case, the incoming buyer will not have to go through the rigmarole of an open offer and buying out retail investors. Considering that the stock prices are low right now, it makes sense,” said Shriram Subramanian, managing director, InGovern Research Services. Baring acquired a controlling stake in Hexaware in 2013 from promoter Atul Nishar and PE firm General Atlantic, followed by an open offer to public shareholders, taking its shareholding to 71.25%. Baring spent around ₹2,850 crore for the acquisition. The PE firm had first explored a sale of Hexaware in 2016, reaching out to French IT firm Capgemini and PE firms Blackstone and Carlyle, according to a report in The Economic Times. In 2017, it informed shareholders that Baring was exploring a sale to investors outside India. In 2018, Baring managed to sell an 8% stake through block deals for ₹1,120 crore. However, the stake was sold at a significant discount of 10% to the prevailing market price, triggering a steep single-day fall of 16.5% in shares of Hexaware. “They (Baring) have faced an issue with sharp swings in the stock price whenever they have tried to look at a stake sale in Hexaware. Talks of stake sale have in the past driven the stock price to levels where the buyers become uncomfortable in closing the deal,” said a person aware of Baring’s plans.
