Hexaware plans voluntary delisting, board to discuss proposal next week

Analysts see delisting as a move towards making the company leaner before any further step of a merger or complete

Mid-size information technology (IT) services firm Hexaware Technologies on Friday said that it is considering a proposal to delist its stock from the bourses which would be discussed during its board meeting next week.
 

The main objective of the proposal is to provide full ownership of the company to the promoter group which, in turn, will provide increased operational flexibility to support the business, the Mumbai-headquartered firm said in an exchange filing. "The delisting will also help in cost savings and allow the management to dedicate more time to and focus on the company's business," it said.
 

HT Global IT Solutions Holdings Ltd, the offshore investment vehicle of Baring Private Equity Asia that holds the 62.4 per cent stake in Hexaware, has fixed the indicative offer price at Rs 285 apiece for the proposal. It is at a 10 per cent premium to Thursday's close. Remaining 112 million shares or 37.6 per cent are held by public shareholders.

The shares hit the upper circuit of 20 per cent to close at Rs 311.40 on the Bombay Stock Exchange after the development.

Analysts and industry experts see this as a move towards making the company leaner before any further steps of a merger or sale. "This was expected and it is the first of many more to come. It's not true for only Hexaware, but for most mid-cap IT firms as they are under tremendous pressure from a cash flow perspective or winning new businesses," said Sanchit Vir Gogia, founder and CEO, Greyhound Research. This is typically how private equity firms make dramatic changes in the business like disposing some assets or reducing workforce, and public listing brings in a lot of mandatory disclosures otherwise, he added.

Incidentally, Baring PE also owns 70.1 per cent in NIIT Technologies. Analysts, however, said the idea resonates with a complete sale instead of long-pending NIIT Technologies-Hexaware merger. "The PE firm may want a complete exit and the potential buyer could have asked for a full control of the entity," said Madhu Babu, IT analyst at Centrum Broking.
 

"Delisting doesn't make sense if it was a merger (with NIIT Technologies). In that case, these companies would have gone with a share swap. More clarity will emerge if NIIT Tech is also delisted for this particular merger to materialise," said an IT analyst on the condition of anonymity.
 

Also, the street may not be happy with the indicative price as it is nowhere near Baring's floor price of Rs 447.5 in August 2018 when it offloaded 8 per cent, he added.
 

Highlights
 

• HT Global IT Solutions Holdings, the offshore investment vehicle of Baring Private Equity Asia, holds the 62.4% in Hexaware
• Delisting aimed at increasing operational flexibility and cost savings, says company
• Indicative offer price fixed at Rs 285 apiece.
• Shares of the Navi-Mumbai based firm hit upper circuit of 20% to close at Rs 311.40 on Friday
• It is seen as a move by Baring to completely selloff the firm, instead of a merger with NIIT Tech