Baring Private Equity Asia offloads 8.4% stake in Hexaware Technologies

The shares were sold at around at Rs 448 apiece, helping Baring PE raise Rs 11.2 billion

Baring Private Equity Asia on Friday offloaded an 8.4 per cent stake in Hexaware Technologies as part of a plan to monetise its holdings in the midcap technology company. 

The Asia-focused PE firm, which held a 71.22 per cent stake in Hexaware prior to the share sale, offloaded 25 million shares through multiple block deals on the stock exchange platform. The shares were sold at around Rs 448 apiece, helping Baring PE raise Rs 11.20 billion. Citibank and Societe Generale were among investors that bought these shares, exchange data showed.

Baring PE, which has holdings in a clutch of other domestic firms, owns a controlling stake in Hexaware through HT Global IT Solutions Holdings. Following the share sale, HT Global’s shareholding will come down to 62.82 per cent, which, according to market buzz, will be brought down further to 51 per cent in the near term.

“The small sale does not impact Hexaware in any manner whatsoever. We will continue to execute our unique strategy of automate everything, cloudify everything and transform customer experiences,” the company said in a statement.

The share sale, however, weighed on Hexaware’s secondary market share price, which dropped nearly 17 per cent. The stock managed to recoup some losses to close at Rs 431.5, down 13.3 per cent compared to the previous day’s close. “The shares were bound to fall in line with the floor price set for the share sale. Following the correction, the stock is available at attractive valuations,” said SP Tulisan, founder of investment advisory firm SP Tulsian.com.

The floor price for the share sale was set at Rs 447.5 per share, a discount of 10.1 per cent to Thursday’s close.

Baring PE has made more than threefold gains on its five-year old investment in Hexaware. In 2013, it acquired a 41.8 per cent stake from promoter Atul Nishar and General Atlantic Partners for Rs 16.9 billion. It bought an additional 9.6 per cent stake from ChrysCapital for Rs 3.5 billion. Later it made the mandatory open offer through which it mopped up additional 20 per cent for Rs 8.2 billion. Following the three transactions, Baring PE’s stake in Hexaware crossed 71 per cent and the total acquisition cost reached Rs 28.6 billion. Baring PE has seven other listed companies, including Shilpa Medicare and Manappuram Finance. The stock in most other companies, however, is in lower single-digits. 

Baring PE’ stake sale in Hexaware comes a day after BG Asia Pacific, an affiliate of global gas major Shell, divested a 14 per cent stake in Mahanagar Gas.

Domestic brokerage IIFL initiated coverage on Hexaware on Friday with a target price of Rs 520. “We believe Hexaware is uniquely positioned to participate in the structural trend of IT spend shifting towards digital, including cloud and automation, largely due to its focused investments in these areas and relatively less exposure in legacy services,” said IIFL analysts Rishi Jhunjhunwala and Ameya Karambelkar in a note. They expect the company to deliver 20 per cent compounded growth in earnings till 2020 driven by healthy deal wins; steady growth in top accounts and stable margins.

However, not all analysts are as bullish on the stock. According to Bloomberg data, Hexaware has three ‘buy’ ratings, six ‘hold’ ratings and 16 ‘sell’ ratings and a consensus 12-month price target of Rs 426.