Citi in Rs 550 crore e-Serve buyback

Rs 800 a share offered for 56% stake

Citigroup yesterday announced its plan to buy back the shares of its Indian business process outsourcing affiliate e-Serve International, still with the public, at Rs 800 per share.

The pre-market announcement propelled the e-Serve stock to an intra-day high of Rs 800. The scrip closed at Rs 782.40 on the Bombay Stock Exchange.

Citigroup currently holds a 44 per cent stake in e-Serve through its wholly owned subsidiary, Citibank Overseas Investment Corporation. At this offer price, Citigroup will have to cough up around Rs 550 crore for the purchase of the 6.9 million shares outstanding.

The offer price of Rs 800 is at a 27 per cent premium to the closing price of Rs 630 per share on April 8, the last trading day before the announcement was made.

It also represents a premium of 26 per cent to the 52-week average of the scrip. This price is also higher than e-Serve's highest closing price over the past three years.

Although Sanjay Nair, head of Citibank India, was not available for comment, Citicorp said in a media statement, "As e-Serve's largest shareholder and sole customer, obtaining full ownership of e-Serve and integrating it into its global operations will provide the company with increased operational flexibility to support its business and meet the needs of its customers."

While 22.98 per cent of the shares of e-Serve is held by institutional investors, around 20.9 per cent is held by the Indian public. The company's employee welfare trust owns another 6.75 per cent stake.

In accordance with the delisting guidelines recently introduced by the Securities and Exchange Board of India (Sebi), the deal will be struck through a shareholder-led reverse book-built process.

"Citibank Overseas Investment Corporation is prepared to acquire the shares offered to it at Rs 800 per share, subject to the number of shares required for delisting being offered at this price and all requisite regulatory approvals being obtained," a Citicorp release said.

e-Serve will be eligible for delisting if, pursuant to the reverse book-built process, the public shareholding in e-Serve drops below 25 per cent. This is based on the threshold for public shareholding specified in the applicable regulations prevailing at the time of the original listing of e-Serve.

Citibank Overseas Investment Corporation reserved the right not to acquire the offered shares if the final price, as established by Sebi's delisting guidelines, was more than Rs 800 per share, the release said.

Financial services company e-Serve provides information technology-enabled services. Since 1999 e-Serve has provided transaction processing, customer care solutions and technology services to Citibank India and Citigroup businesses in Europe, Africa, North America and South Asia. e-Serve has over 5,000 employees.