Deutsche gets 6% HCL stake for exiting DSL

All-stock deal valued at Rs 698 crore.

Deutsche Bank will get 6 per cent of HCL Technologies stock valued at Rs 698 crore for selling its 49 per cent stake in DSL Software, the financial services software firm, to the Shiv Nadar flagship.

The board of directors of HCL Technologies today approved a preferential issue of 19,358,989 equity shares of Rs 2 each at a price of Rs 361 per share to Deutsche Bank.

The issue is subject to the necessary regulatory and other approvals, including the approval of the shareholders of HCL. An extraordinary general meeting of the shareholders is being scheduled for December 21 for this purpose.

The issue price of Rs 361 is slightly lower than HCL Technologies' closing price of Rs 368 on the Bombay Stock Exchange today.

"We have created great value in the venture. The valuation has taken into consideration that DSL is well managed and has a committed team," Saurav Adhikari, corporate vice president strategy, HCL Technologies, told Business Standard.

The deal puts a valuation of Rs 1,425 crore on DSL Software. The company generated revenues to the tune of $72 million in the last financial year.

DSL Software is a 51:49 joint venture between HCL Technologies and Deutsche Bank. "This is part of the company's strategy to consolidate its operations. HCL Technologies will be the 100 per cent owner of DSL Software," Adhikari added.

Post-acquisition, DSL Software will be part of HCL Technologies and will be called HCL Technologies Banking and Financial Services. Located in Bangalore, DSL Software has over 2,700 employees on its rolls.

Nadar has been acquiring the joint venture partner's stake in various ventures. The company is in the process of acquiring the stake of the European telecom major British Telecom in its business process outsourcing venture.

It will also buy out Jones Apparel from its joint venture called HCL Jones. The company has also recently existed from HCL Perot System by divesting its stake to Perot Systems for about $105 million.

The acquisition is in line with the trends in the software services markets with over 35 per cent of Indian software services exports going in into financial sector.

According to estimates, the IT services spending by the financial services sector globally is expected to be about $130 billion and is growing at about 12 per cent annually.