Texas, Apax in final lap for Patni pie

Two American private equity funds-Texas Pacific Group and Apax Partners-are in the final lap of purchasing the shares of two Patni brothers - Ashok and Gajendra - in Patni Computer Systems.

Sources close to the development said the agreement between one of the private equity partners and the Patni brothers, who jointly hold 29 per cent stake, is expected to be signed next month.

They added that Narendra Patni, the eldest brother and chairman and chief executive officer of the company, would buy out a part of the stake which Ashok and Gajendra had put on the block while the private equity funds would buy the balance.

The share price of Patni Computer has come down sharply in the last four months since May when the shareholding was put on the block. The Patni Computer stock reached its 52-high of Rs 572 on May 29. IT closed at Rs 363.95 on the BSE, 5.42 per cent lower than its previous close.

At the current price, the country's sixth largest IT services company Patni Computers is valued at Rs 5050 crore. So, the Patni brothers' 29 per cent stake is valued at Rs 1,460 crore. There will be no open offer for the Patni shareholders, post the deal.

Narendra Patni holds 14.69 per cent stake in the company, Ashok holds 14.87 per cent and and Gajendra 14.42 per cent.

Narendra Patni had told Business Standard immediately after his brothers expressed intention to sell their stake that he was open to buy a part of his brothers' stakes provided the price is correct. "I have built the company from scratch and would like the shares to find a good home when they are on offer," he said.

General Atlantic Partners, which holds a 16.38 per cent stake in the company, has also decided not to exit, he added. Other institutions holding stake in the company include Merrill Lynch and UBS.

An increased focus on margin improvement during the previous few quarters resulted in the Mumbai-based IT major posting a net income (consolidated) of Rs 134.7 crore ($33.2 million) for the second quarter ended June 30, 2007 - an increase of 98.9 per cent compared with Rs 76.6 crore ($16.7 million) for the same quarter last year. Revenues for the quarter touched Rs 662.8 crore ($163.3 million) - a rise of 14.2 per cent from Rs 656 crore ($143 million) year-on-year.

Sequentially (as compared to the trailing quarter), the company's net income was up 19.2 per cent from Rs 120 crore ($27.8 million) while its revenue grew 4.7 per cent from Rs 672.4 crore ($ 156.0 million). However, the figure has been shored up by other income of $7.1 million during the quarter.