Private equity player Warburg Princus recently reduced its holding in BPO services provider WNS to 29 from 48 per cent through a secondary issue, thus raising $64 million. Warburg has been the largest investor in the company for the last 10 years. WNS had also raised $50 million through a primary issue. In an interview with Bibhu Ranjan Mishra, Keshav Murugesh, CEO of the NYSE-listed company, tells what these spell for the company. Edited Excerpts:
Why did Warburg reduce its stake? Was it not satisfied with your growth?
Warburg has acted quite responsibly for the last 10 years. They have been extremely supportive of WNS. When we wanted to go for an issue to raise $50 million, we convinced them to put some of their shares in the issue. This is because $50 million is too small in the US for a primary issue. Our aim was to attract more investors by increasing liquidity.
What does the success of the issue mean for WNS?
It was a very successful issue and it is being seen as a re-IPO, given the market conditions in the US. We could price the issue at no discount at all and there was solid demand from some of the most powerful institutional investors. After the issue, Warburg would continue to be our largest shareholder.
There were talks that Warburg might exit the company fully? How long they would continue with WNS?
They have not sold their stake completely, but have diluted a part of it. Besides, they have not sold it to any strategic investor. Even in 2006, when WNS went public, they never diluted the stake. They would continue to support the company. I am sure, over the next few years, as the company performs well and the price looks better, they will have enough opportunities to recoup further from the rest of the stocks.
Are you seeing growth coming back for the company?
From the company's viewpoint, we are doing all the right things. The revenues as well as margins are growing well. We have also started winning some very large deals.
How do you plan to use the proceeds of the issue?
The cash from this issue net of expenses is $47.5 million. We will use it to accelerate growth by acquiring small technology platforms, making small tuck-in acquisitions and technologically enabling some of our businesses. Besides, we want to create new delivery centres in South America, China and West Asia. We are also creating some special economic zones in India.
You also have a debt of $73 million. Would you use a part of this issue to repay some of it?
We have paid off most debts. We will pay the remaining through internal accruals.
But, we don't necessarily want to be a debt-free company. As long as the debt is being used to accelerate growth, I don't see any problem with that. Besides, our debt-equity ratio is very less.
Which are the new centres you are setting up in India?
We are setting up one in Visakhapatnam. It would cater to domestic market. Initially, it would have 500-600 seat capacity, before expanding. Besides, we have land banks in Visakhapatnam (Andhra Pradesh) and Trichy (Tamil Nadu) for the development of SEZs. Each SEZ will have an investment of $3-4 million.
