With $1b Mphasis Buy, Blackstone Lays Stress on IT
Indian IT witnesses one of the largest M&A deals with Blackstone’s bold bet while Startup Inc realises the need for collaborations
Mumbai | Bengaluru: Blackstone has offered to buy
from HPE at
Open offer will be at
for additional 26% stake
up to for 75%
HP to contribute minimum revenue of for to HPE. This will also trigger a mandatory open offer for the purchase of additional 26% shares from the public at .₹ 457.54 apiece. Based on the response to the offer, the purchase price consideration will vary between .₹ 5,466 crore ($825 million) and .₹ 7,071 crore ($1billion) for a maximum 75% stake in the company.
The transaction is expected to close in the second half of fiscal 2017, subject to various conditions.
Shares of Mphasis, which have gained more than 11% from the beginning of March till end of last week Kochi:in anticipationThedisputeofaoverdeal,thefellcandi-2.9% dateonMondaylistintheto Congresscloseslightlyhasaggra-below vatedtheopenwithofferthepriceThrikkakkaraatRs454.90.MLA Benny“The changeBehananinannouncingpromotertothatan heesistablishedwithdrawingprivatefromequitytheraceplayerfortick-isa etspositive.forthe assemblyHowever,polls.the open offer priceBennyis saiddisappointing,”heiswithdrawingwrote Ru-becmitausDugareKPCCand SaumyapresideShrivasta-ntVM Sudheeranva,analystsisfromagainstReligarehiscandida-Instituture.tionalSudheeranResearch.has suggested other namesOver fortheThrikkakkara.pasttwomonths, ET has beenItwasextensivelyadispute betweencoveringKPCCthe presidentMphasissaleVM SudheeranprocessandandwasChiefthe MinisterfirsttoreportOommenaboutChandyBlackstone’soverthe candidatesinterestinitslisteditioninThrikkakkaradatedFebrua-and 4ryother4.It constituenciesfolloweditup thatwithledanothertothe delayreport inon theMarchannouncement16,sayingBlack-of Congress’stonehad emergedlist.ThethepartystrongestHigh Commandcontender.is expected to announce the list on Monday or Tuesday. It is said the High Command has yielded toAs withChandyseveralthatof hisitsmid-cabinettierpeers,colleagues,MphasisKhasBabu,alwaysAdoorbeenPrakash,aripeKta-C Joseph,keovercandidate,andthetwowhichMLAsgot compo-Benny andundedDominicasparentPresentationHPdefocussedshouldon notitsoperation.beremoved.HP had tried to exit its
BANKING ON BFSI
independent Indian arm two years ago but the process was stalled largely on account of lack of clarity on the US technology giant’s commitment to the business going forward. With HPE trying to revamp its IT services group, the current sale process was revived late last year and an official sale mandate given to Citigroup.
Over the past few years, Mphasis has been focussing on increasing its direct organic business as HPE scaled down dealings with its Indian arm contributing to just about a fourth of its total revenues.
With deep vertical expertise in the banking, financial services and insurance (BFSI) sector — which alone contributes 55% of revenues — Mphasis serves marquee customers including 6 top global banks,11out of 15 top mortgage lenders and 3 top global insurance companies. The company has 24,000 employees across 16 countries. As of December 31, 2015, Mphasis’ revenues stood at Rs 5,996 crore ($904 million) and net profit at Rs 693 crore ($104 million). The other emerging areas include communications and entertainment, digital solutions, global regulatory & compliance and application mana- gement services. so, Mphasis will be included in
“There are very few companies in HPE’s ‘Preferred Provider ProIndia which are close to that critigram’, opening up significant addical $1-billion mark in revenues. tional revenue opportunities. HPE This company is just under that is still one of Mphasis’ biggest somark. With the right ownership urces of revenue. and right strategy, it can move up “Participation from HP through from the sub-billion club to the this significant contract demonstmulti-billionNew Delhi: club,”NearlyAmit8lakhDixit,callssetorates its confidence in Blackstone niorcitizensmanagingin10directordaysflat,offewBlack-quickas an owner,” Dixit told ET. “I am stonequestionsPrivatetoEquityanswerinandIndiaakeytoldinputconfident that going forward the ET soughtinanexclusiveforanyimprovementsinterviewafter--thisrevenue contribution will only go announcingishowthe ModitheGovernmenttransaction.hasre-up from the current 27%.” “Theycently,haveanddeepsilently,marqueedonea ground-BFSI “While our financial relationship customers.checkof Severaltheimplementationoftheserela-ofitsis changing, the business and comtionshipskeyschemes.havebeen there for over mercial relationship with Mphasis five years.ThismassiveTop10ofexercisethemhavedonebeenusingremains an important part of our therenearlyforeight800callyears.agentsWeofarethecon-BSNLservice delivery strategy,” said Mivincedwasabouttoidentifythedepththedistrictsoftherela-whichke Nefkens, EVP of HPE Enterpritionship.”havefared the best in the country inse Services. “We remain commit
Interestingly,implementingHPEfourandmajorBlacksto-schemes -ted to our strategic partnership.” ne havePradhannow agreedMantrionJantheDhantermsYojnaof Following the acquisition, Mphaa Master(PMJDY),ServicesSwachhBharatAgreement(Gramin),sis will potentially get access to (MSA)SwachhwhichVidhyalayatheUScompanyandSoil Healthpro-Blackstone’s entire PE portfolio of posesCard.toBasedsignwithsignificantlyMphasis,onthispostkeyover 80 companies across the world approvalfeedbackbyMphasis’fromtheboardcitizens,ofdi-PM— that post aggregate revenues of rectorsNarendraandshareholders.ModiwillbeawardingThedu-theclose to $90 billion — for future outrationbestofdistrictstheMSAonisCivilfiveyearsServiceswithDaysourcing and technology contthreeon automaticApril21withrenewalsprizes worthoftwo ₹ 10racts. In the recent past, when most yearslakheach.eachUnder--thefirstthistimeMSA,theHPEformatother sectors have slashed IT spenhasofproposedthePMAwardstocommitwillbea tomini-awardding, BFSI clients have floated larmumdistrictsrevenuewhichamountexcelledescalatinginthege transformational deals. year‘ImplementationoveryearandtotallingofPriority$990 “This deal is going to give MphamillionProgrammes’.overthenext five years. Al- sis an opportunity to come out of
THERE’S MONEY TOO
shadows that it had walked into. Ever since its acquisition by EDS and then with HP acquiring EDS, Mphasis went into oblivion. It never was able to establish itself as a visibleSeniorandgovernmentcredibleproviderofficials toldbeyondETthatthefactitwasthatinfactitwastheanPM’sHPideaenti-in ty.earlyMoreover,FebruaryBlackstonethatfeedbackportfoliofrom companiestheschemecouldbeneficiariesinthemselvesshouldalsobe anbeopportunitysoughttojudgetomine,”whichdistrictsaidAruphad Roy,bestresearchimplementeddirectortheat Gartner.priority Blackstoneschemes.Departmentswillcontinueoverseeingtoback thethecurrentfourschemesmanagementhadsubmittedledbyofChiefficialExecutivedatawith aGaneshinitialshort-Ayyar.list of the exceptional districts. Cabinet Secretary PK Sinha then oversaw Thisthe will‘callsbetoBlackstone’scitizens’exercise,thirdiniti-investmentatedindouble-inthetimeIndianwithinITservices3weeks sectoroftheinPM’sthesuggestion.pastsevenAnmonths8-10pointtakingquestionnairesitstotalcommitmentforeachof thein fourthe sectorschemesto$1.4wasbillion.preparedIthadtorecentlybeputto re-peopleacquiredinthebusinessshortlistedprocessdistricts.outsourcingEThas firmlearntIntelenetthatnearlyfor800$385call millionagentsandofthemadeBSNLa$170-weremillionropedin-in vestmenttocallupinoverIBS7.6Software.lakhpeopleSinceover 2005,10 daysithas iinvestednthel aoverstweek$5.1bil-of lionFebruaryinIndia acrossandearlyitsprivateMarchequi-with tyquestionsandrealestatewhichpractice.were to be an“sweredThereasoninaYesweor No,haveandmadeaquerya strongonsuggestedcommitmentimprovements.totheIndian IT“sectorThismustisbecausebethe itbiggesthasdeliveredexercise verycarriedstrongoutreturnsbyany centraltoBlackstoneorstate andgovernmentotherPEinvestorseverinsuchinIndia,”ashort saidtimeDixit.span“Thistogetsectorcitizenisfeedback.alsopoi-
BLACKSTONE’S OUTSOURCING BET
sed for good growth,” he added. India’s IT and software services export revenue is likely to grow 1012% in 2016-17 to $121 billion, according to trade body Nasscom. BlackstoneThe improvementshashiredDavidsuggestedJohnson,by whothe headedbeneficiariesM&A inat itselfDellandisaIBM,very toimportantleaditstechnologyinputforbetteringinvestmentsthe andschemesstrategiesfurther,”worldwide.asenior Cabinet Secretariat official told ET, speaking on the condition of anonymity. FollowingThecitizenthe feedbackexitfromwillatangentialbea“efbusinessfectiveinput”likeMphasis,inselectingHPEthe canaward-focuswinningoncoredistrictsoperations,whichafterhaveChiefgone Executivethrougha multipleOfficer filteringMegWhitmanprocess splitofevaluation/thecomputerexpertmakercommittees.lastNovember.FortheMphasisawards,gotstates/clubbedUTsintohavea separatebeendividedunitthatintotargetscategoriescorpora-fora tionslevel-withplayingservers,field --storageonecategoryandser-is vicestheeightandnorth-washivedeasternoffandfromthreetheonehill focussingstatesof onJ&printersK,Himachaland personalPradesh computers.andUttarakhand,“Mphasissecondwascategoryneverful-is lytheintegrated7UTsandintothirdHPE.categoryGivenisresttheirof ownthe states.challenges,Adistrictits inmanagementeachofthe canthreenowcategoriesfocusatwillthe betasksawardedathand,unbutderthethecashfourwillschemeshelpthemexcepttoforgo throughSwachhtheirBharatown(Gramin)transformation.andSoil AsHealthweareCardmovingSchemeintointheaUTsnewsinceera wheretheschemelabourdoesarbitragetoapplybecomesthere. lessThereimportant,willbe10awardsHPEcaninalluseofRsthe10 cashlakhtoeach.support new strategic imperatives,”ThemainsaidjudgingTomReuner,criteria mana-iseffigingcientdirectorandcorruption-atoutsourcingfreeimplemen-advisorytationandresearchofthepriorityfirmHfSscheme.Research.
PM will be awarding the best districts on April 21 with prizes worth 10 lakh each
Indulal PM, Anirban Sen
& Arijit Barman