‘HP’s Long-term Com­mit­ment will be Big Game Changer’

The Economic Times - - Companies -

The Black­stone Group be­lieves that its global port­fo­lio and value-ad­di­tion can trans­form Mpha­sis into a multi-bil­lion IT ser­vices giant. In an in­ter­view af­ter an­nounc­ing the pro­posed bil­lion-dol­lar buy­out of the Hewlett Packard En­ter­prise arm, Amit Dixit, co-head of Black­stone’s PE busi­ness in In­dia, tells In­du­lal PM and Arijit that a big game changer will be the long-term com­mit­ment that HP has of­fered to Mpha­sis. Edited ex­cerpts:

What at­tracted you to Mpha­sis? We have a pos­i­tive in­cli­na­tion to­wards the IT sec­tor. Within the sec­tor, Mpha­sis is a spe­cial­ist player in bank­ing and fi­nan­cial ser­vices with mar­quee cus­tomers. Sev­eral of these re­la­tion­ships have been there for nearly a decade. Top 10 of them have been there for eight years. We did the dili­gence and we are con­vinced about the depth of the re­la­tion­ship, specif­i­cally the top 15 ones. Mpha­sis has strug­gled to meet ex­pec­ta­tions over the years be­cause of de­clin­ing HP busi­ness. If you look at busi­ness in to­tal­ity, the busi­ness has been de­clin­ing in prof­its be­cause its largest cus­tomers, which at one point in time used to be as much as $700 mil­lion in rev­enues, have come down to $200 mil­lion. This def­i­nitely has had an im­pact on growth. How­ever, if you look at sum of parts, the spe­cialised BFSI busi­ness ($450 mil­lion) or busi­ness from di­rect third-party in­ter­na­tional clients, it has been the crown jewel and con­sis­tently grow­ing com­pared to its peers in the last three years.

What is the com­mit­ment from HP? There are three key points to HP com­mit­ment. It pro­vide sta­bil­ity, pre­dictabil­ity and growth for HP rev­enues, which was the sin­gle big­gest is­sue for the com­pany. Con­trac­tu­ally, we have fixed that is­sue. It is now an 11-year com­mit­ment. A min­i­mum rev­enue of $990 mil­lion over the first five years has been guar­an­teed on an es­ca­lat­ing ba­sis. Mpha­sis has been also in­cluded in HP’s pre­ferred partnership pro­gramme.

What would be the com­po­si­tion of the new board? These are post-clo­sure top­ics and we have at least four months to think about that. Cur­rently, there are nine board seats with five HP direc­tors and Black­stone will have the same post deal clo­sure. We haven’t dis­cussed about our nom­i­nees yet.

What will Black­stone bring to the ta­ble? The global ex­po­sure to our port­fo­lio com­pa­nies will be one of them. Par­tic­i­pa­tion from HP through this sig­nif­i­cant con­tract, and this demon­strate HP’s con­fi­dence in Black­stone as owner. And, the third is our own­er­ship method­ol­ogy, which has mul­ti­ple facets to it. This in­cludes highest qual­ity of cor­po­rate gover­nance while ac­count­ing and trans­parency would be the best in class. Trans­parency and avail­abil­ity of data is un­heard in In­dia. This al­lows good and prompt de­ci­sion mak­ing.

How long will the in­te­gra­tion take? It will take at least 90-120 days to close the ac­qui­si­tion. Af­ter that we will sit to­gether with the man­age­ment and pre­pare a blue­print for the im­me­di­ate three to six months. There is a long and stag­gered time be­tween sign­ing and clos­ing of the trans­ac­tion. We have at least four months to think about that.

How does it help Black­stone in a long run? Mpha­sis is a spe­cialised BFSI player. It’s a provider of dig­i­tal ser­vices. So, there are enough growth op­por­tu­ni­ties.

Amit Dixit

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