Genpact plans largest IPO on US markets by an Indian company at $500-600 mn

Genpact, India’s largest BPO company has finalized its IPO in the US markets as it plans to raise between $500-$600 mn and will list on the New York Stock Exchange. This will be the largest IPO by an Indian company in the US. The Genpact board has approved the issue and has appointed merchant bankers Morgan Stanley and Goldman Sachs for the issue.

The public issue is important as Genpact is the largest BPO company in India, and the issue will fulfill the huge demand for Indian BPO shares in the US market. The issue will also affect the valuations and demand for two other Indian BPO firms that went public last year: WNS, which got listed on NYSE, and EXL Services on NASDAQ. Both WNS and EXL saw a huge demand for their shares when they went public and even after the issue, they command very high valuations.

Genpact is owned by General Atlantic and Oak Hill Capital, who jointly control 60% of the equity of the company. The two funds had picked up the stake in Genpact in 2004 and in two years, have increased the value of their holding by five to six times. This is a fairly high rate of return for the investment made by a private equity funds. The remaining 40% is owned by US conglomerate GE.

The IPO is not likely to see a huge sale of shares by the existing shareholders. Bulk of the issue will be fresh issue of shares and the funds will be available for Genpact to fund growth. While the private equity funds Oak Hill Capital and General Atlantic are not expected to sell their holding, the value of their stake will go up substantially.

Read more in The Economic Times article.
Related Post: Oak Hill Partners may merge portfolio companies Genpact and Vertex; merged entity to be listed

Oak Hill Partners may merge portfolio companies Genpact and Vertex; merged entity to be listed

US-based private equity firm Oak Hill Capital Partners is reportedly working on merging its two BPO portfolio companies, Genpact and Vertex Data Systems.

Oak Hill and General Atlantic bought 60% in Genpact in 2004 from GE for around $500 mn. Vertex Data Systems, a BPO subsidiary of UK-based United Utilities, was bought out by an Oak Hill-led consortium comprising GenNx360 and Knox Lawrence International in a $425 mn cash, debt-and-liability readjustment deal.

Genpact employs around 27,000 people and has a dominant presence in India and operations in China, Hungary, the Philippines, Romania, the US and Mexico. It serves the banking/financial services, insurance, manufacturing, transportation, automotive and business services verticals. Genpact is understood to have revenues of close to $650 mn (Rs. 3000 crores) and is targeting $1 bn by 2008.

Vertex has around 9000 employees, roughly 1500 of them in India, with 12 units in Europe, the US, India and Canada. It offers a range of services across private enterprise, financial services, utilities, and central and local government sectors.

The merged entity would raise an initial public offering (IPO) that may be listed on a foreign or domestic bourse. The merger will allow investors to maximize efficiencies in the two companies’ overlapping verticals and geographies and leverage their separate areas of expertise.

Read the Business Standard article.

Scandent to sell stake in Cambridge Solutions; Apollo, Fidelity, EDS approached

The Economic Times reports that the Scandent Group is selling its majority stake in Cambridge Solutions. Investment bank Lehman Brothers is scouting for buyers for Cambridge which has a large BPO operation in the US. Some US-based funds such as Apollo, Fidelity and strategic players like global IT major EDS have been approached. An information memorandum has also been drafted for the prospective buyers. Cambridge is expected to fetch a valuation of anything above $300 mn, making it the second largest domestic deal in the BPO industry, after the $500 mn sale by General Electric of its 60 % stake in India’s biggest BPO outfit Genpact to Oak Hill Partners and General Atlantic in 2004. At present, the group of original promoters-this include serial entrepreneur Ramesh Vangal, former Pepsico CEO Christopher Sinclair, McKinsey honcho Rajat Gupta, US-Canadian Bronfman family of Seagram fame, the Chanderia family and current CEO Satyan Patel-holds 59.15% stake in Cambridge.

NYSE, Goldman Sachs, General Atlantic, SAIF to buy 26% in NSE

The New York Stock Exchange (NYSE) and US-based global investment banking giant Goldman Sachs are among a group of institutional investors who are about to buy around a 5% stake each in National Stock Exchange (NSE), India’s biggest bourse. The NYSE, Goldman Sachs, General Atlantic Partners and Softbank Asian Infrastructure Fund have entered into an agreement with ICICI Bank, IFCI, IL&FS, PNB and GIC for the purchase.

NSE shareholders IL&FS and IFCI are selling 5% each of their holdings in the exchange to Goldman Sachs and NYSE in two separate deals expected to be signed soon. The two shareholders currently hold 7.1% each in the exchange. IDBI and ICICI Bank, the two other institutional promoters, are also expected to offload part of their holdings in the exchange in subsequent deals. The valuation of the NSE is expected to be over $2 billion.

Earlier, Fidelity had bought around 9% in MCX; later, Goldman acquired over 7% in NCDEX, the other online commodity exchange.

The proposed sale of stakes comes close on the heels of guidelines issued by the RBI on foreign investment in Indian stock exchanges. The RBI has allowed foreign investment up to 49% in stock exchanges, fixing foreign direct investment (FDI) cap at 26% and FII limit at 23%. Securities and Exchange Board of India (SEBI) has stipulated investment limit for single foreign investor at 5% beyond which an FII or any other investor like foreign stock exchange will not raise its stake in stock exchanges.

NSE has 21 promoters: an assorted medley of public sector banks, LIC, ICICI Bank, IL&FS and IDFC. ICICI holds 12.5% and IL&FS has 7.1%. NSE is an extremely profitable entity. In FY06, it had a net profit of Rs. 206 crores on revenues of Rs. 472 crores. In FY07 it is expected to report a profit of Rs. 250 crores. It has 70% share of all stock transactions in India.

Read more about the deal in The Economic Times and IndiaInfoline.com.