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

Deutsche Borse, Singapore Stock Exchange in race to acquire BSE interest

The Singapore Stock Exchange (SGX) and Deutsche Borse are two of some of the leading stock exchanges that may get to buy a stake in Bombay Stock Exchange (BSE).
The London Stock Exchange (LSE) and NASDAQ are two other exchanges that seem to be interested in acquiring a stake in BSE. At one point of time, even NYSE was considering an investment in BSE and was said to have done a due diligence. This was before the government had stipulated a 5% limit for a foreign investor in stock exchanges. NYSE has now invested $115 mn in the National Stock Exchange for a 5% stake (See Related Post).

BSE seems to be in a hurry to find a strategic partner as soon as possible as it wants to complete its IPO before May 2007. A strategic partner is expected to give BSE a higher valuation. Going by the valuation that has NSE received for its stake sale to NYSE and other three foreign entities, it seems that BSE will get anywhere between $750 mn and $1 bn.

Currently, BSE senior management and merchant bankers are busy in fulfilling formalities related to finding a partner and filing a draft prospectus. BSE will also have to increase its capital base from the present Rs. 70 lakhs and is considering a bonus to meet the minimum capital requirements.

Read the article in Business Standard.

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.