Infotech Lead India: HP is initiating talks with private equity funds like TPG Capital, Carlyle Group and Advent to sell its 60 percent stake in MphasiS for around $1 billion.
HP, according to a Times of India report, has hired Citigroup to manage the deal.
The PC maker’s 60 percent stake in Bangalore-based MphasiS is worth $900 million at current market value.
Private equity biggies like TPG and Advent are hungry for a large play in India’s off-shoring story, but have not clinched too many deals except for Apax Partners backing iGate’s Phaneesh Murthy to snap up Patni Computer Systems.
Former Citibanker Jerry Rao founded MphasiS 15 years ago, which became part of HP after the latter’s $14 billion buyout of Electronic Data Systems (EDS) in 2008. HP wrote off $16 billion relating to its recent acquisitions, including EDS, last year.
MphasiS, headed by CEO Ganesh Ayyar, will see HP revenue drop below 50 percent of the turnover by April this year, down from 70 percent in October 2010. The company has chased non-HP revenues in banking, capital markets and insurance verticals, besides pushing inorganic growth to offset the drop in business from the parent.
In February 2013, Mphasis said its revenues for the first quarter fell 3.8 percent sequentially, mainly because of fewer working days at client firms.
The company’s net profits during the three month period fell 11 percent to Rs 184.4 crore in the quarter ended January 31, from Rs 209 crore in the previous quarter.
Over the past few quarters, Mphasis has been trying to reduce its exposure to HP, which is undergoing a large-scale restructuring, including some 29,000 job cuts to save costs.
The company said during the November-January quarter, HP contributed 52 percent of its revenues, compared with 58 percent in the corresponding period last year. On the non-HP side, Mphasis reported a 1.1 percent sequential growth and added 14 new clients during this quarter.