Hexaware High On Open Offer

The news of a possible stake sale by the promoters of Hexaware Technologies and General Atlantic (a private equity firm with a stake in Hexaware), were floating in the markets for more than a year. On August 23, 2013, Hexaware announced that Baring Private Equity Asia has agreed to buy a controlling stake in Hexaware in a deal that has total potential investment of USD 420 million.

In accordance to the deal, Baring Private Equity Asia will purchase the 27.7% stake of promoter entities led by Atul Nishar, the founder and Chairman of Hexaware and 14.1% owned by General Atlantic Global Investments, in aggregate representing 41.8% shareholding in Hexaware.

The price paid for this transaction would be Rs 126 or Rs 135 per share which would translate to a sum of Rs 1575 crore or Rs 1687 crore (approximately USD 242 million or USD 260 million, based on an exchange rate of Rs 65 per dollar). The higher price of Rs 135 per share would be paid by Baring Asia if its aggregate shareholding in Hexaware reaches 50% or above.

Baring Asia has made a public announcement for an open offer to the public shareholders of Hexaware to purchase an additional 26% stake at a price of Rs 135 per share, which is in accordance with the requirements of the SEBI. This would result in an additional shelling out of Rs 1058 crore or USD 160 million.

Since speculation around the deal had been doing rounds since a year, there was considerable volatility seen in the share prices of Hexaware. However, now that the deal is announced, and priced at a premium of 4.35% to 11.8%, we think volatility would reduce going forward and gains would be capped. We thus recommend investors to offload their holding in the open offer.