Baring acquires Merill's stake in MphasiS

Baring India Pvt Equity Fund, a subsidiary of Baring Pvt Equity Partners Group, announced on Tuesday that it had bought close to 3.6% stake for over Rs 129 crore in mid-rung BPO and software solutions firm MphasiS (MPHASIS.NS : 677.1 +4.5). In 2006, Baring had offloaded 34.73% stake in MphasiS for Rs 1,150 crore to Electronic Data Systems via an open offer.

With this, the equity holding of Baring and its associates in MphasiS has gone up to 12.21%. The sale was executed on the NSE (^NSEI : 4941.75 -63.8) on Friday. Baring bought the stake from Merrill Lynch Capital Markets

Baring has underlined that Indian IT companies have good prospects despite the global slowdown. While the BSE (^BSESN : 16632.01 -222.92) IT index has fallen by over 17%, compared with a 6% dip in the Sensex overall since December, Indian IT companies retain a strong upside, according to Baring managing partner Rahul Bhasin. This confidence stems from the sharp depreciation of the rupee against the dollar, which assumes significance as top domestic IT companies derive more than half their revenues from the US.

MphasiS, in a regulatory filing on Monday, said that Baring India Pvt Equity Fund III had bought 75,92,100 MphasiS shares in a bulk deal at a price of Rs 170.50 per share. This means Baring bought the shares from Merrill Lynch at a discount of Rs 9 compared with Monday's closing price of Rs 179.60 (markets were closed on Tuesday). The purchase translates to roughly 3.62% of MphasiS floating stock. Baring India, through its two associate funds, already held around 8.61% in the company.

The stake sale by Merrill is in line with its global plans. It has sold most of its holdings in Indian companies to raise cash to ease its own liquidity squeeze. EDS is the principal shareholder in MphasiS, with subsidiaries EDS Asia Public Holdings controlling a 39.73% stake and EDS World Corporation (Far East) holding another 21.11%.

The combine holds 60.84% in the MphasiS, while founder Jerry Rao holds 1.39%. Other principal shareholders in the company include HSBC Global Investment Fund (2.71%), Aberdeen Asset Managers (3.13%), ICICI (ICICIBANK.NS : 850.9 -14.6) Prudential Life Insurance Company (1.33%) and Lloyd George Investment Management Barmuda Ltd (1.05%).

Last quarter, Mpahasis earned a net income of Rs 977.6 crore and posted a net profit of Rs 210 crore.