Apax Partners to buy Electra PE’s stake in Zensar Technologies for £84 mn2 min read . Updated: 10 Oct 2015, 01:25 AM IST
Inclusive of dividends and proceeds from the sale of shares, this will generate a return of 19x on original cost over the 18 years of the investment, Electra said in a statement
Mumbai: Private equity (PE) firm Apax Partners will buy a 23% stake in Zensar Technologies Ltd, part of the RP Goenka Group, from Electra Private Equity Plc.
After the transaction is completed, Electra will receive approximately £84 million (around ₹ 835 crore).
“Inclusive of dividends and proceeds from the sale of shares, this will generate a return of 19x on original cost over the 18 years of the investment; an internal rate of return (IRR) of 18%. This will represent an uplift of £12.4 million, or 18%, on the valuation of Zensar at 31 March 2015, implying an increase in diluted NAV (net asset value) per share of 31 pence," Electra said in a statement on its website.
Ganesh Natarajan, vice-chairman and CEO of Zensar Technologies, confirmed the transaction. “The deal is very exciting for all of us given the value that Apax can add to Zensar," he said.
Electra originally invested $9 million in 1997 in the equity of an unquoted subsidiary of a Mumbai-listed manufacturer of computer hardware. In 2001, the listed parent closed down its operations and reverse-merged the unlisted subsidiary. This resulted in Electra owning shares in the listed entity.
“In 1997, when we first invested in Zensar, the company was uniquely positioned in the software as a service market with strong growth potential having established effective customer relationships and a good reputation," Hugh Mumford, Electra Partners’ managing partner, said in a statement. “Since the original investment, the company has grown considerably supported by an acquisition strategy and a strong focus on innovation embracing new technologies."
Headquartered in Pune, Zensar is an IT services company catering to global clients in the manufacturing, retail and hi-tech businesses. It has end-to-end capabilities in Oracle implementation and maintenance, and is the industry leader in e-commerce solutions. The firm employs more than 8,000 people at 29 locations around the globe.
Natarajan said Apax’s investment in Zensar is a reflection of its confidence in the strong business fundamentals and growth potential. “We believe Apax’s deep understanding of the sector positions them very well to provider Zensar with significant insights," he said.
The RPG Group, he said, continues to be the promoter and the largest shareholder in the company with a 48% stake.
Natarajan also indicated that Apax will have a board representation in Zensar.
For the April-June quarter, Zensar reported a 36% increase in net profit to ₹ 76.08 crore. Revenue rose 16.5% to ₹ 704.64 crore.
On Friday, shares of Zensar Technologies closed at ₹ 841.10 apiece, up 1.83%, on BSE. The benchmark Sensex closed at 27,079.51 points, up 0.87%. The company has a market capitalization of ₹ 3,739.33 crore.
The news of the investment was reported after market hours.
“Seventeen years is a long time...over that period of time 18% dollar IRR is pretty decent," said Sanjeev Krishan, leader (private equity and transactions) at PricewaterhouseCoopers Pvt. Ltd, a consultancy firm.