Blackstone Group LP, which has a string of troubled investments in India, appears to have struck a decent deal for its investment in Mphasis Ltd. It has valued Hewlett Packard Enterprise’s (HPE’s) stake at $825 million (around 5,460 crore), or 430 per share.

This is a significant 31-35% discount to similar-sized companies such as Mindtree Ltd and Hexaware Technologies Ltd, based on their financial year 2015-16 price-earnings ratio. What’s more, Blackstone has also eked out a minimum revenue commitment from HPE, which will bring some stability to the business. According to an analyst with a domestic institutional brokerage, the purchase price looks unusually low.

As pointed out in this column earlier, in the past year, promoters of companies such as Geometric Ltd, iGate Corp. and Polaris Financial Technology Ltd have struck great exit deals. The fact that HPE has settled for a relatively low valuation in addition to providing a minimum revenue commitment as a customer, therefore, stands out. The analyst cited earlier says it’s likely that profitability on the revenues accruing from HPE would be far lower than the company’s average profit margins.

To be sure, it’s premature to conclude that Blackstone has got itself a great deal.

To make the deal work, Mphasis will need to tap into Blackstone’s portfolio companies and their IT services budgets. According to Amit Dixit, Blackstone’s senior managing director, these portfolio companies collectively have an information technology budget of $1 billion annually. He added that in the period between 2007 and 2011, its investee company Intelenet Global Services signed seven Blackstone portfolio companies as customers, which eventually contributed to 27% of its revenues.

According to an analyst with a multinational brokerage, if Blackstone can open doors for Mphasis and this results in materially higher growth than the industry, the deal will make sense. Of course, whether this happens remains to be seen.

Meanwhile, the minimum revenue commitment from HPE may be heartening, but hardly exciting. Currently, HPE accounts for 24% of revenues and contributed $55 million to revenues in the December quarter. Five years ago, quarterly revenues from the HPE channel amounted to over $180 million.

According to Blackstone, revenues from HPE will cumulatively amount to $990 million over the next five years, at a minimum, with revenues growing annually. Assuming a rate of growth of around 5%, this means the minimum revenue commitment will be around $45 million in quarterly revenues to start with, and gradually pick up to $55 million by the fifth year.

The remainder of Mphasis’s business, therefore, needs to grow at a much faster pace in order to make it attractive for investors going forward. In the past five years, the non-HP business has grown at around 15.6%, or more or less in line with industry growth rates. As pointed earlier, Blackstone and Mphasis will need to work hard to bring on board new clients.

Needless to say, whether minority shareholders end up making decent returns from these levels also depends on this. They now have the option of exiting at the current market price of 455, slightly higher than what HPE has got.

In fact, if one were to strip the value of its minimum revenue commitment, it effectively means that HPE has settled for a price of less than 430 for its stake. As such, the current market price as well as the open offer price of 457.5 provide decent exit opportunities.

The writer does not hold positions in the companies discussed here.

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