Sanjiv Goenka buys Firstsource for 400cr

[admin]

Forays Into BPO Space By Acquiring 49.5% | Open Offer May Push Deal Size To 650Cr
TIMES NEWS NETWORK

Kolkata: The RP-Sanjiv Goenka Group has made a large play into the BPO space by striking a Rs 400-crore deal with ICICI Bank and two other shareholders to acquire a 49.5% stake in Firstsource Solutions — one of the top five BPOs in the country. The group also announced an open offer for an additional 26% stake in Firstsource at Rs 12.2 per share, which could take the deal size to Rs 650 crore.
ICICI Bank has been keen to exit Firstsource following regulatory pressures. Last year, RBI issued new norms requiring banks to bring down their stake in non-financial service companies to below 10%. For ICICI Bank, exiting Firstsource emerged a challenge after a foreign currency convertible bond issue (FCCB) came up for repayment, which was not provided for. Key to the present deal is an agreement by ICICI Bank to facilitate Rs 130-140 crore funding to meet part of the shortfall in redeeming the convertible bonds.
CESC – the RP-Sanjiv Goenka Group’s flagship company — will acquire the BPOs shares through a wholly-owned subsidiary Spen Liq. “The transactions will be in two parts. Firstsource is issuing fresh shares, which is 34.5% of the expanded capital base, to Spen Liq for Rs 278 crore. Besides, our group is buying 5% stake from each of three existing shareholders — ICICI Bank, Fidelity and Temasek for — Rs 122 crore. The total deal value will be around Rs 400 crore,” said Sanjiv Goenka, chairman of the group, adding that the deal will be funded by internal accruals and debt.
The undivided RPG group had presence in the IT sector through Zensar Technologies, which is now owned by Harsh Goenka-led RPG Enterprises. The RP-Sanjiv Goenka Group has interests in sectors like power, retail, engineering, entertainment and tea. It has Rs 14,000 crore of assets under management and a combined revenue of Rs 10,000 crore with EBIDTA of Rs 1,450 crore.
According to Goenka, the group had appointed McKinsey six months ago to identify new areas for growth. “We wanted to get into IT-related. Firstsource presents a very good opportunity in BPO verticals and has a very strong management team,” he added. He said the arrangements are in place to repay the Rs 800 crore of FCCBs on their due date this quarter. There is a Rs 420 crore shortfall faced by the BPO in meeting the redemption, which will be financed jointly by the RP-Sanjiv Goenka Group and ICICI Bank.
“We are putting in Rs 278 crore as fresh equity into the company. The remaining Rs 130-140 crore will be arranged by ICICI Bank. It has already tied up that amount,” he added.
The BPO has 32,000 employees and reported a net profit of Rs 62 crore on revenues of Rs 2,255 in 2011-12. Goenka expects the topline to touch Rs 2,500-2,600 crore this fiscal. The company, whose clients are banks and companies in financial services, healthcare, telecom and media has 48 delivery centres across US, Ireland, the UK, the Philippines, India and Sri Lanka. Over UK contributes 52% of FSL’s revenue followed by North America (31%) and India (12%). “Telecom and media are the biggest sectors with 34% contribution to revenue,” Goenka added.
LOGS INTO TECH BASE
äFirstsource will issue fresh shares, which is 34.5% of the expanded capital base, to Sanjiv Goenka’s CESC for 278cr
äThe company, via its arm Spen Liq, will also acquire 5% each from ICICI Bank, Fidelity and Temasek for around 122cr
äThe company has launched an open offer for another 26% at Rs 12.20 per share