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PE exits may create 2 new IT unicorns PE exits may create 2 new IT unicorns

Jun-29-2015 | 0 Comments


BANGALORE/KOCHI: Private equity deal counters are buzzing at two of India's fast emerging IT companies, both being valued at around $1 billion each.

Warburg Pincus has just mandated Credit Suisse to sell its 20% stake in outsourced engineering services company Quest Global for at least $200 million. Similarly, General Atlantic Partners has received offers from rival private equity majors to buy its nearly one fifth ownership of IBS Software — a solutions provider to the global travel, transportation and logistics sectors — for $150-200 million.

Carlyle Group and Baring Asia are among the new investors who have looked at a deal at IBS Software, which is said to have postponed its earlier stated plans or a US listing. JP Morgan and Morgan Stanley are advising IBS on potential options. General Atlantic had invested $60 million in the Thiruvananthapuram-based company about eight years ago.

Warburg, which invested $75 million in Quest five years ago, is seeking an exit after the latter ramped up through acquisitions, including a significant buyout of NeST Software, last fiscal. Bangalore-based Quest provides services in aerospace, defence, power generation, oil & gas, industrial and fast moving consumer goods, combining product development with low-cost engineering services. Its clients include Rolls-Royce, GE, Pratt & Whitney and Airbus.

Credit Suisse is likely to launch a formal process, which is expected to land Quest, co-founded by Ajit Prabhu and Aravind Melligere, in the country's expanding list of IT and IT-enabled unicorns (a term in the investment industry, particularly venture capital investing, for companies with billion-dollar valuations). Quest's revenue this fiscal is expected to reach $290 million. "Most large private equity funds are likely to look at this transaction, one of the more significant deals among Indian IT's growth companies this year," banking sources said.

A Warburg Pincus spokesperson said the firm is bound by internal operational policies, which do not allow discussion of investment activities. "We are unable to share any views on your query," the spokesperson added in an emailed response.

IBS Software, founded by VK Mathews, has IP rights to 17 software products in the areas of airline passenger services, airport operations, airline cargo, oil & gas and logistics, travel and cruise management and ocean and surface transportation. The company's revenue, projected to touch $200 million this fiscal, has grown at a CAGR of 47.5% in the past 18 years. The clients include All Nippon Airways, British Airways, London's Heathrow Airport, Qantas, Marriott, Orbitz Worldwide and Shell.

IBS chairman and founder Mathews said "there is lot of speculation going, the news is incorrect", though admitting that a lot of investors are interested in his company right now.

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