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According to news reports, Hexaware’s top brass is believed to have met
Mr. AM Naik (CMD, L&T). Though details of the discussion are still not
known, timing of the meeting has triggered large‐scale speculation about
L&T Infotech, the engineering company’s IT arm, exploring options to buy
out Hexaware. While L&T management did not comment on the
development, Hexaware Tech denied of any such meeting with L&T
Infotech.
L&T Infotech may bid for Hexaware; deal likely at over USD800mn
As per a recent news article, Hexaware top brass is believed to have met Mr. AM Naik,
CMD of L&T. Hexaware founder and Chairman Atul Nishar and his two private equity
(PE) shareholders, General Atlantic and ChrysCapital, recently roped in investment
banks, Morgan Stanley and Credit Suisse to advise them on selling a majority stake in
the company. While the promoter stake stands at 28%, General Atlantic owns a little
less than 15% and ChrysCapital 9.77%. Several foreign technology giants like NEC, NTT
Group and US PC manufacturer and services player, Dell along with a clutch of large PE
buyout funds like Providence and Advent have also been approached, as per reports.
Promoters expect the company’s value to be USD700mn‐800mn which is 15x CY11
EBITDA and around 2.5x CY11 sales, say media reports.
Our view: Negative in the near term
If the deal takes place, this is negative in the near term given L&T’s sizeable
commitment to developmental projects which coupled with this deal could put further
pressure on the company’s balance sheet. We believe that L&T is in a divestment
mode, looking to sell stakes in non‐core businesses like switchgear, material handling
JVs, etc hence buying out another IT company at this juncture looks unlikely. Our IT
team believes that if the deal goes through, the target valuation would be atleast 13x
forward P/E, implying INR43bn. We have a `BUY/SO’ rating on Larsen & Toubro
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
According to news reports, Hexaware’s top brass is believed to have met
Mr. AM Naik (CMD, L&T). Though details of the discussion are still not
known, timing of the meeting has triggered large‐scale speculation about
L&T Infotech, the engineering company’s IT arm, exploring options to buy
out Hexaware. While L&T management did not comment on the
development, Hexaware Tech denied of any such meeting with L&T
Infotech.
L&T Infotech may bid for Hexaware; deal likely at over USD800mn
As per a recent news article, Hexaware top brass is believed to have met Mr. AM Naik,
CMD of L&T. Hexaware founder and Chairman Atul Nishar and his two private equity
(PE) shareholders, General Atlantic and ChrysCapital, recently roped in investment
banks, Morgan Stanley and Credit Suisse to advise them on selling a majority stake in
the company. While the promoter stake stands at 28%, General Atlantic owns a little
less than 15% and ChrysCapital 9.77%. Several foreign technology giants like NEC, NTT
Group and US PC manufacturer and services player, Dell along with a clutch of large PE
buyout funds like Providence and Advent have also been approached, as per reports.
Promoters expect the company’s value to be USD700mn‐800mn which is 15x CY11
EBITDA and around 2.5x CY11 sales, say media reports.
Our view: Negative in the near term
If the deal takes place, this is negative in the near term given L&T’s sizeable
commitment to developmental projects which coupled with this deal could put further
pressure on the company’s balance sheet. We believe that L&T is in a divestment
mode, looking to sell stakes in non‐core businesses like switchgear, material handling
JVs, etc hence buying out another IT company at this juncture looks unlikely. Our IT
team believes that if the deal goes through, the target valuation would be atleast 13x
forward P/E, implying INR43bn. We have a `BUY/SO’ rating on Larsen & Toubro
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