HP has decided to put on hold its plans to sell its 60 percent stake in MphasiS. The current market conditions have prompted HP to go slow on the divestment.
The decision will negatively impact the buyback plans of MphasiS’ founder Jerry Rao and his ex-colleagues.
Rao and his former colleagues had received multiple investor backing of more than $1.5 billion to mount a bid.
As per HP’s strategy, HP tried to work with Citigroup to find a suitor, but decided to put off the stake sale, Times of India reported.
HP’s abysmal performance in its mainstay business has forced the company to consolidate its core before considering a stake sale in MphasiS. ( HP’s revenues dip 10% to $27.6 billion, profit decline 32% to $1.1 billion in Q2 FY 2013 )
The $1 billion-plus company has chased non-HP revenues in banking, capital markets and insurance verticals, besides pushing inorganic growth to offset the drop in business from the parent.
HP has seen its share of business to Indian outsourcing company steadily fall from 70 percent to 46 percent in the last 10 quarters. It dropped 1.8 percent in the latest February to April quarter. ( MphasiS revenue up 5.8%, profit declines 6.8% in Q2 )
IT services company MphasiS says its revenue rose 5.8 percent to Rs 1,405 crore in the second quarter ended April 30, 2013.
Net profit declined 6.8 percent to Rs 177 crore. The decline is primarily due to lower other income as the IT services company deployed funds towards the acquisition of Digital Risk.
The current MphasiS management, spearheaded by Ganesh Ayyar, had sought time to make MphasiS more desirable for a sale.
Despite sell off plans, MphasiS completed the acquisition of Digital Risk on February 11, 2013.
The company is also on a hiring spree. Recently, Infosys executive Kumail Tyebjee joined MphasiS. ( Infosys veteran Kumail Tyebjee joins MphasiS as vice president )
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