PE firms eye BT's stake in TechM

As British Telecom (BT), who has 31 percent stake in Tech Mahindra (TechM), a solution provider in the telecom space, planning to sell its 21 percent stake, many private equity players are now eyeing to acquire those stakes.

Sources said, "BT is learnt to be keen in retaining 10 percent stake in venture, post transaction, given that it has committed $2 billion in business to TechM."

 

A part sale of 21 percent in the company would value the transaction at over Rs. 1,850 crore at Thursday's closing price of Rs.771.40 on the BSE.

"BT is not looking at a total exist from Tech Mahindra. While Tech Mahindra is no more a strategic investment for BT, it has substantial and long term business interest in the Indian company," sources said to The Economic Times.

Sources also mentioned that the sale will help it at a time when its profitability is on the slide, while also helping it earn a good return on the residual stake when there are limited attractive investment options in the market. By retaining some stake BT would prefer to have board representation.
An industry sources commended that the 20 percent stake on offer makes a strategic investment by any other Indian IT company such as Infosys or Wipro unlikely.

"Even if they get BT's entire stake, the question is whether any of them will be a partner in a JV where the Mahindras have the major stake. In contrast a private equity player could look at it only from a 4-5 year investment horizon," source added.

"Even if they get BT's entire stake, the question is whether any of them will be a partner in a JV where the Mahindras have the major stake. In contrast a private equity player could look at it only from a 4-5 year investment horizon," source added.

The actual transaction is expected to take place in a month. In most joint ventures, the first right of refusal in case of sale is with the other partner. However a company official said, "Our official stance is unchanged. The statement we issued earlier still holds good."

Sanjay Kalra, President, Tech Mahindra said, "As a strategic partner of BT, we have enjoyed a great relationship with BT over many years and will continue delivering on long term contracts and winning new business."

On the other hand, BT says, "India remains a critical market both for BT and our customers, and we expect to continue developing both the operational network and service presence that we have established over years."