Warburg Pincus eyes majority stake in Firstsource
SOURCE: Times of India
DATE: May 26th, 2008
Mohit Soapbox:
The article talks about a possible merger of WNS and Firstsource if indeed Warburg is looking to get a stake in Firstsource.
WNS recently had announced their financial results for the last quarter and 2008. Revenue for fiscal 2008 of $459.9 million increased 30.5 per cent over the prior fiscal year. WNS was one of the first casualties of the sub prime meltdown in the US when their client First Magnus shut down their operations. WNS net income for the last quarter was lower because of expenses related to this and other charges.
Firstsource seems to be making good inroads into the domestic Indian markets. They recently signed a deal with Airtel for domestic outsourcing. (LINK). Firstsource also recently announced a push to expand their operations in Ireland (LINK)
Synergistically this could be a good combination and add scale and market diversity to the combined entity. WNS has talked about going domestic and Firstsource combination will provide it a domestic foot print and create scale to go after larger deals globally.
ARTICLE
Is Warburg Pincus, the US-based venture capital firm, planning for a majority stake in Firstsource Solutions? While top officials at Firstsource Solutions and ICICI Bank, the promoters of the Mumbai headquartered BPO, denied any knowledge of such moves, talks among industry players are that the US-based VC fund could be planning a series of moves to gain majority control in Firstsource.
According to industry sources, Warburg holds stake in WNS, an India-based BPO listed on the New York Stock Exchange. It also holds stake in Metvante Investments (Mauritius), which holds a little over 20% stake in Firstsource. Industry players are speculating Warburg could talk to Metvante to buy out its 20% stake in Firstsouce.
The next step would be to go for an open offer. And in case the open offer is successful, Warburg could propose a merger of Firstsource and WNS, in the process create a BPO giant. Warburg Pincus is the majority shareholder in WNS.
A senior official at ICICI Bank said that the bank, which as a promoter holds nearly 27% in Firstsource, can not sell more than 5% in the BPO till August 2010. This is because, Firstsource went public last year and as promoters, part of ICICI Bank’s holding are under a three year lock-in clause.
Other than ICICI Bank and Metvante, Aranda Investment Mauritius, an arm of Temasek, the Singapore government’s investment company, holds about 21.2% in Firstsource.
About 4.6% stake in the company is also held by Westbridge Capital and Seacrest Investment holds 4.4%.
In Monday’s weak market, Firstsource stocks on the BSE ended 2.75% lower at Rs 40.70. The stock’s current market price is nearly 37% off its last year’s initial public offer price of Rs 64.
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