Blackstone inks largest deal in India with Mphasis buy

The New York-based investment firm has made its biggest bet on India yet, investing in the country's $150 billion business process outsourcing sector.

The Blackstone Group will acquire a majority stake in Bangalore-based information technology services provider Mphasis Limited from Hewlett-Packard Enterprise (HPE) for about $825 million, the firm said.

Blackstone will buy at least 84 percent of HPE’s 60.5 percent stake in Mphasis for INR 430 ($6.49; €5.70) per share. Besides buying HPE’s stake, Blackstone will buy 26 percent of Mphasis’ shares through a mandatory tender offer as required by Indian takeover laws. The firm said it could end up paying up to $1.1 billion in total, depending on the open offer subscription.

The transaction is expected to close in the second half of 2016, subject to customary regulatory approvals.

The investment came from its Blackstone Capital Partners VI, a 2011-vintage vehicle that raised more than $16 billion. Known investors in the fund include the California Public Employees' Retirement System, Canada Pension Plan Investment Board, New York State Common Retirement Fund and the Washington State Investment Board, according to PEI's Research & Analytics division.

Mphasis is an IT services provider offering applications, business process outsourcing and infrastructure. The company generated about $904 million annual revenue as of the end of December 2015 and employs 24,000 staff across 16 countries. Mphasis serves six top global banks, 11 out of 15 top mortgage lenders, and three top global insurance companies.

Amit Dixit, senior managing director and co-head of private equity in India at Blackstone, said: “We see large potential going forward driven by Mphasis’ world-class delivery capabilities and its access to Blackstone’s portfolio of companies across the globe. The company has an experienced management team who has a clear roadmap for company’s growth. With a long-term commitment of company’s largest customer, HPE, we are confident that Mphasis will scale new heights.”

Blackstone has over $330 billion in assets under management. It has invested more than $6 billion in private equity and real estate in India since 2005, including a $384 million acquisition of UK outsourcing firm Serco Group’s operations in India and a $175 million investment in IBS Software late last year.