Blackstone buys stake in Mphasis

Blackstone Group is buying a majority stake in Indian IT outsourcing services provider Mphasis Ltd from Hewlett Packard Enterprise Co in an up to $1.1 billion deal, in the US asset manager’s single-biggest investment in India.

The all-cash deal reinforces Blackstone’s bullish outlook on the outsourcing business, where western clients send IT jobs to countries such as India to cut costs. In December, Blackstone announced the purchase of a minority stake in India’s IBS Software for $170 million.

Blackstone is betting that India’s IT industry will continue to grow in double-digits as companies move to high-margin digital services to offset a cut-back in routine IT spending by clients, a senior executive at the firm said. “The reason we have made a strong commitment to the Indian IT sector is because this is a sector which has delivered very strong returns to Blackstone and other PE investors in India,” said Amit Dixit, Blackstone’s senior Md in India. “This sector is also poised for good growth ... and especially digital services, an area in which Mphasis is strong in,” he said on a conference call after the deal was announced.

In what is one of the biggest M&A transactions in the outsourcing sector, Blackstone will pay Rs 430 per share for at least 84 per cent of HP Enterprise Co’s 60.5 per cent stake in Mphasis.