Calcutta, Oct. 25: Power generator CESC Ltd today acquired a controlling stake in BPO firm Firstsource Solutions Ltd for Rs 393 crore.
CESC, owned by Sanjiv Goenka, the younger son of Rama Prasad Goenka, will have a 49.4 per cent stake in Firstsource. The BPO clocked a Rs 2,250-crore revenue and Rs 62-crore profit last fiscal.
The power firm is looking to tap new areas as opportunities in the energy sector are drying up following uncertainties in natural resource allocations.
“The opportunity in power is limited. We wanted a new growth driver when this came up,” Sanjiv Goenka said, adding that the existing management will stay and the name of the company remain the same.
According to Goenka, the low operating profit of the BPO firm provided a scope to scale up. Goenka will join the board and is likely to be appointed chairman.
The deal has two parts — issuing fresh shares on a preferential basis to shore up the capital base and equity sale by the three existing shareholders.
Firstsource, originally promoted by ICICI, will issue Spen Liq Private Ltd, a wholly owned subsidiary of CESC Ltd, 226,897,444 shares at Rs 12.10 on a preferential basis, comprising a 34.5 per cent stake of the enhanced share capital of the company. This transaction is valued at Rs 273 crore.
Three existing shareholders — ICICI Group, Temasek and Fidelity — will sell a 5 per cent stake (of the enhanced share capital) each to Spen Liq at the same price, putting the value at Rs 120 crore.
Following the deal, Spen Liq and persons acting in concert will make an open offer to the existing shareholders of Firstsource, including retail, for another 26 per cent stake at Rs 12.20 per share, according to Sebi’s new takeover regulations.
The CESC stock today closed at Rs 332, down Rs 10.35, or 3.02 per cent, after touching a year’s high of Rs 345 on the BSE.
CESC will have to spend another Rs 250 crore if the open offer gets fully subscribed.
The Firstsource stock jumped Rs 1.01, or 7.63 per cent, to Rs 14.24 on the BSE even as the benchmark Sensex rose 0.26 per cent.
Firstsource will use the funds from the sale of fresh shares to pay holders of foreign currency convertible bonds.
Goenka said Firstsource had Rs 750 crore cash on its books, besides Rs 273 crore from preference shares. “There will still be a shortfall of about Rs 150 crore. But financing arrangements are in place to pay off this amount as well,” he said.
The zero-coupon FCCB bonds, issued during the stock market heydays of December 2007, are due for redemption on December 4, 2012.
Goenka said the induction of a strong promoter group such as CESC would go a long way in raising the BPO’s profit margin.
“We had appointed consultancy McKinsey to chart a road map for the group and it had identified the BPO sector as one of the verticals for growth,” he said.
Goenka said CESC had enough internal accruals to finance the deal even as a small amount could be debt.
This is the first acquisition by Sanjiv Goenka after he split with his elder brother Harsh two years back and came up with a new corporate identity, RP-Sanjiv Goenka Group.
In a statement, Rajesh Subhramaniam, MD and CEO of Firstsource, said, “We are excited to have RP-SG Group as our largest shareholder, given their lineage and solid foundation in creating long lasting businesses. With strong business fundamentals and patronage, Firstsource will now be able to accelerate further growth in its business segments. This is an important step in bolstering stakeholders’ confidence in the company.”