Mumbai, April 4: Blackstone is buying a majority stake in Mphasis, an Indian IT outsourcing services provider, from Hewlett Packard Enterprise in an up to Rs 7,071-crore ($1.1-billion) deal.

The all-cash transaction - the biggest private equity deal in the country - 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 will acquire the entire stake (60.5 per cent) held by Hewlett Packard at a purchase price of Rs 430 per share. It will also make an open offer to buy an additional 26 per cent at a price of Rs 457.54 per share.

Based on the open offer subscription, the purchase price will vary between Rs 5,466 crore and Rs 7,071 crore ($825 million-$1.1 billion).

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 managing director in India.

"This sector is also poised for good growth ... and especially digital services, an area in which Mphasis is strong," he said on a conference call.

However, the deal failed to enthuse the stock markets.

Shares of Mphasis, which have gained more than 11 per cent from the beginning of March till end of last week in anticipation of a deal, fell 2.9 per cent on Monday to close slightly below the open offer price at Rs 454.90 on the National Stock Exchange. On the Bombay Stock Exchange, the share fell 2.77 per cent to Rs 454.45 from Friday's close of Rs 467.40.

Investors were disappointed because the acquisition price came at a discount to the closing price of the share last Friday.

HP's exit had worried analysts as it accounted for as much as a quarter of the Indian company's revenue.

But Blackstone has ensured that HP maintains its commercial partnership with Mphasis. The Indian company has signed a five-year revenue guarantee of at least $990 million through sales to HP, the companies said.

The duration of the agreement is five years with three automatic renewals of two years each.

Mphasis will also be included in HP's preferred provider programme which is expected to open up significant additional revenue opportunities.

Sources said Blackstone was the frontrunner in an auction run by HP for its Mphasis stake. HP had been looking to exit from the Indian venture to shore up its capital.

Tech Mahindra and private equity fund Apollo Global Management were also in the race.

Mphasis's last twelve months revenue as of December 31, 2015 was at Rs 5,999.6 crore ($904 million) with a net profit of Rs 692.3 crore.

Dixit said HP accounts for over 27 per cent of the revenue, which is slated to touch $1 billion this fiscal for the Bangalore-based company that has expertise in banking, financial services and insurance (BFSI) sector and a strong portfolio focus on new generation services, including digital solutions.

The company has roughly 24,000 employees across 16 countries. He added that while Mphasis has reduced its dependence on the business coming from HP, non-HP business has been growing at 20 per cent year-on-year.

The sale is expected to complete in the coming months, subject to customary closing conditions and approvals.

"We see large potential going forward driven by Mphasis's world-class delivery capabilities and its access to Blackstone's portfolio of companies across the globe," Dixit said.

India's IT and software services export revenue is likely to grow 10-12 per cent in the financial year beginning April 1 to as much as $121 billion, according to trade body National Association of Software and Services Companies (Nasscom).