Blackstone Group LP had struck a neat deal when it bought a majority stake in Mphasis Ltd in 2016. The deal was at a 30-35% valuation discount to similar-sized companies such as Mindtree Ltd and Hexaware Ltd. Now, almost five years after it announced the deal, it is sitting on profits of nearly 300% on the investment. But as of now, it is just on paper.
As news reports suggest, a plan to exit the investment and book these profits hasn’t worked out. Blackstone, evidently, wants to make the most of the momentum at Mphasis, where growth rates in the core business have far surpassed those of peers. In other words, in contrast to the discount it got when it purchased the stake, it is looking to exit at a premium. “At the current market price, Mphasis’s valuation is higher than the peak valuation for a strategic sale of an Indian outsourcing firm,” says an analyst at a domestic institutional brokerage.