Four months after iGate announced the delisting of Patni Computer Systems, it seems the plan may come a cropper.
Nasdaq-listed iGate feels the delisting would be nearly impossible. “It’ll be the easiest process or an impossible one because I know what price we are going to pay for the buyback. But there is a fund with a large stake in the company. If it agrees for this price (Rs 450), then it is very easy. But if it doesn’t, then it is never going to happen and we are going to pull off the delisting,” said Phaneesh Murthy, chief executive and managing director, iGate-Patni.
US-based hedge fund Elliott has increased its stake in the company through its funds in Mauritius, Suffolk and Mansfield. Both these entities hold 6.12 and 3.29 per cent, respectively, taking the total holding to 9.41 per cent.
The capital market regulator is also inquiring if the delisting of Patni is possible without lowering promoter stake to 75 per cent as mandated by law. Some minority shareholders of Patni had approached the Securities and Exchange Board of India last year, alleging iGate had violated norms by announcing the delisting without first paring its stake from 83 per cent to 75 per cent.
“Only after getting the regulator’s approval, can we plan to go forward with the delisting process. The government had some queries and we had replied to that. Now, we are waiting for the final nod,” Murthy told Business Standard.
iGate acquired Patni in early 2011 for $1.2 billion. It also arranged for a debt of $215 million to fund the share purchase. “Based on affordability and the current share price of Patni, my confidence is low that we can pull up and do the delisting very soon. As of now, we can only afford $215 million for the buyback. Anything more than that means it is unlikely to be able to delist Patni,” he said.
The other problem is the rising share price of Patni. When iGate announced the delisting plan in November, the Patni share was trading at a floor price of Rs 350. iGate had said it might offer a buyback price in the range of Rs 400 to Rs 450 a share. But the share soared to a 52-week high of Rs 502 on the Bombay Stock Exchange. The share is trading in the Rs 470-480 range. iGate, which owns 83 per cent of Patni, has to buy back 17 per cent of the company’s shares through an open offer.
“We are not in discussions with anybody on the buyback. The regulatory consensus is the primary step for any further action. After that, we have a year to plan and do the transaction,” he said. “We have taken enough debt and can’t afford more. If nothing works out for us, then we may even cancel the plan of delisting. Technically, delisting can be done at any point of time.”