Bain Capital buys stake in QuEST Global Engineering

Private equity player Bain Capital is set to expand its portfolio in the Indian information technology services space by acquiring a stake in engineering services company, QuEST Global Engineering.

According to multiple sources privy to this development, Bain Capital is learnt to be closing around $400-500-million (approx. Rs 2,600 cr - Rs 3300 cr) investment in the Bengaluru-based engineering services company which counts marquee clients in the aviation and automotive space such as Pratt & Whitney, Rolls Royce, Boeing and Airbus. Bain would buy out Warburg Pincus, a long-time investor in QuEST, apart from acquiring fresh shares issued by the company at a valuation of around $1 billion (approximately Rs 6640 crore). "The deal is almost final," industry sources said.

Warburg Pincus which had invested $75 million in QuEST Global in 2010 holds 25 per cent in the company.

In reply to a query, a spokesperson of the Bengaluru-headquartered said, "QuEST Global is committed to delivering best-in-class engineering solutions and as a policy does not respond to speculations pertaining to investment activities." Bain Capital could not be reached for its comments.

For Bain Capital, this would be one more large investment in the Indian technology outsourcing services space. The company already holds 30 per cent in NYSE-listed business process outsourcing services company Genpact in which it had invested around $1 billion in 2012.

Founded in 1997 by Ajit Prabhu and Aravind Melligeri, QuEST Global is one of the largest pure-play engineering services companies with an estimated revenues of over $290 million (Rs 1,700 crore). It does not include the revenues from its recent acquisitions including Kochi-based NeST Software which it acquired in November last year for over Rs 500 crore.

Sources said with this large investment round, the company is looking at growing its capabilities through acquisitions as well as expanding its reach to newer markets.

In the last couple of years, QuEST has made several acquisitions including Beeken TechQuest, a US-based firm focused on engineering outsourcing in the oil & gas segment, and EDF GmbH, a Munich-based automotive engineering services and prototyping company.

"To emerge as the most trusted and long term engineering solutions providers for our customers, we are constantly on the lookout for assets with outstanding engineering capability," Ajit Prabhu, CEO of QuEST Global was quoted in one of the company's earlier releases.

Engineering and research and development (ER&D) is one of the fastest growing segment in the IT services segment. According to industry body Nasscom, ER&D export revenues from India is expected to touch $37-45 billion by 2020, up from an estimated $12.4 billion in FY14. Apart from pure-play engineering services companies like QuEST Global, Cyient (formerly Infotech Enterprises) and L&T Technology Services, most of the large and mid-sized IT services companies including TCS, Infosys, HCL Technologies and Wipro also offer engineering services as a part of their overall service offerings.

A GIANT STEP

• This could be Bain Capital's second largest investment in the IT technology space
   
• PE major invested $1 bn in BPO services firm Genpact in 2012
   
• Deal would see an exit of Warburg Pincus which holds around 25% in QuEST
   
• Deal values QuEST Global at $1 bn