Blackstone to acquire majority stake in R Systems for Rs 2,904 crore

Blackstone is buying the promoters' stake for Rs 245 per share, a premium of 3.9 per cent on the current price of Rs 235.8 per share. The promoters will get around Rs 1,496.95 crore

Private equity player Blackstone continues to bet on the IT/tech industry as it announced its plan to acquired majority stake in product engineering firm R Systems for a total amount of Rs 2,904 crore.

Blackstone announced that it is acquiring 52 per cent stake of promoters including the founder Satinder Sigh Rekhi’s stake. Blackstone is buying the promoters stake for Rs 245 per share, a discount of 10.6 per cent to the current closing share price of Rs 271. The company’s share price during pre-market hour was Rs 235.8 per share.

The promoters will get around Rs 1,496.95 crore for their 52 per cent stake at Rs 245 price per share. Dr. Rekhi will continue to guide the company in his role as a non-executive advisor, said Blackstone in a statement.

Blackstone has also launched a conditional delisting offer, at a price of Rs 246 per share. The offer is at a discount of 9.22 per cent to the closing price of the company’s stock.  

The IT/ITeS has been one of the strongest investment thesis for Blackstone in India and globally. In India, Blackstone has made investments of around $ 7 billion into companies like Mphasis, VFS, TaskUs, IBS software, Intelenet, Simplilearn among others.

In 2022, Blackstone closed out VFS for $ 2 billion, ASK Wealth for $1 billion and $300 million in Xpressbees.

Mukesh Mehta, Senior Managing Director at Blackstone, said: “As a leader in outsourced software product development, R Systems is well-positioned to benefit from digitalization tailwinds, shorter product launch cycles and increased openness to outsource product development. This investment follows Blackstone’s long-standing conviction in IT services and builds on the firm’s robust track record in the sector globally.”

R Systems, founded in 1993 by Satinder Singh Rekhi, specializes in product engineering, and serves over 250 customers in technology, media, telecom, and financial services sectors globally. The company is employing over 4,400 people across 18 delivery centers in North America, Europe, Asia Pacific, and India. R System’s revenue for the last twelve months, as of September 30, 2022, was Rs 1,445 crore (~$189 mm), registering a 36% year on year growth. 

The transaction is expected to be completed in the coming months, subject to customary closing conditions and regulatory approvals.

For R Systems this acquisition will take it to the next level of growth as Blackstone will be able to open its network of clients for the company. “I am excited that our partnership with Blackstone will take R Systems on the path to its next level of growth. Today, R Systems is a well-known product engineering brand that attracts top-notch talent looking to work on cutting-edge solutions for our global clients. The company’s management team will be excited to welcome Blackstone and benefit from their scale, expertise, and global track record in IT services. Our employees, customers, and partners will gain immensely from this partnership with Blackstone. I am happy for my new role as an advisor to the company under Blackstone’s ownership,” said Rekhi, CEO, R Systems.

BDA Partners acted as the financial advisor to the sellers of R Systems. AZB & Partners acted as legal advisor to the sellers. KPMG, Cyril Amarchand Mangaldas and Simpson Thacher & Bartlett acted as advisors to Blackstone.  

Some of the earlier investments by Blackstone in Indian tech ecosystem:

• Blackstone total investment in India $60bn
• Investment in tech/ITeS $ 7 Bn 
• Invested in Mphasis around $2.8bn
• Invested $2bn in VFS
• TaskUs IBS software, Intelenet, Simplilearn among others