PEs in race to buy Geometric from Godrej

Stock up 40% in a month over takeover buzz

Shares of mid-cap infotech firm Geometric Ltd have shot up 40 per cent in the past month over speculation the company is being taken over by a clutch of private equity funds.

Speculation was rife after the company announced on May 27 that insiders had been banned from dealing in its shares from June 1 to July 24. On Monday, the company's stock was up another five per cent.

In a notice to the stock exchanges, the Godrej-owned company said no company director, employee or officer will trade in the company's shares for close to two months. This statement led to a speculation that a deal was close for the sale of the promoters' 39 per cent stake in the company.

Private equity players, including Apax Partners, had shown interest in Geometric after talks with top infotech companies failed over valuations, bankers said. When contacted, a Geometric spokesperson said as a policy, it does not comment on market speculation. The spokesperson said trading had been suspended over results for the June quarter. A source in Apax Partners said Geometric was too small for it to make an investment.

Bankers said mid-sized infotech and outsourcing companies in India were up for sale as their valuations had improved and bigger companies were undercutting smaller players. They added Geometric was on the block for quite some time but Indian infotech majors did not buy the company after due diligence.

In the March quarter, Geometric's revenue declined by 0.7 per cent, quarter on quarter, to Rs 273.4 crore and its earnings before interest, tax, depreciation and amortisation (EBITDA) margins declined by 2.18 percentage points to 16.7 per cent due to a payout to consultants. Its profit after tax (PAT) declined 10.5 per cent to Rs 6.73 crore due to higher tax rates and loss on asset revaluation.