MFs dominate among 20 buyers of Tech Mahindra shares

BT group Thursday sold shares worth Rs 1,395 crore, accounting for 14.1% shake in Tech Mahindra, pruning its holding to 9.1%

Domestic mutual funds, including Reliance, SBI and ICICI Prudential MFs, purchased shares worth an estimated Rs 1,000 crore in Tech Mahindra -- outpacing foreign investors as well as Indian insurers in buying shares put on block by British Telecom, a promoter in the IT firm.

The UK-based global telecom giant BT group yesterday sold shares worth a total amount of Rs 1,395 crore, accounting for a 14.1% stake in Tech Mahindra, while pruning its holding in the Indian IT firm to 9.1%.

BT said last night that shares were sold to institutional investors, but did not disclose the name of the buyers.

However, the share dealing data with the stock exchanges show that the shares were acquired by more than 20 investors, which included domestic mutual funds and life insurance companies, as well as foreign investors.

While domestic fund houses acquired shares worth an estimated Rs 1,000 crore, the life insurers bought equity worth less than Rs 100 crore. The foreign investors purchased shares worth close to Rs 300 crore.

Overseas investors included Merrill Lynch, Credit Suisse, Copthall Mauritius Investment, Blackrock, a Norway government fund, Master Trust Bank of Japan, Kuwait Government Investment Authority and New Vernon (a India-focussed US based fund).

Among mutual fund investors, shares were bought by Birla, ICICI Pru, Reliance, SBI, Sundaram BNP and DSP Blackrock MFs. The insurers that acquired the shares were HDFC Standard Life, SBI Life, IDBI Life, Birla Insurance and Reliance Life. The acquirers also include Indus and Kotak UK funds.

The transactions happened through close to 40 bulk and block deals on the BSE and NSE, and were managed by global investment banking giants JP Morgan and Credit Suisse.

BT sold a total of 17.9 million shares at an average price of Rs 777.73 per share. Interestingly, most of the life insurance companies purchased the shares at an average price of Rs 775 apiece, lower than some domestic and foreign funds.

BT has said it would consider further share sale in future, but Tech Mahindra would remain a key supplier for it.

BT Group is a co-promoter of Tech Mahindra, with the other being Indian business conglomerate Mahindra and Mahindra (M&M) Group. BT and M&M had set up a joint venture company in 1986 to provide IT services to the telecom sector and this venture later became Tech Mahindra.

M&M has close to 48% stake in Tech Mahindra.

Prior to yesterday's stake sale, BT had a 23.16% holding in Tech Mahindra, while previously it had sold a 5.5% stake in the IT firm to another promoter M&M in 2010.

Tech Mahindra shares fell by over five% yesterday, after hitting an early morning low of Rs 775 -- a price at which many bulk and block deals were struck. The shares rose about 1% today to close to Rs 800.

Investment banking sources said that BT managed to sell more than expected number of shares today, as it was initially targetting to dispose of just 5-10% stake as of now and consider further stake sale at a later stage.

However, the shares managed to get a price better than earlier expectations for about Rs 760-765.

BT has been looking at part-sale of its stake in Tech Mahindra for quite some time, but has been waiting for right market conditions to go ahead.

Tech Mahindra shares hit a 52-week high of Rs 887.70 earlier this week on August 27, prompting the investment bankers to go ahead with the share sale.

The Mahindra group is currently in the process of merging its another IT firm Mahindra Satyam with Tech Mahindra. Shares of Mahindra Satyam, which have also gained considerably in the recent past.

In fiscal ended March 2012, BT purchased services worth 253 million British pounds (over Rs 2,000 crore) from Tech Mahindra, which it terms as a principal associate in India.

The outstanding payment for services as on March 31, 2012 to Tech Mahindra was 51 million pounds (about Rs 500 crore).

In 2010 a cash payment of 127 million pounds (over Rs 1,100 crore) was made to Tech Mahindra for the renegotiation of certain supply contracts as part of the rationalisation of procurement channels within BT Global Services.

Among the major buyers of Tech Mahindra shares, ICICI Prudential MF acquired shares worth over Rs 200 crore each in two deals, while SBI and Reliance MFs bought shares worth Rs 225 crore and Rs 170 crore respectively.

DSP Black Rock got shares worth close to Rs 100 crore, HSBC Global about Rs 128 crore, Copthall about Rs 55 crore, Birla MF about Rs 60 crore and SBI Life about Rs 40 crore.

Norway's Norges Bank (for the account of Government Petroleum Fund) got shares worth about Rs 20 crore, New Vernon about Rs 23 crore Kuwait Investment Authority about Rs 7 crore and the Master Trust Bank of Japan about Rs 10 crore.

Among the insurers, Reliance Life acquired shares worth about Rs 18 crore, HDFC Standard Life Rs 12 crore, while shares worth about Rs five crore each were bought by IDBI Life and Birla Insurance.