Bfl Software In A Fix As Us Firms Revert Decision
The Bangalore-based BFL Software, a Keshav Bangur group information technology outfit, has run into rough weather following the backing out of two US-based funds from picking up the controlling stake in the company. A hoard of software professionals, including two senior executives, have since quit the company pushing the company into troubled waters.
A senior BFL official attributed "the failed due diligence" exercise to the US companies' decision to walk out on the deal. "Besides, the US funds also realised that the promoters do not posses 65 per cent stake for delivery, sealing the fate of the deal," he said.
KPMG Peat Marvick, the internationally acclaimed accountancy firm which conducted the due diligence exercise, has adversely commented on several claims of the company, it was learnt. KPMG spokespersons, however, refused to comment quoting client confidentiality.
The decision of the US funds managed by Alliance DLJ Equity Fund has, however, caused havoc with the Bangalore-based outfit. In all 79 professionals have since quit the company. A company official, who confirmed the virtual exodus, said "we may see more desertions in the coming days." The managing director of the company, B Venkatesh, was not available for comments.
BFL's growth has been stagnating for the last two years with the company virtually clocking the same level of turnover and profit after tax during the period. It clocked a profit after tax (PAT) of nearly Rs 6 crore on a turnover of over Rs 30 crore in the last two financial year.
Though various suitors, including Infosys Technologies, were eyeing BFL Software, it was the US-based Indian Private Equity Fund which persuaded the matter vigorously. The fund, managed by an ace investment banker George Joesph, has been floated by $3-billion Alliance DLJ of the US. Infosys had, however, issued denials on any such take-over move at a couple of occasions.
Alliance DLJ team had detailed discussions with the promoter group led by Keshav Bangur in February this year to sign an initial agreement. Investment bankers said the US fund had agreed to pay Rs 106 each for Rs 10 share of the company in February, while the market price was hovering around Rs 47-52.
The merchant bankers said the promoters have pledged small parcel of their stake with brokers and others investors to raise funds causing depletion in the core promoters holding, which has now come down to 50 per cent. A company official pegged Keshav Bangurs current holding at nearly 47 per cent. "If the deal could be salvaged even at this late hour, the promoters could shore up their stake to around 62 per cent," he said.
But the hopes of a resurrection of the deal hinges largely on a fresh due diligence exercise followed by hard bargaining by the US company.
The US fund still believe the company and its quality manpower command a premium, and the company remains a good take-over target, "only if the entire stake of promoter comes in one parcel and at a right price," said an investment banker.