The fate of Baring Private Equity Asia’s bid to take Hexaware Technologies private hangs in the balance. As of Monday, around 58 million shares were tendered by public shareholders of the information technology (IT) firm in the reverse book building (RBB) process — a method used to arrive at an exit price for delisting.
Private equity major Baring would be hoping that another 25 million shares are tendered on Tuesday, when the RBB process closes.
For any delisting bid to be successful, the promoter needs to acquire at least 90 per cent shareholding. Currently, Baring holds 62.3 per cent stake in Hexaware. To take its shareholding past the 90-per cent mark, it will have to acquire at least 27.6 per cent, or 82.7 million shares, from the public shareholders.
Sources say HDFC Mutual Fund, Invesco, and T Rowe Price are among the institutional shareholders who have already tendered their bids. A bunch of other institutional shareholders are expected to tender their shares on the last day.
Another key factor would be the exit price. The bids received so far suggest that the delisting price could be Rs 475, 12 per cent higher than Hexaware’s last close of Rs 424, and nearly 80 per cent more than the base price of Rs 265 set by Baring. Most of the large shareholders have placed bids at or below Rs 475.
The discovered price is the maximum price at which the promoter shareholding crosses the 90-per cent mark. So far, Hexaware has got 58 million bids at Rs 475 or lower. If Hexaware fails to get 82.3 million bids, the delisting will fall through.
The discovered price also has to be acceptable to the promoter. Like in the previous delisting bid of INEOS Styrolution India, the promoters can reject the delisting price if it is too high. If the promoters reject the price, they have the option of making a counter offer, which, if acceptable to public shareholders, will result in successful delisting.
While most delistings happen at a premium to the floor price, analysts said 80 per cent premium is higher than some of the past delistings in the IT sector.
Often share prices tend to fall if the delisting bids fails like it was seen in the case of INEOS in July.
Market observers say small shareholders also hold the key to delisting. According to the June quarter shareholding pattern of Hexaware, individual shareholders held nearly 20.5 million, or 6.85 per cent, stake in the company.
“It is crucial that retail shareholders also bid in the RBB process, given their substantial holdings. More importantly, they have to place informed bids if the delisting has to be successful. Irrational bids would derail the delisting process,” said an analyst.
The bidding data on the BSE shows that RBB got a few hundred bids for more than Rs 1,000.