BT reduces stake in Tech Mahindra through $251 million block

After completion of the deal, which was enlarged from the original base size of $100 million, BT says it may consider further sales in the future.
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BT cuts its stake in India’s Tech Mahindra to 9.1% (AFP) </div>
<div style="text-align: left;"> BT cuts its stake in India’s Tech Mahindra to 9.1% (AFP) </div>

British Telecommunications (BT) has sold a Rs13.9 billion ($251 million) stake in Tech Mahindra through a block trade, more than halving its holdings in the Indian company.

The UK telecom operator initially planned to sell $100 million worth of shares, with an upsize option of a further $50 million, but sources said that the deal size was increased due to strong demand.

The sale, which was launched on Wednesday evening and completed yesterday, will reduce BT’s stake in the Indian IT company to about 9.1% from 23.16%. BT is a wholly owned subsidiary of BT Group, which is listed in London and New York.

Tech Mahindra is a solutions and services provider to the telecommunications industry.

It was incorporated as a joint venture between Indian conglomerate Mahindra & Mahindra and BT in 1986, and was listed on the Bombay Stock Exchange and the National Stock Exchange of India (NSE) in 2006. However, a majority stake is still owned by Mahindra & Mahindra in partnership with BT.

In this latest deal, BT sold 17.9 million shares (a 14.1% stake) at an average price of Rs777.73, the UK company said in a statement yesterday. The price implies a 6.8% discount versus Wednesday’s close of Rs834.90 on the NSE. The deal was marketed in a range between Rs775 and Rs790, which represented a discount of between 5.4% and 7.2%, according to a term sheet. The initial deal size comprised a base deal of 7.2 million shares plus an upsize option of 3.6 million shares.

The deal attracted high-quality long-only demand from Asia and India, with some accounts from the US participating as well, one source said.

Most of the demand came towards the bottom of the price range and the intention was to price at Rs775, another source noted. However, as the shares were crossed in several batches during yesterday’s trading session, the price migrated slightly higher, resulting in a final average price of Rs777.73.

Tech Mahindra’s share price fell 5% yesterday to Rs793.05. So far this year, however, it has jumped 39%, outperforming a 15% climb in the National Stock Exchange S&P CNX Nifty Index during the same period.

The deal was launched at around 8:30pm Hong Kong time on Wednesday, and was kept open until around 5:00am yesterday to allow plenty of time for US investors to participate. Investors also had to be informed that the deal size had been increased, the second source said.

Credit Suisse and J.P. Morgan were managing the transaction.

BT said in the statement yesterday that Tech Mahindra remains a key supplier to BT, but further sales may be considered in the future. Its current 9.1% shareholding is valued at about $164 million, based on yesterday’s closing price.

In 2010, BT sold a 5.5% stake in Tech Mahindra to Mahindra & Mahindra. BT said at that time that “while further sales may be considered in the future, BT expects to continue to have a shareholding in Tech Mahindra for some time”.

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