Patni Computer Systems raised $140 million on Wednesday night (December 7) via an ADR deal led by ABN AMRO Rothschild, Goldman Sachs and Merrill Lynch. The 6.875 unit issue was priced at $20.34 per unit, which represented parity to the group's Rs469.55 closing share price on India's National Stock Exchange earlier the same day.
The deal was structured as a dual primary and secondary share offering, of which 75% constituted primary shares and 25% secondary shares.
The main vendor is General Atlantic Partners, which drops from 20.99% to 16.82%. pre greenshoe. A further 45% is equally held by the three Patni borothers of whom one is CEO and the other two are non-executive directors.
Should the greenshoe be exercised, the deal will raise $160 million and amount to 8% of the group's enlarged share capital. It represents India's first concurrent ADR of primary and secondary shares and also earns Patni the distinction of becoming first debut issuer to achieve parity pricing to its domestic share price.
Indeed, observers point out that the group's share price rose 6% during the marketing period and is up about 23% year-to-date. Investors will now be hoping it follows a similar trading pattern to larger peers such as Infosys and Wipro, which typically trade at 15% to 20% premium to their local share prices.
The deal accumulated a large order book, which closed 20 times covered with participation by about 250 accounts. By geography, the book split 45% US, 30% Asia and 25% Europe.
The group is currently valued at about 15.5 times 2006 earnings, a steep discount Infosys and Wipro, which are trading at over 30 times. The main reason for this concerns the group's smaller size and lower margins.
Patni recorded revenues of $326 million in 2004, of which almost one third was generated by General Electric - the group's biggest client. As of June 2005, its EBITDA margin stood at 17.5%.
Earlier this year, the group hired McKinsey as a consultant in a bid to improve operational efficiency and help it boost revenues to $1 billion. As a first step it purchased Cymbal Corp in November 2004 to gain access to the telecoms outsourcing sector.