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Tuesday, November 8, 2011

WNS lines up FPO, most likely to facilitate Warburg’s exit

This story first appeared in DNA Money edition on Thursday October 13, 2011.

WNS, the New York Stock Exchange-listed business process outsourcer, has filed a shelf registration statement with the Securities and Exchange Commission (SEC) to offer and sell up to $50 million of ordinary shares/ American depositary shares (ADS).

That could give private equity major Warburg Pincus a chance to exit its majority shareholding in the company.

The sale could be done in one or more offerings, WNS said in a statement.

Shelf registration is a regulation that a corporation can evoke to comply with SEC requirements for a new stock offering up to three years before doing the actual public offering.

Vishal Mahadevia and Niten Malhan, managing directors at Warburg Pincus India, were not available for a comment. “The firm is bound by internal operational policies, which does not allow discussion of its investment activities. Warburg Pincus is unable to share any views regarding your queries,” a spokesperson responded.

Parth Iyengar, head of research, Gartner India, said the move may not necessarily be indicative of the private equity firm’s exit from WNS. He said economic instability in western world may be forcing Warburg Pincus to look at monetising its stake in the BPO firm. “It must be concerned about the economic instability and so must be considering monetisation some of its shareholding in WNS before its value depreciates more.”

Generally, when an investor is looking to exit a venture the shelf registration is for offloading of major stakeholding and in a trickle like it was in the case of WNS, said Iyengar.

Once approved by the SEC, the shelf would allow Warburg Pincus, which is the largest shareholder in WNS holding 48% as of June 30, 2011, to offer and sell up to 2.14 crore ordinary shares or ADSs.

It will be up to the private equity firm to exit its entire holding in the company through one or more offerings.

WNS will not receive any proceeds from the sale by Warburg Pincus.

Keshav Murugesh, group chief executive officer, WNS, did not give away specifics related Warburg’s exit plans.

“The shelf will provide us the flexibility to sell shares as and when required to achieve our strategic objectives and fund our growth plans including capital expenditures, acquisitions and other investments in the business,” was all he conceded.

Interestingly, Warburg has been trying to exit its investment in WNS for a while now, but wasn’t able to, because of disagreement with the WNS management over the exit approach.

According to media reports, WNS was favouring Genpact, which was one of the largest bidders in a stake sale exercise conducted in the last quarter of 2009.

However, Genpact’s bid was in the form of stock and not cash while the PE firm (Warburg Pincus) was looking at the highest bidders offering cash in favour of their investment.

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