Citi in parleys to exit Northgate, Tanla & Havells, besides Polaris

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Chennai: Citibank is in talks with leading IT players to sell its stake in at least four mid-sized information technology firms—Polaris Software Lab, Northgate Solutions, Tanla Solutions and Havells India.

“Citibank has started initial talks with a couple of companies to offload its non-strategic stake in mid-cap IT companies such as Polaris, Northgate, Tanla and Havells. The talks are in a very preliminary stage. The companies which are interested in Citi’s stakes in software firms include IBM, HCL and Wipro”, a source told FE.

In several bulk deals from October, Citibank has sold 1.98 crore shares of Tanla Solutions at Rs 119 each. The bank has also sold 1.8 crore shares of Havells India at Rs 217.5 a share. But in Northgate, the bank has increased its holding on November 26 by 5,38,240 shares after it had sold 8,40,597 shares earlier.

The gradual stake sale by Citi is aimed at liquidating its non-strategic investments to improve its cash flow, narrowed by the sub-prime related losses the bank had suffered in the US mortgage market. The level of “toxic assets” in the bank’s balance sheet is about $305 billion, according to media reports. While Citibank holds 43.33% stake in Polaris, its holding in Tanla Solutions as at the end of September quarter stood at 8.75%, Northgate at 5.32% and Havells India at 4.56%.

For Citi, exiting Polaris could be difficult as Polaris has the first right of refusal in any such divestment. Arun Jain, chairman & managing director of Polaris, and his associates hold a 28% stake in the company.

According to the source, Citi has, however, opened initial parleys with a number of investment bankers representing various domestic and foreign companies to divest its investments in non-core businesses, including investments in several mid-cap IT companies. There was no response to an e-mail from FE to Citibank, while a Polaris spokesperson denied any such development.