MindTree picks 32.57% stake in IT co Aztecsoft

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Bangalore, May 2 : In one of the largest deals in the domestic IT sector, software services and R&D firm MindTree Ltd has acquired 32.57% stake in outsourced product development firm Aztecsoft Ltd for Rs 117.24 crore in an all-cash deal from its promoter and largest shareholder, Mauritius-based E4E Holdings Ltd.

As per the agreement, MindTree will pay E4E Rs 80 per share for Rs 3 per share par value, putting $90 million (approximately Rs 360 crore) valuation on Aztecsoft.

As per the norms, MindTree will also make an open offer for acquiring 20% to Aztecsoft's shareholders. The open offer process is expected to be complete by August and the entire merger, subject to customary regulatory filings, clearances and approvals, is expected to close in 14-15 months from now. "It is one of the largest consolidation in the Indian IT industry. The funding will be done through internal cash reserves. We consider this to be a fair price," MindTree chairman Ashok Soota said here on Friday. As on March 31, 2008 MindTree had a cash reserve of Rs 200 crore, while Aztecsoft had a cash reserve of Rs 75 crore.

Scrips of both the companies showed upward movement on Friday with MindTree shares closing at Rs 484.40 on the NSE, up Rs 17.25 or 3.69% from the previous day's close, while Aztecsoft shares were up 2.95% to close at Rs 78.40. Soota also said there would be no change in the earnings guidance given by both the Bangalore-based, listed firms.

"We are not anticipating any changes in guidance for fiscal 2009 and will run it as two separate companies. There is no impact on the margins too," Soota said.

MindTree has an operating margin of 18%, while Aztecsoft has 14%.