Patni - no stake sale

Mumbai-based Patni Computer System’s stake sale has been stalled, perhaps indefinitely, according to sources close to the development.

The reason for the delay has been attributed to a lack of “common meeting ground” between the brothers. “While the two brothers kick-started the stake sale, they now do not want to dilute their entire stake in the company and want to continue having some rights and privileges in the company,” said the source.

It has been rumoured that private equity players such as the Texas Pacific Group and Apax Partners were in the final lap of purchasing the shares of the two Patni brothers and that due diligence was in progress.

The two Patni brothers — Ashok and Gajendra — who want to sell their stake, together own about 29 per cent stake in the company, which is the country’s sixth largest IT services company. While General Atlantic Partners, which holds a 16.38 per cent stake in the company, has no plans to exit in the immediate future, as a financial investor, it will consider a stake sale if the price is attractive. Other institutions holding stake in the company include Merrill Lynch and UBS. However, any stake sale will be possible only after receiving Narendra Patni’s consent since he has the first right of refusal. Sources said that even if Narendra Patni did agree to a stake sale by his brothers, he was unwilling to give up control over the company. The company’s stock today closed at Rs 442.25 on the BSE – down 2.21 per cent over the previous close. The stock reached its 52-week high of Rs 572 on May 29.

An increased focus on margin improvement during the previous few quarters resulted in the IT major posting a net income (consolidated) of Rs 134.7 crore ($33.2 million) for the second quarter ended June 30, 2007 — an increase of 98.9 per cent compared with Rs 76.6 crore ($16.7 million) for the same quarter last year. Revenues for the quarter touched Rs 662.8 crore ($163.3 million) — a rise of 14.2 per cent from Rs 656 crore ($143 million) year-on-year.