MUMBAI--The billionaire founder of HCL Technologies Ltd. is
sounding out buyers for his $10 billion stake in India's
fourth-largest software and outsourcing firm, two people briefed on
the matter told The Wall Street Journal, in what could be the
biggest sale of an Indian company so far.
The smallest and youngest of India's big four information
technology groups, HCL was founded by Shiv Nadar in 1991. Mr. Nadar
has received bids for HCL in the past but has long said that he has
no plans to sell. But now, the 69-year-old is open to considering
selling his stake because his only child, daughter, Roshni Nadar,
isn't interested in continuing in the technology business, one of
the people said.
Ms. Nadar, 32, a graduate of Northwestern University in Chicago
where she concentrated on television production and journalism,
sits on the HCL Technologies board, and is the chief executive of
its holding company HCL Corp.
Shiv Nadar controls 62% of Bombay Stock Exchange-listed HCL, and
has yet to hire bankers to advise him on a sale, the people said.
Mr. Nadar will only formally appoint advisers if he is satisfied
with the potential offer, the people said. HCL Corp. Friday said it
had no plans to exit. This after news of the planned sale was
published.
"HCL Corp. denies any plans to exit HCL Technologies," the
holding company of HCL Technologies said in a statement. HCL Corp.
also owns Mumbai-listed computer hardware distributor HCL
Infosystems Ltd.
HCL, along with bigger peers Tata Consultancy Services Ltd.,
Infosys Ltd., and Wipro Ltd., has been buoyed by the pickup in the
U.S. economy and the weaker rupee, because it earns a chunk of its
revenue from the U.S. HCL posted a 39% net profit gain, in U.S.
dollars, for the three months ended December.
If Mr. Nadar sells out, HCL will be joining a host of India's
outsourcing giants that have seen a shake-up at the top. Last year,
Infosys, which had been struggling to expand revenue, brought its
chairman and co-founder N.R. Narayana Murthy back from retirement
to revive the firm's sagging fortunes. He brought his son, Rohan
Murty, into the company as an adviser last June.
Wipro founder Azim Premji has also brought in his son Rishad
Premji into the company. Tata Consultancy Services, a unit of giant
Indian conglomerate Tata Group, is the only one of India's big four
IT firms that hasn't shuffled its management in recent years. It is
run by executives who aren't related to the company's founders.
Proceeds from a sale by Mr. Nadar would be invested in HCL's
health-care and education businesses that his daughter is
spearheading, both people added. The Shiv Nadar Foundation, of
which Ms. Nadar is a trustee, is already active in supporting
education initiatives. The foundation runs an engineering college
in the southern Indian city of Chennai and the Shiv Nadar
University in the northern Indian state of Uttar Pradesh. The
foundation also runs schools that teach impoverished children
free.
In February, HCL Healthcare, a recently formed unit of HCL Corp.
said it would invest $161 million over five years into the
health-care and well-being business. HCL Healthcare runs a
health-care delivery unit called HCL Avitas, which has collaborated
with Johns Hopkins Medicine International to run multi-specialty
clinics across India.
Mr. Nadar's son-in-law. Shikhar Malhotra, is the vice chairman
of HCL Healthcare and the chief executive of Shiv Nadar School--a
not-for-profit K-12 school initiative of the Shiv Nadar Foundation
that aims to establish 25 schools across India by 2020. He is also
a director and a board member of HCL Corp. Mr. Malhotra "drives
[the foundation's] strategic initiatives and future road map,"
HCL's website said.
If the sale happens and a tender offer for additional shares
held by minority shareholders is made in compliance with local
rules, it could be the biggest stake sale in India ever. The
biggest acquisition of an Indian company was in 2007, when Vodafone
Group PLC agreed to pay $12.9 billion for a majority stake in
Hutchison Essar Ltd.
The most recent such exit in the technology sector was when
Baring Private Equity Asia agreed to buy a 68% stake in Indian
software company Hexaware Technologies Ltd. for about $434 million
from founder Atul Nishar and General Atlantic LLC in August
2013.
In January 2011, the founding brothers of Patni Computer Systems
Ltd. sold their stake to a private-equity-led consortium in a deal
valued at $1.22 billion. India's tech sector is a favorite of
foreign investors, however, and was where most deals in the country
took place last year. Data from Dealogic showed that there were 47
acquisitions of stakes in Indian tech firms last year valued at a
total of $788 million, the highest in terms of deals among any
sector.
Indian founders who held on tightly to their ventures have
increasingly found their children unwilling to take on the mantle
of the family business. Most of the billionaire kids have trained
in top colleges in the U.S. and want to start their own or new
ventures.
After interning with television channels CNBC TV18 in India and
CNN in New York, Ms. Nader worked for a year-and-a-half at Sky News
in London. In 2006, Ms. Nadar decided to pursue her management
program in social enterprise and management and strategy from the
Kellogg School of Management at Northwestern in Evanston, Illinois.
"That's where the world of philanthropy came about," Ms. Nadar said
in a November interview with The Wall Street Journal.
HCL Technologies' stock price has more than doubled to 1,490
rupees ($23.97) a share in the past 12 months on the Bombay Stock
Exchange, data showed. It earned a revenue of more than $5 billion
for the calendar year that ended in December.
However, an investment professional questioned whether there
would be any takers as Mr. Nadar would expect a premium over the
market price to hand over control. Also, under current Indian
rules, any acquirer must offer to buy a 25% stake in the company.
That could cost an additional $4.21 billion and would take a
potential acquirer's stake to 86.75% if all minority shareholders
agree to sell their shares.
But local laws also require that no majority shareholder or
founder own more than 75% in a listed company. That would leave a
potential acquirer a tough choice--delist HCL Technologies by
paying another $2.2 billion, or sell part of its stake to bring its
shareholding in line with statutory requirements. Under Indian
takeover rules, anyone buying more than 26% needs to offer to buy
an additional 25% from minority shareholders.
The other alternative for a potential buyer would be to acquire
only 50% of Mr. Nadar's stake, which is valued at about $8.4
billion at current market value. But they still have to make a
tender offer if they acquire 26% in a company.
Dhanya Ann Thoppil in Bangalore and R. Jai Krishna in New Delhi
contributed to this article.
Write to Kenan Machado at kenan.machado@wsj.com
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