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Hewlett Packard Enterprise Co. said Monday it plans to sell its stake in Indian outsourcing firm Mphasis Ltd. for about $825 million to Blackstone Group LP, as the U.S. technology company seeks to shore up capital following a recent decline in revenue.

Blackstone Group will purchase at least 84% of Hewlett Packard Enterprise's stake in Mphasis Ltd. for 430 rupees ($6.49) a share, showing the private-equity firm's optimism in the software exporter's prospects even as the industry faces technological challenges.

Blackstone will purchase the remaining 16% of Hewlett Packard Enterprise Co.'s stake via a mandatory tender offer to shareholders, according to a Hewlett Packard Enterprise statement. Depending on the demand for that offer, the deal could be worth as much as $1.1 billion, according to Blackstone.

Palo Alto, Calif.-based Hewlett Packard Enterprise last month reported first-quarter net income of $267 million, or 15 cents a share, down from $547 million, or 30 cents a share, a year earlier. Weighed by currency issues, revenue fell to $12.72 billion from $13.05 billion.

Hewlett Packard Enterprise's decision to sell its position in Bangalore, India-based Mphasis "aligns with our current capital allocation priorities," an HP Enterprise spokeswoman said Monday in a statement. The spokeswoman didn't immediately respond to a request to provide more clarity on those priorities.

"From HP's perspective it makes sense to divest" its stake in Mphasis, said Arup Roy, research director at Gartner in India. The extra cash "gives them some leverage now without affecting their core operations too much," he said.

Hewlett Packard Enterprise was formed in November when Hewlett-Packard Co. split into two companies. The new corporate-technology firm was created along with HP Inc., which focuses on personal computers and printers.

Blackstone lauded Mphasis's "deep vertical expertise" in the banking, financial services and insurance sectors, with profit after tax of about $104 million last year on revenue of about $904 million.

The investment comes as large Indian software exporters, such as Tata Consultancy Services Ltd. and Infosys Ltd., India's largest outsourcers by sales, are dealing with cloud computing and other forces upending their industry. Such firms, which have long relied on inexpensive labor to write code and manage call centers, are trying to reinvent themselves by offering new data-intensive offerings.

India's information-technology services sector is "poised for growth," Amit Dixit, Blackstone's senior managing director and co-head of private equity in India, said Monday on a conference call.

Mphasis's largest client is Hewlett Packard Enterprise itself, according to Blackstone's statement. As part of the deal, the U.S. firm will continue to work with Mphasis for up to 11 years.

One of Mphasis's strengths is in application development and maintenance services, or creating and managing software systems for companies, said Apurva Prasad, an analyst at Indian brokerage Reliance Securities.

Blackstone "probably sees an opportunity" to expand Mphasis's list of clients in order to spur growth, while Mphasis will gain the advantage of having access to Blackstone's portfolio companies, said Dinesh Goel, a partner at the Indian unit of consultancy Information Services Group Inc.

Mr. Dixit said Monday that Blackstone has stakes in around 80 companies world-wide with revenue of $86 billion, and some of these firms could potentially send business Mphasis' way.

Blackstone has been stepping up its investments in India's information technology and outsourcing companies over the past year.

"This is a sector which has delivered very strong returns to Blackstone and other private-equity firms in India," Mr. Dixit said on a conference call Monday.

Blackstone in December said it was paying $170 million for a minority stake in IBS Software, an Indian information technology firm specializing in travel and logistics applications.

In September, it bought back the Indian outsourcing unit of U.K. firm Serco Group PLC for £ 250 million. Blackstone had sold the unit to Serco in 2011 for £ 385 million.

Write to Newley Purnell at newley.purnell @wsj.com and Shefali Anand at shefali.anand@wsj.com

(END) Dow Jones Newswires

April 04, 2016 11:05 ET (15:05 GMT)

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