Report: Hewlett Packard Enterprise To Auction Mphasis Off To Private Equity, Foreign IT Titans
Hewlett Packard Enterprise has initiated an auction process to sell its majority stake in $1 billion IT solution provider Mphasis, according to a media report.
The Times of India reported that HPE has brought on banking giant Citigroup to manage the process of selling off its 60.5 percent stake in Bangalore, India-based Mphasis. A spokeswoman for HPE and Mphasis said their companies do not comment on rumors or speculation.
Mphasis' stock fell 0.2 percent Monday to $7.01 per share. The Times of India report came out before India’s National Stock Exchange (NSE) opened Monday.
[Related: Mphasis Launches Customer Experience Management Solutions To Capture Digital Opportunity]
Mphasis' expensive stock, falling HPE revenue and concerns around margins of Mpahsis' non-HPE business could make the company a tough sell to private equity firms, sources told The Times of India. Mphasis' size is a plus, though, for potential suitors, according to the publication, especially if new ownership is able to revamp the business.
Hewlett-Packard nearly began work two years ago to sell Mphasis, according to the Times of India, but ultimately held off for internal reasons. Media reports since then have floated that Mumbai, India-based L&T Infotech, Tokyo-based NEC Corp. and Pune, India-based Tech Mahindra are potential suitors, along with private equity behemoths the Carlyle Group of Washington, D.C., and Advent International of Boston.
Mphasis has shifted its business away from the Palo Alto, Calif.-based vendor over that time, with Hewlett-Packard going from accounting for 70 percent of Mphasis' revenue three years ago to just 30 percent as of July 2015, according to the company. The financial services vertical has largely filled in HP’s hole, with banking contributing 41 percent and insurance contributing 14 percent to Mphasis' top line.
Mphasis' shift toward big banking has been accompanied by a geographic realignment. The company in 2011 bought Bloomington, Minn.-based Wyde Corp, a solution provider serving the insurance vertical in the United States and Europe, and in 2012 purchased Digital Risk, a Maitland, Fla.-based provider of risk, compliance and transaction management solutions, for $175 million.
Mphasis also sold its India business process outsourcing (BPO) unit in the past year.
Mphasis has been enjoying success in recent months, with year-over-year sales up 4.1 percent for the six months ending Sept. 30, to $473 million. Profits for that six-month period were up 1.8 percent, to $51.1 million.
Those results have been bolstered by several offerings unveiled during 2015.
Mphasis in March launched a Customer Experience Management (CEM) solution to make it easier for customers to adopt digital technology by reducing response times and optimizing the vendor mix to reduce operation costs for customers. The CEM platform incorporates offerings from vendors such as Adobe, MCorp, Lavastorm and Artificial Solutions.
In July, Mphasis rolled out HyperGraf, its first big data analytics solution, which correlates data from social media, credit scores, enterprise, external and third-party entities to provide businesses with a 360-degree view of the customer and gain more insight into the stronger lead, cross-sell and up-sell opportunities.
And in August, Mphasis deepened its presence in the financial services vertical by signing an agreement to provide application management services to the Royal Bank of Scotland (RBS), managing the quality and performance of critical application in RBS' corporate and institutional banking divisions.
PUBLISHED JAN. 11, 2016