N Shivapriya & Rashmi Pratap, Mumbai
The Economic Times
UK telecom major British Telecom (BT) is learnt to have put the sale of its stake in Tech Mahindra on the back burner following the dramatic collapse of Wall Street’s giants.
“BT has temporarily put the process on the hold because of bad market conditions,” sources told ET. Although the market was bearish when BT had initiated discussions for the stake sale, there was no crisis of the current scale and impact. “BT would not like to sell in such a market,” said the source.
The telecom operator was earlier in discussions with a few top private equity players to sell part of its stake, and buyout firm, Kohlberg Kravis Roberts & Co (KKR), was reported to be among the top contenders. Tech Mahindra scrip closed at Rs 609.35 on Monday, down 2.54 percent from its previous close. At this price, the market capitalisation of the company is around Rs 7,425 crore, valuing BT’s 31 percent stake at Rs 2,301 crore.
“The stock price is much below the Rs 750 levels that it had reached in July this year when BT was actively considering sale. In the current market scenario, a sale will not give BT the desired returns as it will fail to capture the real value of the company,” said another source. “BT will wait for the market to stabilise,” he added. In response to a questionnaire from ET, a BT spokesperson stated, “BT does not comment on rumour and speculation. BT has operations and investments worldwide, which we regularly review. India remains a critical market both for BT and our customers, and we expect to continue developing both the operational network and service presence that we have established over a number of years.”
A Tech Mahindra official said, “The company does not comment on market rumour and speculation.” BT is Tech Mahindra’s number one customer contributing over 60 percent of revenues. It has committed business worth over $2 billion to Tech Mahindra. The two partners have enjoyed a good relationship and there was no immediate trigger for BT’s decision to sell part of its stake, excepting to monetise its value. BT’s profits have been under pressure and analysts had said this was one of the more immediate motivations. The Tech Mahindra stock had hit a high of Rs 1,550 in October last year and has been slipping after that.
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