Global telecom giant BT Plc on Thursday sold 14.1 per cent stake in Tech Mahindra to institutional investors for about Rs 1,395 crore and said it would consider further share sale in the Indian IT firm in future.
UK-based BT Group (British Telecommunications Plc) is a co-promoter of Tech Mahindra, with the other being Indian business conglomerate Mahindra and Mahindra Group.
Pursuant to Thursday's transaction, BT group has pared its stake in the Indian IT firm from 23.16 per cent to 9.1 per cent. In 2010, BT Group had sold 5.5 per cent stake in Tech Mahindra to Mahindra and Mahindra (M&M).
The shares were sold through a series of open market transactions at the BSE and NSE on Thursday and the deal was managed by global investment bankers JP Morgan and Credit Suisse.
BT sold a total of 17.9 million shares to various institutional investors for total gross cash proceeds of Rs 1,394.9 crore (158.6 million pounds) at an average price of Rs 777.73 per share.
Tech Mahindra shares on Thursday settled 5.2 per cent down at Rs 792.15 at the BSE, after remaining under pressure for most part of the day. The stock had hit a low of Rs 775 early in morning trade, but managed to recover some lost ground.
"Following this sale, BT has a 9.1 per cent shareholding in Tech Mahindra but further sales may be considered in the future," the UK-based company said in a statement after the deal.
"The financial impact of the disposal is expected to be treated as an income statement specific item in BT's next financial results," it added.
The group, however, said that Tech Mahindra remains a key supplier.
A Tech Mahindra spokesperson declined to comment.
BT is one of the world's leading providers of communications services and solutions, serving customers in more than 170 countries.
Investment banking sources said that BT managed to sell more than expected number of shares today, as it was initially targeting to dispose of just 5-10 per cent stake as of now and consider further stake sale at a later stage.
Sources have said that BT has been looking at part-sale of its stake in Tech Mahindra for quite some time, but has been waiting for right market conditions to go ahead.
Tech Mahindra shares hit a 52-week high of Rs 887.70 earlier this week on August 27, prompting the investment bankers to plan the share sale for Thursday. They were open to the idea of continuing the sale tomorrow as well, had a right price been not achieved. However, the shares managed to get a price better than earlier expectations for about Rs 760-765.
The Mahindra group is currently in the process of merging its another IT firm Mahindra Satyam with Tech Mahindra. Shares of Mahindra Satyam, which have also gained considerably in the recent past, fell by about 2 per cent at the BSE on Thursday.
In one of the bulk deals at the BSE, BT sold 56.55 lakh Tech Mahindra shares for about Rs 440 crore. This lot of shares accounted for close to five per cent stake and were sold at an average price of Rs 777.89 a piece.
Among the various investors, Merrill Lynch Developing Capital Market Fund bought 8.43 lakh Tech Mahindra shares for Rs 65 crore in a bulk deal at the BSE.
In another bulk deal, Copthall Mauritius Investment Ltd purchased seven lakh Tech Mahindra shares (about 0.5 per cent stake) for Rs 54.25 crore.
At the end of last quarter, the total promoter holding in Tech Mahindra stood at 70.78 per cent, which included 47.57 per cent with Mahindra & Mahindra, 23.16 per cent with BT Plc and 0.05 per cent with Mahindra BT Investment Company Mauritius Ltd.
BT is also a major customer for Tech Mahindra.
In the fiscal ended March 2012, BT group purchased services worth 253 million British pounds (over Rs 2,000 crore) from Tech Mahindra, which it terms as a principal associate in India.
The net value of services purchased in the fiscal ended March 2011 was 258 million pounds, and 301 million pounds in the year prior to that.
The amount outstanding and payable for services at March 31, 2012 to Tech Mahindra was 51 million pounds (about Rs 500 crore).
In 2010 a cash payment of 127 million pounds (over Rs 1,100 crore) was made to Tech Mahindra for the renegotiation of certain supply contracts as part of the rationalisation of procurement channels within BT Global Services.