NTT to continue talks with Patni promoters

Japanese information technology services firm NTT Data Corporation is still in talks to acquire stake in Patni Computer Systems, despite acquiring Intelligroup for $199 million (around Rs 895 crore), say sources in the investment banking industry.

NTT has been in advanced talks with the promoters of Patni Computer to buy their combined 46.5 per cent stake, investment banking sources said. There have been rumours that NTT has given the mandate to investment banking firm Nomura as advisor for the deal. However, this could not be confirmed.

"Japanese firms are considered to be tough negotiators and they do not mind spending some time in pursuing a target. The prime issue still remains the valuations aspect," said a source close to the development.

The Patni brothers -- Narendra, Gajendra and Ashok -- who have reached an internal agreement to sell their stake, have hired investment management and brokerage company Ambit Capital as adviser for the deal. The promoters are asking for Rs 700-800 a share, about 13-28 per cent more than the stock's 52-week high of Rs 623.90 recorded last month. This values the promoters' combined stake at about Rs 4,200 crore-4,800 crore. The company's stock today was trading at Rs 556.55, down 2.75 per cent from the previous close of Rs 572.30.

"It still makes sense for NTT to acquire a controlling stake in Patni. Japanese firms have been trying to increase their presence in India but it has been a painfully slow process. Take the instance of Fujitsu, which has been in India since 2001 and has just about 1,500 people. For IT services, firm scale and customer base is very important. And Patni gives that to NTT; it's an excellent proposition," said an analyst from a leading global research firm tracking the IT services segment, on condition of anonymity.

The analyst also pointed out that acquisition of Intelligroup by NTT will add pressure on the promoters to take a decision. "Patni was in talks to acquire Intelligroup but NTT made the first move. This will add to the pressure. Besides Intelligroup gives NTT the BPO capability, in which Patni is not a major player. If it acquires Patni, it will get the IT services piece as well," he added.