MphasiS BFL has bought out the minority shareholders' 30.86 per cent stake of in MsourcE for Rs 187 crore (Rs 1.87 billion). The target company was valued at $149 million {or Rs 700 crore (Rs 7 billion)}, which is 2.2 times its estimated revenues for fiscal 2005 or 3.7 times its last fiscal's revenues.

MsourceE Corporation is the US-based listed subsidiary of Mphasis Corporation, which in turn is a wholly owned unlisted subsidiary in the US of MBFL, an Indian listed company.

The case refers to the proposed merger of MsourcE Corporation (subsidiary) with its parent.

MphasiS Corporation held a 69.14 per cent stake in MsourcE and at that time was in the process of acquiring the balance stake held by minority shareholders. Post-acquisition, MsourcE is proposed to be merged into MphasiS Corporation.

The minority shareholders, who were bought out, were paid Rs 63 crore (Rs 630 million) in cash and the balance through stock in MphasiS. With this deal, MphasiS has issued 3.5 million shares to erstwhile minority shareholders in the September quarter.

Earlier this year, in September, the Securities and Exchange Board of India had allowed MphasiS BFL to issue stock options to the employees of MsourcE.

The securities watchdog had said that MBFL was eligible to grant options to option holders of MsourcE Corporation only if the said option holders fall within the purview of clause 2.1.1 (c) of the employee stock options scheme guidelines."

The Sebi decision, followed a request made by MBFL, seeking "interpretive letter" as to whether the beneficial exception, as given under proviso to clause 9.1 of Sebi (employee stock option scheme and employee stock purchase scheme) Guidelines 1999 would be available to the option holders of MsourcE.