Baring Private Equity Asia is set to buy a controlling stake in Indian outsourcing services provider Hexaware Technologies Ltd (HEXT.NS) for about $400 million, two sources with direct knowledge of the matter said on Friday.
The transaction is expected to be approved by the Hexaware board as early as Friday, said the sources, who declined to be named before a public announcement. A spokeswoman for Hexaware did not have immediate comment.
The deal, if approved, underscores the surging interest of buyout firms in software services providers, on expectations of lucrative outsourcing contracts from global corporations trying to cut costs and boost efficiency.
Baring will roughly buy a 42 percent stake in Hexaware from the Indian company's founders and private equity investor General Atlantic. It will then have to make a mandatory tender offer for up to 26 percent, the sources said.
The sale would be the second major exit by founders of a mid-sized Indian information technology outsourcing company in the past two-and-a-half years, amid cut-throat competition from bigger global and local rivals.
In January 2011, U.S.-listed iGate Corp IGTE.O, backed by private equity firm Apax Partners, acquired the founders' and General Atlantic's stake in mid-sized outsourcer Patni Computer Systems for $1.2 billion.
Hexaware develops software and provides business process outsourcing services to overseas clients. Its rivals in India's $108 billion outsourcing industry include Infosys Ltd (INFY.NS) and Tata Consultancy Services Ltd (TCS.NS).
Shares in Hexaware rose as much as 6.5 percent on Friday to 126.40 rupees, giving it a market value of about $580 million. At Thursday's market close price, a 68 percent stake in the company was worth about $375 million.
Baring is one of the largest independent private equity firms in Asia, with over $5 billion in capital under management. In May, Baring agreed to invest $260 million in French cement maker Lafarge SA's LAFP.PA India operations.
The private equity firm invests in Asia from its fifth fund, which at $2.46 billion when it closed in 2011, was the largest raised for Asia investments since the global financial crisis.
Indian M&A deal value in the first half of this year was $18.4 billion, up from $17.9 billion in the same period last year, Thomson Reuters data showed. The Hexaware stake sale, if approved, would be the fourth largest inbound deal this year.
(Writing by Sumeet Chatterjee; Editing by Stephen Coates)