WNS Files For $50M Issue, Warburg Pincus Stake Sale

Business process outsourcing firm WNS (Holdings) Ltd has filed a shelf registration statement with the Securities and Exchange Commission (SEC) which may pave the way for the private equity major Warburg Pincus to exit the firm. The shelf registration, once approved by the US market regulator, will allow Warburg Pincus to sell its 47.9 per cent stake which may fetch around $258 million given the current share price trends. The deal will also allow WNS to raise up to $50 million through sale of ordinary shares/ADSs in a primary offering.

In its filing, WNS has said that the shares may be sold in one or more offerings by both WNS and the selling PE shareholder. Warburg Pincus will have the right to sell shares in the market once the registration process is completed. The PE major may also be looking at a partial exit, as it has done in some of its Indian portfolio companies over the past few months.

In 2009, WNS had looked at a strategic sale in which Warburg Pincus was reportedly looking at an all-cash deal of at least $18 per share, but a deal did not materialise due to valuation differences.

The share price of WNS closed at $11.90, down 0.92 per cent on NYSE, giving the firm a market capitalisation of $530 million. The current exit price would be a far cry from its high of $35.83 per share, which the company reached in 2007 after its listing. Its current 52-week high is $12.94 per unit.

Other shareholders of WNS include Nalanda India Fund (11.7 per cent), Columbia Wanger Asset Management (13.45 per cent) and FMR LLC (14.3 per cent).

Warburg Pincus formed WNS after acquiring the captive of British Airways in May 2002. The unit was performing back-office functions for the airline. The PE major picked up 65 per cent stake for $40 million in the company which was spearheaded by its entrepreneur-in-residence Neeraj Bhargava. In June 2006, WNS became India's first BPO company to be listed on the New York Stock Exchange, with Warburg Pincus sitting on nearly 10x unrealised gains at the time of the IPO.

With the current stake sale, Warburg can still be looking at around a 7x return on its nearly a decade-old investment. According to VCCedge, the PE firm had made a partial exit in 2006 by selling 4.21 per cent stake for $30 million.

For its Q1FY12 results, WNS reported revenues of $125.7 million, down 16.2 per cent from the corresponding quarter last year and down 21.2 per cent sequentially due to change in accounting for repair payments. The company's profit stood at $0.7 million, compared to the loss of $5.8 million in the corresponding quarter last year.

For FY11, the company reported a revenue increase of 5.8 per cent at $616.3 million as compared to $582.5 million in FY10. Its revenue less repair payments was $369.4 million as compared to $390.5 million in fiscal 2010, representing a decrease of 5.4 per cent.