Report: Indian Firm Pulls Out Of Running For Mphasis

Technology services firm Tech Mahindra is pulling out of the battle to acquire India-based solution provider Mphasis from Hewlett Packard Enterprise, according to a published report.

The Indian news website Business Standard said Wednesday that Tech Mahindra wanted to avoid a bidding war with other suitors for Mphasis, based in the technology center of Bangalore. HPE owns 60.5 percent of Mphasis.

In January, HPE launched an auction process to sell that stake, according to The Times of India, which also reported that HPE had brought in banking giant Citigroup to manage the sale process. Mphasis is believed to be valued at about $1 billion.

[Related: Report: Hewlett Packard Enterprise To Auction Mphasis Off To Private Equity, Foreign Titans]

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Business Standard said Tech Mahindra had been seen as a serious contender for Mphasis. Earlier this week, Tech Mahindra, Apollo Global Management and Blackstone Group were performing due diligence before submitting final binding offers, according to a separate report from The Times of India.

"Tech Mahindra is no longer contesting to acquire Mphasis," sources told Business Standard, which said a company spokesperson declined to comment.

Meanwhile, a spokesperson for HPE said the company doesn’t comment on rumors or speculation.

Hewlett-Packard -- before it split last year into HP Inc. and HPE -- nearly began work two years ago to sell Mphasis, according to The Times of India, but ultimately held off for internal reasons. Earlier media reports had also identified Mumbai, India-based L&T Infotech and Tokyo-based NEC Corp. as potential suitors, along with private equity behemoths the Carlyle Group of Washington, D.C., and Advent International of Boston.

Meanwhile, Mphasis shifted its business away from the Palo Alto, Calif.-based vendor, with Hewlett-Packard going from accounting for 70 percent of Mphasis' revenue three years ago to just 30 percent as of July 2015, according to the company. The financial services vertical has filled in some of that gap, with banking contributing 41 percent and insurance contributing 14 percent to Mphasis' top line.

Mphasis' shift toward big banking has been accompanied by a geographic realignment. In 2011, the company bought Bloomington, Minn.-based Wyde Corp., a solution provider serving the insurance vertical in the U.S. and Europe, and in 2012 purchased Digital Risk, a Maitland, Fla.-based provider of risk, compliance and transaction management solutions, for $175 million.

Mphasis also sold its India business process outsourcing (BPO) unit in the past year.

Business Standard reported Wednesday that Tech Mahindra’s interest in Mphasis was driven by its strength in financial services, which it's trying to build after it provided nearly 10 percent of its revenue in the quarter that ended Dec. 31. Tech Mahindra rivals TCS, Infosys and Cognizant derive between 30 percent and 45 percent of their revenue from financial services, according to Business Standard.