Monday, September 26, 2011

Aptech For Sale?

The news of Aptech being up for sale has been doing the rounds for a few days now. Here is my (re) take on why the deal would be difficult. Bulk of Aptech's 600 Cr market cap can be attributed to its investment in China (22% stake in BJB career education). Buying Aptech would be tough for a strategic investor  (unless BJB itself were to buy out Aptech to gain entry in India)

Any private equity investor would face two scenarios
a) No clarity on IPO of BJB career education:  Private equity guys hate uncertainty and and since Aptech has a minority stake in BJB Aptech would have a limited say in getting it to IPO. Also, a PE investor in Aptech would not be able to perform due diligence on BJB which forms the major part of the valuation making the deal virtually impossible

b) There is certainty on IPO of BJB Career Education:  In such a case, Rakesh Jhunjhunwala is better off waiting for the IPO to happen rather than selling out pre IPO.

In my view, best case scenario for Aptech, if possible, would be to sell off its stake in BJB pre IPO to a private equity player (would happen at a discount to IPO price). Pay out the proceeds as dividend and then sell the company.  Selling off stake in Aptech before the above happens would be very difficult unless done at a discount to current market price.

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