Mumbai: Private equity firms Advent International and Bain Capital as well as Government of Singapore Investment Corp (GIC) are in preliminary talks for a partial or full exit of their stake in engineering services firm Quest Global, valuing the Singapore-headquartered company founded by Indian entrepreneurs at around $2.5 billion.
The three of them together own around 30 per cent stake in the firm and are expected to make more than two times return from a three-year-old investment.
The funds are also weighing an option of a public listing of the firm in the US through which promoters of the company are also likely to trim their ownership, multiple sources close to the negotiations told ET.
About six investment bankers are hired to run a formal process, sources said. JP Morgan, Nomura, Morgan Stanley, Credit Suisse, Citi and Goldman Sachs are working on the deal, which is expected in the first quarter of 2020, said one of the sources.
Spokespersons with Quest Global, Advent, Bain Capital declined to comment while mail sent to GIC did not elicit any response till press-time.
Founded in 1997 by Ajit Prabhu and Aravind Melligeri, Quest provides engineering outsourcing services to firm in sectors including aviation, automobiles, oil & gas, power, and healthcare. With revenue of around $675 million, Quest is one of the largest engineering services firms and counts Airbus, General Electric, and Pratt & Whitney as some of its clients.
Quest’s service portfolio includes mechanical, embedded and engineering software offerings across hi-tech industries such as aerospace, transportation, energy and medical devices. It operates out of 31 centres globally with delivery centres in the US, the UK, Singapore, Germany, Italy, Spain, France, Japan and India, and employs about 7,300 people.
When PEs acquired minority stake in Quest in 2016, they paid a valuation of 15-16 times Ebitda (earnings before interest, taxes, depreciation and amortisation) and today the promoters are looking for a multiple of 18-20 times, one of the sources said. Advent, Bain and GIC had bought shares from Warburg Pincus and other minority investors for a total consideration of around $350 million.
The India-focused outsourcing space has seen an increased interest from private equity as well as strategic investors in the past few years. Recent deals include Tech Mahindra’s acquisition of BORN (formerly Group FMG), a global marketing and media solutions agency operating in the USA, Europe and Asia. In July, Baring Private Equity Asia had acquired healthcare analytics company Citius-Tech in a deal valuing the company at $1 billion. Similarly, Indian promoters-owned digital engineering and transformation solutions provider EMIDS was acquired by New Mountain Capital in September.
AION Capital Partners, the joint venture between global PE fund Apollo Global Management and domestic fund ICICI Venture, had acquired InterGlobe Technologies (IGT), the IT and back office arm of travel major InterGlobe Enterprises (parent of budget airline Indi-Go) for $230 million (Rs 1,600 crore) in January. IGT provides services in the entire spectrum of travel, transportation and hospitality domain globally.
IT services and technology was among the top three sectors that have seen major M&A activity in the first half of 2019 in India, according to data compiled by Thomson Reuters.
The sector recorded deals worth $5.3 billion, more than a two-fold rise from last year, data showed.