Blackstone plans to delist R Systems and take it private

Private equity player Blackstone, a predominant player in the real estate space in India, has taken another bit bet on the IT space. Blackstone now plans to buy out a majority stake in R Systems limited for a total consideration of Rs2,904 crore, or approximately $350 million. R Systems is a specialized product engineering company based out of India. Blackstone will buyout the 52% stake of the promoter group led by Satinder Sigh Rekhi at a price of Rs245 per share. The price represents a discount of nearly 10.5% to the previous closing price of Rs271 per share. This will give full control of R Systems to Blackstone.

As part of the transaction, Satinder Singh Rekhi and the promoter family will get around Rs1,497 crore for their 52% stake in R Systems Ltd. However, Dr Rekhi is expected to continue to play the role of non-executive advisor of R Systems even after the deal is completed. In addition, under the modified SEBI rules, Blackstone has also launched a conditional delisting offer, which has been fixed at a price of Rs246 per share. Under the new SEBI rules, the potential buyer of an Indian company can simultaneously make the delisting offer with the majority stake purchase without any cooling period as before.

However, the IT and ITES space is nothing new for Blackstone. It currently has investments to the tune of $7 billion in the IT and ITES spaces. Some of the marquee names in its portfolio include some formidable names like Mphasis, VFS, Task-Us, IBS software, Intelenet, Simplilearn and many more such IT properties. In 2022, it made some major purchases investing nearly $2 billion in VFS, $1 billion in ASK Wealth (part of the Asit Kotecha group) and another $300 million in XpressBees which is a key logistics player in the Indian market catering largely to the digital logistics players.

What is the big attraction for Blackstone in R Systems? According to the India Managing Director of Blackstone, Mukesh Mehta, R Systems is the undisputed leader in outsourced software product development. The company is likely to benefit from the trend towards digitalization, shorter product launch cycles and a rise in openness to outsource product development. Blackstone has been a long believer in the India IT outsourcing and ITES space and this purchase is in line with that conviction. It adds one more feather to the cap of Blackstone as far as its IT portfolio in India is concerned.

To give a background about the company, R Systems was established in the year 1993 by Satinder Singh Rekhi. The company specializes in product engineering and currently caters to over 250 customers in sectors like technology, media, telecom and BFSI globally. R Systems currently employs over 4,400 professionals across 18 delivery centres located at North America, Europe and Asia (including India). For the latest fiscal year i.e. FY22, R System had reported top line revenues of Rs1,445 crore. The Blackstone / R Systems transaction is expected to be completed over the next few months.

It appears to be a marriage of mutual benefits for Blackstone and for R Systems. Needless to say, Blackstone gets one more high value IT property to add to its India portfolio. Regarding R Systems, it gets a much more deep-pocketed partner to bankroll its growth in the future. Also Blackstone would be able to open its network of clients for the company and that could be a big value addition to R Systems. With Blackstone in their roster, R Systems will also benefit from their scale, expertise and global track record in IT services. According to Rekhi, it could be a win-win situation for both partners in the deal.

Blackstone happens to be one of the biggest investors in India and has over $60 billion or Rs500,000 crore invested into India at this juncture. Out of this $60 billion investment, its investment is $7 billion in the IT and ITES space alone. Real estate is one space where it is the most prominent in India and it has been behind some of the most iconic REIT launches in the Indian markets. Once the transaction is fully consummated, Blackstone plans to take the company private post delisting it from the bourses.