Buy-out groups eye BT’s Tech Mahindra stake

Private equity groups are in talks with BT about buying the UK telecoms group’s 31 per cent stake in Tech Mahindra, one of India’s largest software services providers, in a deal worth up to $800m (£506m).

Apax Partners, Providence Equity and Goldman Sachs Private Equity are among the buy-out groups in talks with BT about buying the stake in Tech Mahindra. All the parties declined to comment.

But people familiar with the talks said BT had been trying to sell the stake for several years and a deal could collapse if agreement was not reached on price.

The deal is seen as risky by private equity executives as Tech Mahindra depends on BT for half its revenues. It is also merging with Satyam, the Indian outsourcing group hit by an accounting scandal last year.

BT is willing to sell its Tech Mahindra stake because the holding does not fit its strategy.

BT’s Indian strategy has been focused on Global Services, the UK group’s subsidiary that supplies telecoms and IT services to companies.

Tech Mahindra was established in 1986 as a joint venture between Mahindra & Mahindra, the Indian conglomerate, and BT.

BT last year supported Tech Mahindra’s decision to buy Satyam, which nearly collapsed after its former chairman admitted to fraud.

Tech Mahindra has revived Satyam, which was once one of India’s leading outsourcing groups. But the company’s headcount has nearly halved and it is still making losses.

Satyam, which has been renamed Mahindra Satyam and is wholly owned by Tech Mahindra, released its first accounts since the fraud last month.

They revealed financial irregularities under the previous management of Rs78.5bn (£1.1bn). The company is also facing an investor lawsuit in the US and a potential civil claim by the Securities and Exchange Commission.