HOV Services @ Rs 153~up 62% in 4 days and worth more despite undervaluation of Investment Sale to Promoters

Disclaimer : My Clients and I do have an interest in HOV Services from 2013

HOV Services @ Rs 153~up 62% in 4 days and worth much more despite undervaluation of Investment Sale to Promoters

Earlier SS Recommendation in 2013 of HOV Services @ Rs 39  

We had recommended this Pune based Scrip to Clients  last year at Rs 39 precisely for the potential unlocking of  value of  the 26.1 % equity stake  it held in US based SourceHOV through it’s wholly owned US Subsidiary…most of the remaining Equity of SourceHOV is held by Citigroup  through Citi Venture Capital International (CVCI Private Equity) which bought out on March 19,2013 the full ownership interest of Apollo Global Management LLC Private Equity Group that the latter had acquired as a result of the restructuring of SourceCorp + some stake held by some minority shareholders

Unlocking of  Value of the 26.1% Stake in SourceHOV by selling Stake at undervalued US % 95 m to Promoters themselves ! 

This 26.1% Stake is proposed to be sold for US $ 95 m (@ Rs 580+ crs) to US  based HandsOn Fund 4 LLC (HOF4LLC) whose ultimate beneficiary owners are from the promoters of the Indian Listed HOV Services Ltd !  

HOV Services Prospectus filed with SEBI when it came out with the IPO in 2005/6 reveals that HandsOn at that time was 100% owned by Mr Parvinder Chadha and members of his family and managed by a team of seven of which four were promoters of HOV Services Ltd…Mr Chadha currently is the Executive Director of HOV Services Ltd 

While this deal sounds like a bonanza for HOV Services Shareholders as it amounts to Rs 464 per share (HOV Services Equity is Rs 12.5 crs of FV Rs 10) the Deal Valuation is clearly undervalued in my view

The Valuation should be over 160% more @ US $ 250 m and not just US $ 95 m !

The Valuation of this stake should be @ US $ 250 m  => over 160% than just the US $ 95 m that has been arrived at  !

If this 26.1% stake is valued at just US $ 95 Million it means that the whole of SourceHOV is valued at just US $ 364 m ! =.just 0.6 of Sales of US $ 600 m !….when it was reported to be seeking a twice Sales US $ 1.2 Billion Valuation last year like faster growth and bigger competitor Genpact had

SourceHOV is a leader in providing  Transactions Processing Solutions  and this merger will create a Global Leadership position with Revenues exceeding US $ 900 m

In the latest 15 months Annual Report of HOV Services Ltd as on March 31,2014,the Chairman and Promoter,Mr Sunil Rajadhyaksha said this in his Message read more