I have blogged twice extensively on HOV Services last month in October 2014 here & here
Now here’s an update
November 6,2014 Update
As expected the deal has been approved in the Postal Ballot and even the merger of SourceHOV and BancTec has gone through
The Share Price zoomed to Rs 187 and closed at Rs 178 yesterday
Apparently some Minority Shareholders of HOV Services have approached the Company Law Board to question the Valuation of SourceHOV and force the Company’s Board to be more fair and appoint another Valuer and raise the Valuation
Citigroup had sold off Majority Stake to Rohatyn Group in the last quarter of Calendar Year 2013
Interesting to note that in December 2013 itself and in a move to probably comply with the strict Volcker Act,Citigroup’s Citi Venture Capital International (CVCI) was sold off to the New York based Rohatyn Group ...along with this top CVCI Personnel moved to the newly set up TRG Group within the Rohatyn Group…one of the names was Anil Khanna …the deal was actually announced earlier in September 2013
BancTec was acquired by the HOV Promoter Group HandsOn in April 2014
Then in April 2014 this year BancTec itself was bought out by the HandsOn3 Group who are also the Promoters of the Indian listed Company HOV Services
Rohatyn Group has now just sold off full majority stake to the HOV Promoter HandsOn Group in November 2014
…….and now on November 4,2014 Rohatyn Group has divested it’s entire majority holding in SourceHOV to the HandsOn Global Group,the new name for HandsOn3
Thus the HandsOn Group is now the Majority Shareholder and probably to soon become Sole Shareholder,if they have their way of the Merged huge Global Entity of SourceHOV & BancTec
As per Moodys Rohatyn deal sell off was @ US $ 354 m…Thus for their 68% they got this much valuing SourceHOV therefore at US $ 520 m and thus this means the HOV Services 26.1% Stake should be at least US $ 135 m !
The combined entity will have Revenues of over US $ 900 m and a new Credit line of US $ 1.1 billion committed by Morgan Stanley
Rohatyn Group may have sold to the Promoters HGM Group for their own reasons….just because they did so at the same price the Indian Listed Company’s Investment Stake of 26.1 % has been approved too for divestment to the HGM Group does not mean it is a fair value !…there may have been a clear conflict of interest and vested interests involved in an undervaluation
The CFO of HOV Services who has signed the Notifications to the Exchanges is sharpening his skills at stonewalling and defending the Undervaluation !…when Minority Shareholders manage to connect with him they get a stock reply ” Why are you so concerned when even the Majority Shareholder is exiting at the same valuation !”….Wow ! Mr CFO ! at one time even the Whole world thought the Earth was Flat !
NEW INDEPENDENT VALUATION REQUIRED OF THE NEW MERGED ENTITIES SourceHOV & BancTec
How can the Indian Company divest it’s 26.1% Pre Merger Stake in SourceHOV for just US $ 95 million !
Come On Exchanges,SEBI and CLB !…..Protect the Minority Shareholders !….or is there a HandsOff Approach to the
HandsOn Promoters !?
Don’t let the Promoters get away with this undervaluation of the Investment stake being sold to themselves !
Let a New Independent Valuation be worked out of the merged Entities SourceHOV & BancTec…it now is one of the World’s largest TPS Service Providers
Because that’s the way to go
My Take on the Valuation of the Investment Stake held by the Indian HOV Services in the New Merged Entities
In fact in my View even if this stake is diluted post merger ,the value zooms up even more than the earlier US $ 250 m I opined….My sense is now double this at US $ 500 m ! for this stake ! as the merged Entity will have initial Revenues of nearly a Billion Dollars and over 16000 Employees and a Valuation in my view of over US $ 2 Billion despite the Debt it will have and a low rating from Moodys for it
Minority Shareholders are not against the deal…they are against the undervaluation at US $ 95 m….they sense that Promoters are getting to eat the full cream while offering a few licks to the minority shareholders !
So how did the postal ballot succeed ?…well……experienced veterans can tell you how
Sadly if the Deal Goes through at just US $ 95 m then watch some time in the future how and by how much the Promoters HGM Group (www.hgmfund.com) will monetize their shareholding valuation by divesting part or full stake or offering fresh equity at a high price
So what now with HOV Services at Rs 178 !
And whats happens to the Indian listed HOV Services after the deal goes through !?….Is there any point keeping it listed !?…..In the Scheme of Things would serve Minority Shareholders better if the Board returned to shareholders the High Book Value achieved from the Rs 464 per share received on the deal and wind up the company
My clear sense is that there is little downside and only a huge upside….and if the fair sense of valuation prevails or is forced on the Promoters then there is great upside
To state it in practical & blunt terms the current Share Price of HOV Services is Rs 178 ~ even at this unfair deal value of US $ 95m it should be at least twice this at Rs 300+….and if the Deal Value is upped towards US $ 250 m the share price should be even twice Rs 300 …that’s Rs 600+ ! …all this even if one consider’s haircuts
Now Imagine if the Deal does not go through and HOV Services retains this Stake in the merged Entity !
The Value of this Stake will be much higher than even US $ 250 m…I’ve opined earlier above US $ 500 m !…that’s Rs 3000 + crs !….and the market cap of the Indian Company is just Rs 222 crs !
Now Promoters may accuse minority shareholders and me of day dreaming and living in the clouds !
That’s where the Promoters will have ascended to laughing if the deal sale goes through at US % 95 m to themselves !
Suffice to state many of my clients hold this share which was first recommended last October 2013 at just Rs 39
(I must thank my blog Reader Jigam Gandhi for his latest inputs)
11 thoughts on “Update on HOV Services @ Rs 178 ~ Sense Little Downside & Huge Upside yet”
Thanks for Citation.
The Rohatyn Group is getting $354 Million as per Moody’s website
The Rohatyn Group is getting $354 Million as per Moody’s website
Updated the post accordingly with the link…thanks…it would mean SourceHOV is valued over US $ 500 m and thus HOV Services Stake of 26.1% in it is worth at least US $ 135 m
I think $135 million is not great but better then $95 Million mention before by company if they get it. I would say @$520 M it is cheap buy but not that bad at it looked before considering debt.
Thanks Gaurav for sharing an excellent insight . . . lets hope HOV stake gets a better fairer/valuation . . . Tx T
I guess, The transaction will be at 95Mil $ only, because
a) The Moddy filing is of 9th Oct, Which is before the deal. The funding is given to them to redeem majority shareholders. (May be Hovs LLc also), Because if we work backwards, HOVS LLc stake at 95 mil $ converts to approx 363 Mil $.
b) If the price of 353 Mil $ is only for Raohathyn group, It means no funding arrangements are made to buy Hovs LLC stake….. Then What ????
Hopefully it is more then $95M and I agree Jigam that from Moody’s filing It is not clear how HOV will get its share of sell price. Interesting next few days coming up? We might see HOV retaining stake in new company. Does anyone have any insite if SEBI is doing anything as company hasn’t give indication of new independent inquiry unless it is declared tomorrow after board meeting.
No announcement on the sale after board meeting. We are still kept in dark.
HOV Services Ltd has announced that post merger of BancTec Group LLC with SourceHOV Holdings Inc. (SourceHOV), the stake holding of HOVS LLC in SourceHOV has increased to 44.82% in the combined entity, as majority stakeholder the Rohatyn Group (“TRG”) (formerly known as CVCI) exited out in the merger.
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