Baring PE Asia will first buy the 30.58% stake held by the promoters of NIIT Technologies. At the end of December, NIIT Ltd held 23.58% stake, Rajendra Singh Pawar (as trustee of Pawar family trust) held 3.53% and Vijay Kumar Thadani (as trustee of Thadani family trust) held 3.53% in NIIT Technologies.

Baring PE Asia is likely to buy these stakes for about ₹2,500 crore, said the first person. NIIT Technologies has a six-month weighted average price of ₹1198.72 per share on BSE, valuing the promoters’ stake at about ₹2,260 crore.

The stake purchase will trigger an open offer, which will allow Baring PE Asia to raise its stake further and gain control of the company.

“The deal will come at a premium for the shareholders of NIIT Technologies and will value the company at ₹8000-10,000 crore,” said the first person. The company’s six-month average market capitalization stands at around ₹7,400 crore.

A spokesperson for NIIT Technologies declined to comment.

A Hong Kong-based spokesperson for Credit Suisse declined to comment, while an email sent to Baring PE Asia remained unanswered.

Analysts said NIIT Technologies is currently trading at attractive levels as compared to peers. Markets Mojo, an equity research firm, rates NIIT Technologies as a “very attractive” stock at current levels, while rating Oracle, Mphasis Ltd and Hexaware Technologies Inc. as “attractive”.

Post the buyout, Baring PE Asia also plans to merge NIIT Technologies with Hexaware Technologies Ltd to create an IT services entity that will compete more closely with larger rivals such as Mindtree Ltd, L&T Infotech Ltd, Mphasis Ltd and Oracle Financial Services Software Ltd, according to the second person.

“Currently, both NIIT Technologies and Hexaware are rather smaller IT services firms in the listed space. If the merger goes through, the combined entity will have a market cap of around ₹20,000 crore, which is more than that of Mindtree and is close to mid-tier IT firms,” said the second person.

The pace of consolidation has intensified in the small and mid-tier IT services industry, which can be attributed to slowing growth, strengthening rupee, limited digital capabilities (such as artificial intelligence, automation of processes and digital services), diminishing revenues and the inability of smaller IT services players to win large contracts to earn fees as IT vendors.

Elara Capital (India) Pvt. Ltd said in a 2 January report that while NIIT Technologies has shown good execution by adding clients in the $10 million tier, its only concern is lack of growth in top-5 accounts.

In a 7 January report, SBICAP Securities projected a moderate revenue growth (for the December quarter) for IT companies “on the back of seasonal factors and adverse cross-currency movement (which is likely to impact reported US$ revenue by 50-70bps)”.

A 4 January report by JM Financial Institutional Securities Ltd expected NIIT Technologies’ margin expansion to be moderated by seasonally higher SG&A (selling, general and administrative) expenses.

Meanwhile, Mindtree’s largest shareholder and founder of Café Coffee Day, V. G. Siddhartha, has been looking to sell his stake and the stakes held by two of his firms in Mindtree.

On Wednesday, Mint reported that the promoters of Mindtree are caught in a riddle over paring their stakes as the company’s largest investor (Siddhartha) nears a decision to sell his stake.

To be sure, Baring PE Asia has held discussions with Mindtree promoters and Siddhartha as well to acquire control in the Bengaluru-based IT services firm.

However, the promoters of Mindtree are reluctant to transfer control to Baring PE Asia as the latter has demanded an eventual merger of Mindtree with Hexaware Technologies Ltd (in which Baring PE now holds 62.79% through HT Global IT Solutions Holdings), according to the Mint report.

“Baring Asia wants to merge Hexaware with Mindtree because they are finding it tough to monetize their stake directly. Through the merger, Baring will be able to dilute its stake in Hexaware, which is so expensive right now (as compared to its earnings growth) that it is difficult to find a buyer,” said the Mint report, citing a person familiar of the discussions.

On 24 August, Baring PE Asia sold 8.4% in Hexaware for around ₹1,120 crore as part of its plan to monetize its holdings in the company.