Mumbai, May 31
Private equity giants Carlyle Group LP and Blackstone Group LP as well as Indian outsourcers L&T Infotech and Tech Mahindra, are lining up bids for Hewlett-Packard Co's US $1 billion stake in MphasiS Ltd, several sources involved in the process said.

Buyout firms Advent International and Bain Capital LLC are also in talks to bid for HP's 60.5% stake in MphasiS, an IT services exporter, said the sources, who declined to be named as details of a potential deal are not yet public.

Tech Mahindra and L&T Infotech, midrange players in India's $108 billion IT outsourcing industry, may team up with private equity firms to make bids for the MphasiS stake, two of the sources told Reuters.

MphasiS, which generates roughly half its revenue by providing services to HP's clients, has a market value of $1.8 billion. Reports of a potential stake sale to private equity firms emerged about a month ago.

Preliminary bids for the MphasiS stake sale are likely to be invited by the end of June, sources said, and a deal could be finalised during the July-September quarter.

MphasiS was formed in 2000 and six years later Electronics Data Systems Corp acquired a majority holding in the company. In 2008, EDS was acquired by HP, which resulted in the transfer of the shareholding to the world's largest PC maker.

A deal would be one of the largest in India's showpiece IT outsourcing services sector. US-listed iGate Corp bought a controlling stake in India's Patni Computer Systems for $1.2 billion in 2011.

The iGate deal valued Patni at about eight times EBITDA (earnings before interest, tax, depreciation and amortisation), and sources said MphasiS is likely to command a lower valuation since the bulk of its business depends on subcontracting by HP.

Officials with HP, MphasiS, Carlyle, Blackstone, Advent, Bain, Tech Mahindra and conglomerate Larsen & Toubro, which owns L&T Infotech, all declined to comment.

MIDRANGE PLAYER: MphasiS competes with Indian outsourcing services providers, including market leaders Tata Consultancy Services, Infosys and Wipro.

India's top outsourcing companies, including Infosys and TCS, are not seen as possible bidders for the MphasiS stake as their acquisition strategies are driven by the need to add new service lines or enter new countries, some of the sources said.

"This is mainly going to be a competition among the PE firms with some mid-sized companies expected to jump into the fray in the final stages," said one of the sources.

"The buyer will have to focus a lot on sales and marketing in the first few years to grow the non-HP business," which is why a private equity firm may team up with an IT services company, he said.

HP is expected to continue to send IT services contracts to MphasiS over the short to medium term after the sale of its stake and its contribution to the Indian unit's revenue will gradually decline after that, some of the sources said.

Besides MphasiS, HP has its own IT delivery centres in India where it employs thousands of engineers who provide services and develop software applications for its global clients.

Some of the sources said HP's move to sell its stake in MphasiS is part of CEO Meg Whitman's turnaround plan, which includes expanding into markets and areas with longer-term potential. HP could also use some of the sale proceeds to reduce its $2.9 billion debt, they said. — Reuters

New Delhi, May 31
Finnish mobile phone maker Nokia said Friday tax authorities have dismissed its appeal against a Rs 2,080 crore income tax demand notice for five fiscal years starting 2006-07.

The company said it is examining all options, including going to Delhi High Court.

“Nokia is disappointed by the decision of the commissioner of income tax (appeals), and will now examine all options open to it. These include taking the case back to the Delhi High Court,” it said in a statement.

The tax demand was issued on Nokia’s India unit on March 15. The notice issued by income tax department alleged tax evasion by Nokia on royalty payments made against supply of software by the company’s parent firm. Royalty payments attract a 10% tax deduction under the tax deducted at source (TDS) category.

“In addition to the legal action Nokia is taking in India, it is worth remembering that the ministry of finance in Finland has launched the mutual agreement procedure with its counterpart in India under the bilateral double taxation avoidance agreement to reach a common understanding on the matter. Nokia will act quickly and decisively to protect its interests,” the company statement added.

The company said it will defend itself “vigorously” in the case and against any other Indian tax allegations, using all channels available.

“Nokia reiterates its position is that it is in full compliance with Indian laws as well as the bilaterally negotiated tax treaty between the governments of India and Finland.

“Since establishing the Chennai (Madras) factory in 2006, indeed since starting business operations in India in the mid-1990s, Nokia has been scrutinized by the tax authorities regularly, and its policies have been validated by the Indian and Finnish tax authorities in the normal course of tax proceedings,” it added. — PTI

Mumbai, May 31
Sun Pharmaceutical Industries Ltd is in talks to buy Swedish drugmaker Meda AB for US $5 billion-$6 billion to boost its generics business in developed markets, two sources with direct knowledge of the process said.

Meda makes specialty products, over the counter drugs and branded generics - the same areas of focus as Sun Pharma. Meda had sales of about 13 billion Swedish crowns ($1.98 billion) in 2012 and has a market value of roughly $3.7 billion.

Mumbai-based Sun Pharma is India's most valuable drugmaker, with a market capitalisation of roughly $20 billion, and has made several acquisitions in recent years, although a deal for Meda would be its largest.

Sun Pharma had cash of Rs 40.6 billion ($721.84 million) at the end of March.

"Sun Pharma is in an extremely sweet spot with a low amount of debt and strong organic business growth," said Jagannadham Thunuguntla, equity head at SMC Global Securities in New Delhi.

"While this (deal) shows their aggression, they should play it a little carefully in terms of valuation and their ability to chew it," he said. "It can put the balance sheet under stress”, he added.

Sun Pharma is in talks with a clutch of banks to raise funds for a possible deal, the sources said, declining to be identified. They did not say how far along the discussions were, or how likely it was that a deal would be reached.

A spokeswoman for Sun Pharma declined to comment. Meda was not immediately available for comment.

Shares in Meda were up about 4 percent on Friday. Sun Pharma shares closed down about 2.8 percent on Friday in a broader market that was down 2.25 percent.

Last year, Sun Pharma bought S-based Dusa Pharmaceuticals Inc for about $230 million as well as URL Pharma from Japan's Takeda Pharmaceutical Co for an undisclosed amount.

Sun Pharmaceutical also sought to buy out minority shareholders in its S-listed Israeli subsidiary, Taro Pharmaceutical Industries, for US $571 million before withdrawing the proposal earlier this year.

Meda last year received S approval for an inhaler product, Dymista, which is manufactured and supplied to Meda by Cipla, an Indian rival of Sun Pharma. The product is seen as having strong market potential. — Reuters

Mumbai, May 31
Jet Airways on Friday said market regulator Securities & Exchange Board of India has allowed its promoters to sell further 1.54% stake and relaxed the conditions for undertaking the sale through OFS route to help the company meet minimum 25% public shareholding norm.

Jet Airways, on Thursday, offered to sell nearly 4.3 million shares via offer-for-sale (OFS) mechanism and got bids for around 3 million scrips accounting for 3.5% stake in the company.

A further sale of 1.54% holding, which could be done on Monday, the last date for complying to SEBI's norms, would result in total 5% stake sale by promoters. This would take the total public holding in the company to 25%.

SEBI, in a communication to Jet Airways' main promoter Tail Winds, said: "The company’s promoters are allowed to sell up to 1.54% of the share capital on the floor of the stock exchange in a bona fide manner to unrelated nonpromoter entities through the regular market conditions."

Shares of Jet Airways, which opened on a weak note, further fell by 5.66% to a low of Rs. 498.60. However, after the share-sale, the company recouped some of the losses and was trading at Rs. 504.25 apiece on the BSE, down 4.60% from the previous close at 12:49pm.

Meanwhile, Tail Winds is in the process of transferring its stake to Jet Airways chairman Naresh Goyal. Since last week, Tail Winds had sold 66% stake to Goyal through two block deals on the stock exchanges.

On Thursday, Goyal picked up nearly 37% in Jet for about Rs. 1,670 crore. Last week, Goyal bought a 29% stake from Tail Winds for about Rs 1,434 crore. At the end of Q4FY13, Tail Winds held 79.99% in Jet, while Goyal owned a 0.01% holding in the firm in his personal capacity. — PTI

Ludhiana, May 31
The income tax department is seeking details from banks in cases related to violations of “Know Your Customer” (KYC) norms in high value transactions done through banks. Such violations came to the fore while the Reserve Bank of India was investigating transactions done through both state-owned and private sector banks.

Income tax chief commissioners have been asked to review such cases and furnish reports to the Central Board of Direct Taxes with suggestions to improve systems for collecting and disseminating information.

It has come to light that some domestic banks were violating KYC norms and allowing high value transactions without quoting permanent account numbers. This is being done even when customers have a PAN number and are regular taxpayers but submit Form 60 to avoid taxes.

A number of cases has come forward in which neither PAN nor Form 60 has been obtained by the banks or dummy PAN has been quoted in case of multiple entities. The directorate of intelligence & criminal investigation is identifying defaulters and sending verification reports for necessary action, a senior IT official said.