Global private equity majors EQT Partners, PAG, Blackstone and CVC are among suitors in talks to acquire a controlling stake in software services firm ValueLabs from the promoters, according to three people with information on the deal.
A potential deal will value the Hyderabad-based company at around $1 billion underscoring the growing trend among large risk investors seeing enterprise tech as a high growth, yet stable sector.
“Currently, due diligence is on,” one of the persons with direct knowledge of the development said adding that the first round of bids are likely by end of November.
Global PE firms are betting big on mid-sized information technology and enterprise technology services providers coming out of India. “There are other PE (private equity) firms and some large strategics who will also likely look at it apart from these four firms,” the first person cited above added. (Strategics in private equity parlance refers to strategic players who are acquirers from the same or adjacent industries.)
Investment bank Goldman Sachs is advising the promoters on the sale, The Economic Times reported in October.
“The promoters—the Donakanti Family will likely continue to hold a minority stake,” the second person with knowledge of the deal said.
Queries emailed to the spokespersons of EQT, CVC and ValueLabs did not elicit any response. Spokespersons for Goldman Sachs, Blackstone, and PAG declined comment.
ValueLabs was founded in 1997 by Arjun Rao and family members, who are the current promoters. The agentic artificial intelligence (AI) service provider currently has over 7,000 engineers and serves more than 300 enterprise clients, according to its website. It competes with large IT services companies such as Infosys, Cognizant, and Wipro as also AI-focused ones such as Fractal Analytics, Happiest Minds, and Quantiphi. (Agentic AI systems are capable of taking decisions without human intervention.)
It offers various services including product development, quality engineering, cybersecurity, data & analytics and operates across sectors such as banking and financial services, healthcare, insurance and education, among others.
According to its latest financial numbers available, ValueLabs posted a standalone revenue of $74.1 million in fiscal 2024, a marginal decrease from $74.9 million in FY23. Its profit dipped to $5.6 million in FY24 from $7.1 million a year earlier, according to data shared by Tracxn.
The Indian software services sector has been witness to private equity investor participation.
An expert said the private equity funds are keen to buy into IT services companies at the leading edge of transformation in the sector. “Companies having a global footprint while (being) able to provide to end-to-end digital transformation, leveraging advanced technologies in cloud, data, AI/ML, and automation to deliver high-performance solutions are high in demand,” said Amit Nawka, partner – TMT deals, at consultancy firm PwC India.
Some deals in the sector include: EQT’s investment in Indium, an AI-focused digital engineering services company, and in digital and IT services consultancy Perficient; TPG-backed digital services specialist Altimetrik’s acquisition of tech services provider SLK Software; Brighton Park Capital’s investment in TheMathCompany, a data analytics and strategy company; among others.
Mint reported in July that early investors TA Associates and True North in tech services company Accion Labs Holdings were looking at an exit at an $1 billion valuation.
