Homegrown private equity player True North has struck an IT services bet after a 1-year hiatus of any activity in the sector, on the sidelines of raising capital for its seventh and latest domestic investment vehicle.
The PE firm will invest $75 million (around Rs 624 crore according to current exchange rates) in US-based digital transformation services and consulting company iLink Digital for a minority stake.
According to a press statement, True North will make this investment via its sixth fund, making it the third bet from the vehicle in the IT services sector.
To be sure, the other two portfolio bets from its sixth fund are Accion Labs and Quest Global.
"iLink Digital reflects our fundamental approach to investing in digital product engineering companies," said Prasad Thrikutam, partner at True North.
The US-based IT services firm will utilise the capital primarily to drive its M&A agenda. A portion of the proceeds will also be used towards employees, the statement added.
"(True North’s) knowledge of the technology sector, efforts to assist companies with M&A and ability to help us with our long-term objective of launching an IPO in Indian markets were decisive factors in our decision," said Sree Balaji, chief executive officer at iLink Digital.
iLink Digital was founded by Indian-origin entrepreneurs Balaji and Sridhar Mahadevan in 2002. The firm has a 2,500 strong consulting and digital engineering staff across 18 offices in eight countries. iLink has a significant presence in India, with its offices located in Chennai, Pune and Trichy.
Investment bank Lincoln International acted as the financial advisor to iLink Digital on the said transaction.
Meanwhile, True North has recently made a few moves to monetise its past investments as it goes about raising its seventh fund. For instance, last month, VCCircle reported that it has pared its stake in an insurance company it backed less than four years ago, generating spectacular returns.
It is also looking to monetise its bet on Fedfina, a subsidiary of the private-sector lender Federal Bank.
In May, the PE firm divested part of its stake in local financial services company Home First Finance company, beating benchmark returns. It is also looking at an exit window as portfolio company Fincare Small Finance Bank received regulatory approval to float its IPO.
PE interest in the IT sector has risen over the past few years, especially after the Covid-19 pandemic that boosted demand for technology services. But the sector had been a favourite hunting ground for PE firms even earlier.
American buyout giants Blackstone and Carlyle, the UK’s Apax Partners and India's ChrysCapital are among the large number of PE firms that have invested in IT firms.
On Wednesday, US-based PE major Warburg Pincus announced an investment in US-headquartered healthcare services firm Everise, in a deal that values the company around $1 billion and would also pave the way for PE firm Everstone Group’s exit.
In May, Apax Partners said it signed a definitive agreement to acquire travel and logistics service provider IBS Software for $450 million.
