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2i Capital, Others put their Stake in QAI India up for Sale

by VARINDIA 2011-05-31

Financial investors will need to write off at least a part of the value of the investment or exit at a loss.

2i Capital and other financial investors have put their stake in Delhi-based software process improvement company QAI India on the block. Vivek Sekhar, founder of the mid-market private equity firm which specializes in investments in mid-sized companies, told VCCircle that the financial investors, who together own less than 50-per cent stake, are looking at financial or strategic investors for an exit, auction of shares or management buy-back.

QAI is in the business of providing software engineering processes and quality consulting, training, assessment and certification. The company is run by Navyug Mohnot, an alumnus of IIT, Delhi. The company offers services in areas like software/systems process improvement and quality management, BPO/CCC performance improvement, business analysis, IT service management and human capital management, among others.

2i Capital had put in around Rs.7 crore in QAI in 2006 and picked close-to 12-per cent stake five years ago. This was the first round of funding for QAI and the company went on to raise money from BTS Swiss Technology Venture Fund for its second round of financing. Other investors include ICICI Prudential and a Singapore-based asset management firm. BTS Swiss Technology is a $22 million SME fund, run by BTS Investment Advisors, a Mumbai-based private equity firm.

Sekhar said that the private equity firm did not wait for an initial public offer from QAI for its exit, as the organization is much below the threshold for going public. QAI's revenue is pegged to be less than Rs.50 crore.

However, a source has told VCCircle that one of the main reasons for the investors cashing out is that QAI is unable to scale up the business as per the expectations of the financial investors. QAI’s revenues have stagnated even as the sector, as a whole, has witnessed a lot of growth.

"There is a feeling that QAI has mismanaged international acquisitions and has not built a strong second line of management. This has affected the scale-up," the source said.

"Financial investors will need to write off at least a part of the value of the investment or exit at a loss," he added.

2i Capital's Sekhar had declined to comment and an e-mail message sent to QAI for a response on the same did not elicit any response till the time of writing this article.

Three years ago, QAI had bought out its US parent company that led to all its international subsidiaries in the USA, the UK, India, Singapore, Malaysia, China and Canada coming under one umbrella. Navyug Mohnot, CEO and president of QAI India, became the CEO of the global organisation.

QAI India bought out the stake of Bill Perry, founder of QAI, USA. The deal was largely funded through the money raised by QAI India from BTS India Private Equity Fund. BTS had invested Rs.24 crore in QAI India.