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Genpact's Secondary Offering, Explained

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Earnings Scheduled For August 7, 2018

Genpact Limited (NYSE: G) announced Monday a secondary offering of 10 million shares by certain shareholders. These shareholders include entities affiliated with Bain Capital Investors and its co-investor GIC Private Ltd.

The shares earmarked for sale represent about 15 percent of Genpact share owned by the said shareholders, constituting about 5 percent of the total outstanding shares. Post the sale, the selling shareholders will beneficially own about 30 percent of Genpact's outstanding shares..

The company clarified it's not selling any common share and won't receive any proceeds from the offering.

Following the announcement, Baird maintained its Outperform rating on Genpact, with a $34 price target. Cowen also maintained its Outperform rating and $33 price target on shares.

Risk/Reward Pretty Good

Baird analyst David Koning said the sell-off by a large shareholder would create a little weakness. That said, the analyst indicated Bain Capital had initially bought its stake in Genpact for $15 per share five years ago, but the stock has doubled since then.

The firm views the year-out risk/reward as pretty good, with the company's shares offering good value. As a supporting argument, the firm noted that the company reported a strong second quarter revenue beat. The firm believes the second-half guidance is achievable.

Additionally, Baird said it likes the company's recurring growth model and sees the possibility of growth accelerating in the second-half, as comps ease, acquisitions become a greater benefit and a divestiture anniversaries.

Meanwhile, Cowen analysts Bryan Bergin and Avishai Kantor said they don't see any meaningful change in Genpact's relationship with Bain Capital, despite the stake sale. The analysts see the stake sale as partial orderly exit after a five-year investment.

Cowen indicated that the Bain/GIC combine will continue to own a combined 30 percent stake in Genpact and four board seats.

Latest Ratings for G

DateFirmActionFromTo
Aug 2018JP MorganDowngradesNeutralUnderweight
Feb 2018JP MorganMaintainsNeutralNeutral
Feb 2018CitigroupMaintainsBuyBuy

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Posted-In: Baird - David Koning Cowen - Bryan Bergin and Avishai KantorAnalyst Color News Offerings Reiteration Analyst Ratings

 

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