LGS Global to raise Rs1,500 crore

Ahead of the merger with the privately-held Ybrant Digital, the Hyderabad-based entity LGS Global is gearing up to raise funds.

LGS has sought a shareholder approval to raise Rs1,500 crore from the market and is expected to shortly finalise the modalities for it.

LGS, an Enterprise Resource Planning (ERP) solutions company, has agreed to merge with Ybrant in an all-stock deal valued at about Rs2,400 crore.

However, the merger is yet to be approved by the regulators and once approved, the brand LGS will cease to exist. The new management would also rename the company to go with brand Ybrant.

“The approval will offer significant headroom to the new management as well. While the mode of funding is yet to be decided, the funds could be used for an exit option for the existing investors in Ybrant,” a source tracking the developments said.

Major PE investors including Oak Investment Partners and GE Asia Pacific Capital have invested about $100 million in Ybrant.

Digital media content major, Ybrant owns proprietary media such as Lycos, Gamesville and getMedia in Latin America, and travel websites in Australia.

It has also partnered with Facebook, Google, MSN, Yahoo, and Viacom.
Ybrant was keen on going public in 2007 and had even sought the regulatory approvals for it.

However, with the market conditions remaining hostile, it decided to keep away.

Interestingly, even while trying to raise capital ahead of merger, LGS has also decided to shift its registered office from Hyderabad to  Chennai.

According to sources, there are “significant financial reasons” to shift the office. “Stamp duties in Andhra Pradesh could be the key reason,” the source said.

According to sources, LGS is currently examining various funding options including a follow-on public offer, a qualified institutional placement and the issuance of foreign currency convertible debentures.

However, the approvals for merger would also encourage the combined entity to consider an American depositary receipt or a Global Depositary Receipt issue for making use of the funding headroom, the source said.