Mu Sigma’s chairman Dhiraj Rajaram re-emerges as controlling shareholder

MUMBAI: Big data unicorn Mu Sigma’s chairman Dhiraj Rajaram has bought out former wife Ambiga Subramanian’s 24% stake along with stock options held by employees to emerge as the controlling shareholder of the company he founded 13 years ago, ending months of uncertainty.

The share buyback, completed two weeks ago, was aided by a $400-million credit line from a consortium of four global banks led by Barclays against Rajaram’s shares and the company’s cash. Credit Suisse, Deutsche Bank and Standard Chartered were the other banks, said executives aware of the matter.

“We have taken approximately $400 million loan, which was taken by the company based on cash that we have already generated… it’s not a personal loan. I now own 52% of the company,” Rajaram said in an emailed response.

“The institutional investors own the same percentage of the company as before. Ambiga does not own any equity in the company,” he added.

A back-of-the-envelope calculation suggests that the acquisition values the company at around $1.5 billion. However, this could not be independently verified.



Mu Sigma’s investors, including Sequoia Capital, Fidelity Capital, General Atlantic and MasterCard, together own 48% of the company. Subramanian and Rajaram originally held 24% each.

Deutsche Bank and Standard Chartered and Barclays declined to comment. There was no response to emails sent to Credit Suisse. Subramanian did not respond to emails and SMSes.

DIVIDEND RECAPS
“When you effect a buyback, then the company is raising money to pay back its shareholders,” said a legal executive aware of the transaction. “These shareholders have the right to take out excess cash lying in a company... In this case, both husband and wife were shareholders. Dhiraj Rajaram forfeited his right to have his shares bought back and instead gave the entire proceeds to his ex-wife Ambiga. That’s an inter-se arrangement between the two.”

As far as the company is concerned, 50% of the quantum that is to go to the former couple is now going to one individual, he said. “In the west, it’s called dividend recaps where you take debt to pay dividend to shareholders,” he said. “This is structured somewhat like that.” The exercise concludes the yearlong dispute between the founders of Mu Sigma, one of the most valued emerging companies that drew topnotch global investors. Subramanian, a former Motorola engineer who was in a variety of roles at Mu Sigma before becoming chief executive, decided to exit the company following her divorce from Rajaram in May last year.

Analysts said the stake acquisition will help the founder and investors realign the shareholding and put Rajaram on a firmer footing, bringing stability. Ganesh Lakshminarayanan quit in July 2015 after being the managing director of Mu Sigma for a year. He was running India operations. Atul Bansal quit as chief financial officer in March that year.

“Such things happen between business partners and founders all the time. It was unfortunate what happened at Mu Sigma. Now with the realignment in shareholding, it is good to see the company getting back to stability and expect to see it getting on the growth track and attain its lost Unicorn status again,” said Harish HV, partner and head of private equity transactions advisory services at global consulting firm Grant Thornton. The company found itself in another controversy after Aon Corp. founder Patrick G Ryan took Rajaram and the company to court in March 2016 for allegedly cheating him of hundreds of millions of dollars when his stock was bought back by purportedly citing dull growth prospects. Ryan had invested $1.5 million in Mu Sigma in 2006 and was paid $9.3 million to sell his shares in 2010, according to media reports.

DIFFERENT PATHS
Rajaram, an alumnus of the University of Chicago and College of Engineering in Guindy, Chennai, founded Mu Sigma in 2004 after working for consulting firm Booz Allen Hamilton. Subramanian is setting up a B2C venture, which will not be a competing business, people aware of the matter said, contradicting previous reports.

Following the divorce, Rajaram had explored tapping private equity and strategic investors to raise funds. Canada’s Ontario Teachers' Pension Plan (OTPP) and Canada Pension Plan Investment Board (CPPIB), along with bulge-bracket private equity funds such as Blackstone, Bain Capital and CVC Capital Partners explored the acquisition of a significant minority stake at a $1.1-1.2 billion valuation. So did US-based software and analytics giant Palantir Technologies but the talks didn’t yield any result as Rajaram refused to cede control, people said.