13 Dec 2008:
NEW DELHI: HCL Technologies
, which is going to close the largest acquisition by an Indian IT firm, is already considering more buyouts. The
country’s fifth-largest IT services firm is interested in engineering services, remote infrastructure management
(RIM) and platform-based BPO firms, its CEO said.
HCL will acquire UK-based consultancy Axon Group for £441.1-mn ($655 mn) on Monday. “We will acquire (more companies). This (Axon) is one of the acquisitions. We are homing into a few things,” HCL Technologies CEO Vineet Nayar said.
The firm has cash worth about $570-mn on its balance sheet. It had earlier received shareholders’ approval to raise debt worth Rs 4,000 crore (about $825 mn). Of this, about £400 mn ($594 mn) has been raised to fund the Axon acquisition.
As per its acquisition strategy, HCL looks at three kind of deals: smaller deals for niche domain expertise and greater access to untapped markets and large transformational deals such as Axon. The company had identified the four areas of engineering services, RIM, SAP consulting and platform-based BPO to implement its Blue Ocean strategy of growth.
These are emerging areas representing a $1-billion market opportunity each and a shift from the lower-end traditional applications development and maintenance (ADM) work.
A recent report by sourcing advisory Everest Research Institute listed Indian outsourcing firms’ move up the value chain as a factor likely to have the most profound effect on M&A activity in the IT outsourcing sector. “Cash-rich Indian companies experiencing slow growth will prompt M&A activity,” the report quoted Everest vice-president Ross
Tisnovsky as saying.
Mr Nayar said HCL has seen a rise in outsourcing deals and the October- December quarter would be the biggest-ever quarter in its history, in terms of total contracts signed. “More countries are now outsourcing such as Sweden, Germany, Japan and Australia that were not doing so previously.
There is a very high degree of vendor consolidation in search of value and companies are looking at new vendors for new ideas,” he said. HCL has seen a large number of deals coming from areas such as manufacturing, media & entertainment and engineering.
Source:
http://economictimes.indiatimes.com/Infotech/After_Axon_HCL_eyes_more_buyouts/ar
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