Mphasis On The Look-out For Acquisitions

Mphasis Ltd is looking at more than one acquisiton in the sub-$100mn range to strengthen capabilities in areas of business support, package implementation, BPO and remote infrastructure management.

EDS- the previous parent of Mphasis was acquired by HP in 2008. Mphasis gets around 70% of its revenues from HP and the acquisitions are aimed at increasing revenues from direct clients other than HP.

MphasiS, which gets 12% of its revenues from HP as a direct client and 58% as a partner, is also simultaneously looking at increasing the share of joint-go-to market-led revenues with HP, and tap into new revenue streams in HP such as implementation services for its software products.

The company plans to fund these acquisitions from its cash balance of $200mn as on end of 2009 as compared to $10mn at the end of 2008.

The increase in the company’s cash position was largely on the back of increased focus on RIM and application-led services other than BPO, cost optimisation and reducing days of sale outstanding from 83 days in October 2008 to 72 days in October 2009.

In August 2009, MphasiS acquired the captive unit of AIG (AIG Systems Solutions) which provides IT services and solutions to AIG companies worldwide for an undisclosed amount.

In the last two years the domestic market for RIM has started looking up. Previously, remote model was mostly meant for network management . However now, around 15-20% comes through remote model and the rest happens through onsite due to customer reservations.

According to Nasscom, the global RIM industry has grown at more than 80% CAGR from $2 bn in 2006 to $6 bn to $7 bn in 2008.

Nasscom estimats that the global addressable market for RIM services stands at $96-104 bn. Out of the total IT Infrastructure management srvices to be off-shore, upto $13-15 bn is likely to be contributed by India by 2013 with over 30% CAGR.

Looks like RIM is the next big thing with tech firms on an acquisition spree to boost services in this segment. Last week, Zenzar technologies had announced its plans to acquire companies within and outside India with a turnover of over $21 mn. In January, HCL was to buy OLR for around $30-35mn.

Transaction Reference: Financial Express

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