Tuesday, January 22, 2013  Business Standard

Eyes acquisition in $40-50 mn segment in IM, SAP segment

RPG Group’s IT services company Zensar Technologies expect’s to track a volume growth rate of 15% for financial year 2013-14, on the back of a strong deal pipeline and a better spending budgets in the US.
The growth driver for FY14 will be infrastructure management (IM) by leveraging the Akibia acquisition and sectors like retail and healthcare.

“We are seeing a strong momentum across verticals we are present. For the next year we are targeting revenue of about $135 million from IM business. Almost 40% of this will be driven by our focus on shifting work to offshore. Add to this we have a visibility of at least 20 deals in the $5 million to $25 million range across industry in the enterprise and IM space,” said Ganesh Natarajan, CEO and vice chairman, Zensar Technologies.

Natarajan said that the company has closed deals in the IM space worth $21 million in the third quarter. “The drop that we reported in the IM business was primarily due to the shift from onsite to offshore. We are creating a dual shore model for the IM business where we continue to leverage the presence of Akibia and bring our offshore capabilities,” said he. The company’s third quarter had reported a drop in revenue from the IM business by 4.3% sequentially.

Zensar in order to focus on large clients is also moving out of some smaller deals with limited option of growth. During the quarter the $1 million client degrew from 43 to 41. “We have eliminated some of the projects with smaller clients as we want to focus in the $5 million and $20 million segment,” he added.

In terms of geography the company is betting on the US, but said that Europe will continue to be under pressure. “In Europe we do expect growth returning to in the retail sector, especially in the UK. We also plan to de-emphasis its focus from the Japan market.

The company also continues to focus on growing inorganically as well. “The 15% growth for FY14 is organic. We are looking at a follow-on investment in the IM space and in firms that can give us additional capabilities in SAP. We are comfortable with a deal size of $40-50 million,” he added. Zensar had acquired US-based Akibia for $66 million in 2010.

For the third quarter FY13, Zensar reported a net profit of Rs 48.7 crore, though up 51% sequentially, it was down 7% on a year-on-year basis. Revenue’s were impacted due to planned shutdown in large client. It was up 9% on a y-o-y basis, but down 2% on q-o-q.

The company's stock closed at Rs 264.15 per share, down 9. 4%.

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