Looking at acquisitions in next 6-12 months
News | 26 Aug 2013
In an interview to CNBC-TV18, Natarajan adds that the company will be eyeing a few acquisitions in the next 6 to 12 months. Hailing the Hexaware-Baring deal , Ganesh Natarajan, vice chairman and chief executive officer, Zensar Technologies says private equity (PE) players help any acquisition by bringing in a deep understanding of the market to the table. "I don't think there is too much to choose between a strategic investor and Baring. Baring is a good investor, good for the management team, good for customers so overall I would be very positive about the transaction," adds Natarajan on the Hezaware-Baring stake sale. Natarajan adds that the company will be eyeing a few acquisitions in the next six to 12 months. "We are looking for companies who are either in the SAP space or in terms of new technologies. Deal size is not important. If we get any company which is good would be between 25 million to 75 million will be interested," he explains. Below is the edited transcript of Natarajan's interview to CNBC-TV18.
Q. Before I talk about this large order, since you are part of Nasscom as well. I am sure you many not want to comment on some other company but a private equity company actually coming out and picking up substantial stake in an Indian IT company and the founder actually selling to a PE company and not an IT company how would you view that transaction?
A: It is a good deal for Hexaware because it values the big IT companies that are at a very respectable level. I don’t think there is too much to choose between a strategic investor and Baring. Baring is a good investor, good for the management team, good for customers so overall I would be very positive about the transaction.
Q. What would Baring bring to an Indian IT company? What would it bring to the table?
A: It is difficult to say that. We have had private equity investor for over 12 years and what they bring is the depth of understanding of the market. They may not help in customer acquisition but for a stable company which is doing well, which has a good management team, I think it is more of financial security than any customer access is what I would look at.
Q. With regards to the deal- because we have so many headwinds going for the IT sector at this point, the US market doing well, the rupee in favour of the IT space- Do you think that this is a good time to strike some deals within the IT space and we could expect a lot more to happen at least within the Indian space?
A: I am not too sure about that because if one looks at significant companies, they are all doing well. If one looks at the 3-4 mid-tier companies including Zensar, they all are seeing very good traction both in Europe and United States. Hence, there is no particular reason for any of us to sell, consolidate, or to get merged. One will see merger and acquisition (M&A) action. There is clearly an opportunity for large companies to buy big companies in Europe and US. Even for companies like ours, we will see M&A action. Barring that, I don’t see any consolidation in terms of mergers of mid-tier or large companies but that is not going to happen as the market is good.
Q. You said your company will also see M&A action that is inward or outward M&A action. Will you be on the block yourself is that what you are suggesting?
A: Not at all, absolutely not. Yes, the market is there for buying companies and we should be looking at more acquisitions over the next 6 months to one year.
Q. What would be the deal size that you possibly will be looking at in terms of M&A activity for the company itself?
A: We are looking for companies who are either in the SAP space or in terms of new technologies. Deal size is not important. If we get any company which is good would be between 25 million to 75 million will be interested. Right now there is nothing on the cards in terms of immediate sign ups but certainly we are interested and this is the organic business is good. With the positive winds in the sector profits are also good definitely we will be in the markets for acquisitions.
Q. If you could tell us going forward how is the pipeline looking because the recent rupee depreciation has made Indian companies far more competitive than they were last year. That was the concern last year how is the pipeline looking and could you be announcing some more orders going forward?
A: First of all let me segregate the two because the fact that rupee has fallen is a recent phenomena. We had good traction from customers both in the infrastructure management space, new technologies as well as traditional support services, For the last 6 to 9 months the market started improving right from January and we had a steady stream of big orders. These are orders between 5 to 10 million that have been coming in. With the current pipeline that we have over USD 200 million both in the infrastructure management and in the new deals we will continue to see good traction. I am very confident about the markets particularly in Europe and in the US.
Q. What is your total guidance in terms of growth for FY14?
A: No guidance. We haven’t looked at that but definitely if we look at the Nasscom guidance that is really what we are looking. Things look very positive at this point but beyond that, I really won’t be able to comment on specific guidance for this.