Mastek lines up $45 M for acquisitions

By siliconindia   |   Thursday, 19 April 2007, 07:00 Hrs
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MUMBAI: Mid-size IT firms are treading where the big five of Indian IT have shied away from: massive overseas acquisitions. Latest to join the acquisition fray is Mastek, which recently sold its 50.1 percent stake in its JV with Deloitte Consulting for Rs 58.44 crore, reported The Economic Times today.

The company has earmarked $45 million for acquisitions, CMD Sudhakar Ram told ET. The acquisition will likely be in the insurance domain, and of a US-based company, where the firm gets a smaller percentage of revenues as compared to the rest of the software industry. While most software companies get over 60 percent of their revenues from the US, Mastek gets only 20 percent of its international revenues from North America. It has been fighting hard to grow its revenues from the region; Ram had in fact re-located to the US to give the efforts a bigger push.

Mastek recently appointed William Mc Carter, with experience in the insurance and financial services vertical, as president of its US operations. Although Europe is the fastest growing geography for the industry, the North American market is larger in terms of size and more willing to outsource as compared to their European counterparts, noted the paper.

As far as acquisitions are concerned, Europe is a tougher market. The paper noted that at a recent meeting, Tata Consultancy Services’ global HRD head S Padmanabhan had said labor laws were stricter in Europe compared to the U.S., making it hard for companies to reduce workforce and offshore a larger percentage of work.

“When Indian companies acquire firms abroad, the purpose is to gradually move more work offshore. Without that, it doesn’t make sense,” an analyst with a brokerage was quoted by the paper. In the just ended March 2007 quarter, Mastek’s U.S. operations contributed Rs 44.8 crore while its European operations contributed Rs 138 crore, or 65 percent of its overall revenues.

Incidentally, while European revenues showed flat growth and Asia Pacific revenues grew 4 percent sequentially; North American revenues registered a sharp 28 percent growth over the preceding quarter, making it the fastest growing geography for the company.

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