Infosys, Wipro said to be eyeing analytics firm

Indian offshore giant Infosys and Wipro are reportedly both gunning for MarketRX, a US-based provider of analytics services for the pharmaceutical and biotech industries, according to a report in the Economic Times, an Indian paper.

Analytics has attracted a lot of attention from outsourcers recently as a higher value service to tack on to their existing offerings. Much of the work in this area is around marketing analytics - tools and services to help companies better understand and devise customer strategies.

Some Indian vendors have built up their own analytics business, and others have acquired analytics vendors in recent years. WNS, for example, earlier this year bought Marketics in a deal worth up to $65m. And last year fellow BPO provider EXLService bought Inductis, another analytics provider.

But with Infosys and Wipro now eyeing this space, it's no longer just the BPO specialists looking to get serious about analytics. The market for analytics is young but clearly poised for growth. And companies seem willing to pay dearly for access to this market. The Economic Times said MarketRX could fetch a price between $150m and $160m, some five times its annual revenue.

Stand by for a big Infosys acquisition

Earlier this week, Wipro announced that it would acquire Nasdaq-listed IT infrastructure management firm Infocrossing for $600 million in India’s biggest software acquisition overseas so far. Wipro has long spoken of a “string of pearls” strategy for acquisitions, and that usually meant buying small overseas companies to either gain customers or competencies, which in turn could be linked to operations in India to provide cost-efficient services to customers.

But then, at 600 million US dollars, the latest pearl must be the size of a football. That big an acquisition is happening now because this seems to be the ideal time for an Indian company to go shopping abroad. And I do believe Infosys is ready to make a big purchase now.Rumours have been rife in the markets for a while now that Infosys may try and get Capgemini to build its European market while Capgemini itself acquired US-headquartered Kanbay, which has a strong presence in India. London-based Xansa was also said to be an Infosys target, but is now being acquired by Steria, another European player.

The story is quite simple. Foreign companies who have missed out on the Indian software party are buying capacities to have a strong presence in India, while Indian players make Western acquisitions either to get juicy customers from the companies being bought, or to acquire specialised competencies and relationships with regard to technical skills or consulting capabilities.

Companies like Accenture and IBM have been hiring away in India, matching Infosys and Wipro in wooing skilled engineers. The job market is getting tight, with salaries going up and managers difficult to find. Meanwhile, the rupee has become stronger, eroding profit margins for software service exporters like Infosys.

Now, consider the fact that Infosys is hiring about 24,000 employees in the current fiscal year. This means it is building capabilities to execute orders. Infosys has often said that it does not propose to use acquisitions to build capacities. Being good at training and managing young fresh graduates, Infosys essentially looks for acquisitions to give strategic headroom to acquire big-ticket customers. In Australia, it paid about $23 million to buy Expert Information and last month, it said it would pay $28 million to take over the business process outsourcing (BPO) operations of Philips which would bring with it a $250 million outsourcing contract.

Infosys could do with some consulting muscle and more big-ticket customers.

The Bangalore-based company is sitting on a huge cash pile of about $1.6 billion (Rs. 6,350 crore)! Nandan Nilekani, Infosys’s executive chairman, has long maintained that cash is a “strategic asset” but at some point, I suspect it becomes a strategic liability.

Infosys does not invest in stock markets, its venture funding has not proved too good, and returns from bank deposits and liquid mutual funds are too low. The best thing for Infosys is to either return some cash to its shareholders, buy real estate to build facilities (which it is already doing) or else, go for acquisitions.

This week, the government clamped down on external commercial borrowings (ECBs) to stop the rupee from appreciating further. The rupee, which was 44 to a US dollar at the start of the year, is now at Rs. 40.5, and that means anything bought overseas is nearly 10 per cent cheaper.

This could be the best time for the company to shed its trademark south Indian conservatism and do some big-time shopping. I expect it to happen sooner than later.

Original Story

Xansa in Takeover Talks with Infosys?

Tascali UK reports that Xansa is in takeover talks with some companies.

Xansa is an outsourcing and technology company in UK wit £379.7m revenue and 8,600 employees. Bridgewell analyst Michael Donnelly said he was "99 percent sure" an Indian firm was behind the deal. "It could be Infosys, Wipro or Tata," he told Reuters. "They are big in low-cost India but their challenge is client contact. How do you achieve that? Buy a Western company. The Indian companies have a lot of cash to burn."

Quoting from Original Story

LONDON (Reuters) - IT services firm Xansa said on Friday that it was in advanced talks that could lead to a takeover offer, sending its shares up 37 percent.

The company said in a statement that the potential offer would be at a premium to the current share price -- which was already up 20 percent for the day by the time the announcement was made.

Shares in the group, which counts the BBC and the National Health Service among its clients, then rose further to be up 35 percent at 103 pence by 1:39 p.m., valuing it at 358.5 million pounds, according to Reuters data.

A spokesman for Xansa declined to comment further, but Bridgewell analyst Michael Donnelly said he was "99 percent sure" an Indian firm was behind the deal.

"It could be Infosys, Wipro or Tata," he told Reuters. "They are big in low-cost India but their challenge is client contact. How do you achieve that? Buy a Western company. The Indian companies have a lot of cash to burn."

Spokeswomen for Infosys , India’s second-largest software services exporter, and third ranked Wipro declined to comment.

A spokesman for industry leader Tata Consultancy Services also declined to comment.

Earlier a trader had said he had been told Cap Gemini was behind the bid, but the French IT group’s chief executive, Paul Hermelin, told analysts that there were no talks going on between the two firms.

Market rumours have also linked Cap Gemini with Infosys, but Hermelin told reporters there had been "no kind of contact whatsoever" between the companies.

Xansa reported in June that pretax profits rose 23.3 percent to 16.4 million pounds for the year to end April, below analyst forecasts.

The company is also without a chief executive, after Alistair Cox resigned to join recruitment group Hays , again in June. Non-executive Chairman Bill Alexander is currently in charge on an interim basis.

Outsourcing deal triggers Infosys up

MUMBAI: Infosys Technologies stock rallied on Thursday after the company purchased contract from Royal Philips Electronics. In a $250-million seven-year outsourcing deal, structured as an acquisition, Infosys Technologies will take on board 1,400 employe es of Royal Philips Electronics in three nations including India. At 11.50 am, the stock was up Rs 38 or 1.90 per cent at Rs 2,027 on the NSE today.

As part of the deal, Infosys BPO will provide finance and accounting (F&A) services and the processing of purchase orders to Philips.

Infosys will pay $28 million upfront to acquire the Philips' BPO assets on 'as is where is' basis in Poland, Thailand and India. Philips' shared service centre at Lodz in Poland is 780 strong, while the company has some 400 people in Chennai and 175 in B angkok.

Original story

Infosys Buys Philips' Captive Finance BPO Operations

India's Infosys Technologies Ltd said it is buying the captive division of Royal Philips Electronics NV's finance and accounting business process outsourcing unit for 28 mln usd.

As part of the deal, Infosys will enter into a seven-year contract worth 250 mln usd with Philips to provide finance and accounts (F&A) services.

India's second-largest software exporter, which has a cash reserve of 1.6 bln usd, will buy three of Philips' service centres in India, Poland and Thailand, with about 1,400 employees. Of this, 750 employees are in Poland.

'The deal will place us among the top five players in the F&A outsourcing space globally. We want to focus on the F&A space in BPO - a growing area,' chief financial officer V Balakrishnan told Thomson Financial News.

Analysts view the transaction as positive for the company though at least one brokerage said the deal would dilute margins over the next few months.

'Infosys BPO can now expect to win 200-250 mln usd deals given its increased capacity after this acquisition. Moreover, Philip's captive unit is spread across a few countries, especially in Eastern Europe, and Infosys has been looking at a nearshore in this region,' an analyst at BRIC Securities said.

Balakrishnan said: 'Europe is an important market for Infosys and we get incrementally more growth from Europe than anywhere else.'

On recent speculation that Infosys is seeking to buy Capgemini, Balakrishnan said the company is looking at further acquisitions globally, including Germany, France and Japan.

'To sustain growth, acquisitions of this size are important. Earlier on, we saw deal sizes of 50-100 mln usd but now it is bigger in size,' ABN Amro IT analyst Pankaj Kapoor said.

An analyst from Motilal Oswal Securities said the deal is likely to be margin-dilutive in the next few months, and is similar to rival Tata Consultancy Services's purchase of UK's Pearl Group insurers.

The Mumbai-based brokerage said the transaction signifies that Infosys has changed its traditional attitude towards acquisitions.

Another analyst said the deal would add only 50 paise to Infosys' full-year per-share earnings.

This is only the second acquisition in Infosys' 25-year history, after its 2003 purchase of Australia-based Expert Information Services Pty Ltd for 22.9 mln usd.

Infosys' BPO unit, formerly Progeon, currently has about 11,000 employees providing the company with round-the-clock processing. It had revenues of 2.0 bln rupees for the first quarter, contributing about 5 pct to the company's total revenue of 37.7 bln rupees during the period.

Infosys shares closed at 1,990.15 Indian rupees on the Bombay Stock Exchange, up 0.69 pct.

Infosys looking at acquisitions in all geographies: CEO

Ramnath Shenoy
Bangalore, Jul 25 (PTI) IT major Infosys Technologies Ltd is scouting for acquisitions in "all geographies" to expand its overseas footprint, the company's Chief Executive Officer and Managing Director S Gopalakrishnan said.

Gopalakrishnan said it has started investing in Japan, China, Europe, Australia and the US in order to fill gaps in their services offerings.

"We look at acquisitions to fill gaps in our services as well as accelerate our growth in certain geographies where we have less presence today", Gopalakrishnan told PTI here.

"And if you are looking at where we are investing today...Japan, China, Europe, Australia and even in the US to fill the gaps in our services. In that sense, we are looking at all geographies (for acquisitions)", he said.

"There is always something being evaluated (potential acquisitions)", Gopalakrishnan said.

The NASDAQ-listed firm had cash and cash equivalents of USD 1.6 billion (Rs 6,442 crore) as on June 30 this year.

Speaking on his role as CEO, Gopalakrishnan said stepping into the shoes of N R Narayana Murthy and Nandan M Nilekani who held the post earlier is challenging as the company has been successful under their leadership, and (now) there is a lot of expectation about where it is going.

The company today is operating in an environment which is changing, he said. PTI