i-Flex Solutions has just announced an acquisition of a risk solution provider, Mantas in the US and it believes that with this acquisition, they it be able to add to their anti-money laundering solutions and package. (See: i-Flex to acquire US company Mantas for $122.6 million)

Rajesh Hukku, CMD, i-Flex Solutions, says that the Mantas deal will be EPS accretive this year on a non-GAAP (Generally Accepted Accounting Principles) basis.

He adds that the company is always looking at strategic acquisitions in the financial services business. He further states that the surveillance market is large and their focus is on increasing market share. CNBC-TV18 shares with domain-b its exclusive interview with Hukku:

Can you tell us what this brings to your plate of offers?
We are excited because risk and compliance are becoming one of the hottest and the most important areas for banks and financial institutions worldwide. We have a product called Reveleus, which handles operational risk and analytics credit risk and with Mantas, we bring in anti-money laundering, detection and surveillance. This completes the whole risk and compliance picture that we offer worldwide.

Reveleus has really gained top tier customers like Wells Fargo, Wachovia, CitiBank in the US and Mantas also comes with top tier customers like ABN AMRO and Merrill Lynch. So the combination of these two should be a leadership in the space of risk and compliance.

Could you comment on the preferential allotment that you have done in terms of the money that you have used, instead of doing this deal through your balance sheet?
The whole deal is pretty large for our side. It is $122.6 million and the board evaluated various options of taking a loan or using the balance sheet or doing a rights issue. But we are in a unique position where we have the support of Oracle and they feel that this is a good deal for us, so they agreed to basically take it at a preferential allotment.

So we are going to use the SEBI guidelines to allocate about 4.44 million shares to them, which will increase their stake from 52 per cent to about 55 per cent. So it is a small increase in stake, but the whole issue would be done as per the preferential allotment guideline.

When will the deal be accretive or will it be dilutive to your earnings?
In a deal there is a real cash part, so on a non-GAAP basis, it should be accretive as we do it in this year itself. But if one takes the effect of all the GAAP accounting and the accounting entries, then it will take about one to one-and-a-half years to be accretive.

How big do you see the anti-money laundering market in the world and how much share would you like to have?
As per the reports of the industry analyst at present, the whole risk and compliance space is about $20 billion a year and it is growing at a healthy rate. There are several companies in that area and with our size, this space is so big that we are not worried; the target market is not a problem.

But certainly in terms of the quality of coverage and the software, already industry analysts have ranked both Reveleus and Mantas as one of the top leaders in their field. So we feel excited about trying to sell it and capture more marketshare that we have.

In order to further augment your product portfolio, do you see any acquisition coming?
Like more software companies that are pushing a very aggressive strategy, we are always looking at companies for acquisitions. But from our point of view, we are first focusing on the financial services industry. Within that, we are not going to do an acquisition just to increase the size, but we will really do something, which is strategically at the right timing and which enhances the scope of our offerings.

Strategically, which sector or industry are you looking at?
We are only focusing on the financial services industry, which are banks, mutual funds and insurance. If one looks at our track record, five to six of our acquisitions have been in the area of insurance products, consumer lending products, front-end analytics, etc.