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Virinchi Technologies acquires Ksoft in first of kind stock cash deal news
Our Infotech Bureau
27 August 2005

Hyderabad: Virinchi Technologies a Hyderabad-based company offering web-enabled enterprise-wide solutions to various industry verticals across the globe, has acquired the US-based KSoft Systems Inc (2004 sales: $3.7 million) in a unique stock and cash deal for a total consideration of $2.66 million. Ksoft provides enterprise business solutions with expertise in packaged product implementation.

The deal has been structured in a way that Virinchi will pay $1.2 million in cash in three installments, with the first being $600,000 payable upon share holders' and regulatory approvals and the next two lots of $300,000 each payable after 180 and 540 days respectively from the date of acquisition and preferential allotment of shares worth $1,460,000, priced as per SEBI norms for preferential allotment.

Viswanath Kompella, chairman and managing director, Virinchi Technologies, said, "The acquisition, the first of its kind in the Indian IT industry landscape, is a healthy blend of stock and cash deal."

This acquisition is in line with Virinchi's aggressive expansion plans to grow at 100 per cent year on year both organically and inorganically. It also enables Virinchi to expand its service portfolio into new arenas of business intelligence and packaged product implementation in particular the highly rewarding SAP Implementation practice.

Ksoft founder and CEO, Praveen Kondai, says, "Virinchi's acquisition of KSoft brings together companies with complementary strengths that will deliver greater value to customers while increasing KSoft's ability to enhance its services to its clients and add more clients."

Founded in 1996, KSoft is headquartered in New Jersey, USA with a total team of 40 knowledge workers. KSoft has several fortune 5,000 customers such as Nestle, HP, Gartner, Barclays, Fresh Direct, Fortna and many others.

KSoft focuses on packaged solutions implementation mainly on SAP implementations, business intelligence and custom application development apart from other areas of focus like enterprise application integration and software maintenance.

Virinchi's current market capitalisation is at 4.4 times its 2004-05 revenues ($4.4 million), while KSoft is being acquired at 0.72 times its 2004 revenues ($3.7 million).

Virinchi is paying 55 per cent of the acquisition amount through stock with just 7.3 per cent dilution and 45 per cent of the payment through 5.3 per cent dilution, thereby providing a high value-addition to its current share holders.

With 12.6 per cent dilution of the current equity capital, Virinchi has concluded the acquisition of the US company, adding 88 per cent in its top line along with adding several Fortune 500 clients in its portfolio with huge opportunity to improve its bottom line through off shoring while getting lateral entry into new domains such as SAP implementation and enhanced branding. The acquisition price includes real estate property owned by KSoft in New Jersey valued at $250,000," Viswanath Kompella added

The acquisition of KSoft is expected to be completed in the third quarter of 2005. The cquisition has been approved by the board of directors of each company and is subject to various closing conditions.

Sreekanth Uppuluri, the COO of Virinchi said, "As part of the acquisition strategy, Virinchi will reach out to KSoft's customer base and cross sell Virinchi's existing product & solution offerings in the supply chain management space. Virinchi also expects to benefit from KSoft's brand equity developed over the years in the USA."

"This purchase represents the first acquisition by Virinchi," Kompella said. Explaining the company's growth strategy, he said the "Plain Vanilla Organic Growth" curve of Virinchi requires frequent Tequila growth shots through acquisitions". These acquisition targets will essentially be European and US IT companies who are, in any case scouting for off shore
partners or setting up their own off shore development centres.




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Virinchi Technologies acquires Ksoft in first of kind stock cash deal