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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