3i plans to buy out ally in German joint venture

3i Infotech (formerly ICICI Infotech) is consolidating its overseas operations ahead of its initial public offering (IPO).

To begin with, the company plans to acquire the remaining 50 per cent in its joint venture Semantik Solutions GmbH, set up in mid-2002. In addition, the company is also merging its Australian subsidiary with its US subsidiary.

As per the Red Herring Prospectus submitted to the Securities and Exchange Board of India, 3i had entered into a joint venture agreement with the Germany-based Fraunhofer Institute for software and systems engineering (ISST), and Innova Business Development and Holding GmbH in March 2002.

As per the agreement, 3i invested euro 12,500 for a 50 per cent stake in Semantik Solutions GmbH. As of December 31, 2004, the venture had accumulated losses of euro 0.28 million.

The prospectus stated, "We have proposed acquiring the 50 per cent interest in the joint venture that we do not own and, thereafter, Semantik Solutions GmbH will become a wholly owned subsidiary."

The prospectus adds that once the process is complete, the accumulated losses of Semantik Solutions GmbH will be charged against the company's reserves. The prospectus adds that if Semantik continues to incur losses after it becomes a wholly owned subsidiary, 3i would need to continue to provide funding for its capital expenditure and working capital requirements through loans or equity infusions.

In addition, the company also plans on consolidating the operations of two of its subsidiaries "" one in the US and one in Australia.

The company's US subsidiary 3i Infotech Inc was set up during fiscal 2001 to facilitate its entry into the US IT services markets. As of March 31, 2004, this subsidiary had accumulated losses of $ 4.2 million. The prospectus adds that while this operations from this subsidiary has shown improvements, they are unsure whether this improvements would continue.

The company's Australian subsidiary, which was incorporated in fiscal 2003, too had accumulated losses as of March 31, 2004 of Aus $2.6 million.

3i Infotech, provider of IT solutions to the banking, insurance and financial services industry had posted profits for the nine months ended December 31, 2004 of Rs 16.26 crore and its total income during the period totalled Rs 210.21 crore.