Infosys looks to tap Japan market, forms joint venture with Hitachi

Acquires 81% stake in the joint venture for Rs 1.74 billion

India's second largest IT services firm Infosys on Friday announced the formation of a joint venture with Japan’s Hitachi Ltd., Panasonic Corporation and Pasona Inc., as it looks to enhance its presence in the island nation.

Infosys will acquire 81 per cent stake in Hitachi Procurement Service Co., a fully owned subsidiary of Hitachi which currently handles indirect materials purchasing function for the Hitachi Group. The three Japanese firms will hold the remainder of the 19 per cent stake in the joint venture.

“This joint venture will help Japanese corporations transform their procurement processes using next-generation digital platforms, as we bring together the combined power of deep procurement expertise, technology, global expertise and local skills,” said Ravi Kumar, President of Infosys, in a statement.

The IT services firm will pay JPY 2.76 billion (approx Rs 1.74 billion) to acquire 81 per cent stake in the joint venture entity, subject to regulatory closing adjustments. Hitachi will transfer 2 per cent stake each to Panasonic and Pasona as part of the deal, while holding the rest itself.

Infosys said it will bring its expertise in procurement, consulting and analytics, apart from its suite of digital technologies such as artificial intelligence and robotic process automation to the venture. While Hitachi and Panasonic’s knowledge in procurement functions and Pasona’s business process automation network in Japan will allow the entity to offer end-to-end procurement capabilities to customers.

“We are delighted to build this new partnership, combining strengths and unlocking potential of Infosys, Panasonic, and Pasona. The procurement functions role is critical to Hitachi’ success, and this partnership will strengthen Hitachi Procurement’s global competitiveness with new operating models, and high quality delivery at speed enabled by digital technologies,” said Masashi Murayama, Chief Procurement Officer at Hitachi.

As Indian IT services firms look to diversify their exposure beyond the US and UK, which today drive bulk of their revenues, they are taking the joint venture route to crack markets where there is a bias towards working with local firms. 

In September this year, Infosys had also entered into a joint venture with Temasek in Singapore to provide services to Temasek and its clients. Infosys acquired 60 per cent stake in the entity for around $8.7 million, while Temasek holds the remainder 40 per cent.

Japan remains an underpenetrated market for Indian IT services firms, with the country contributing under 2 per cent of their overall revenues. The dynamics of the market favour local firms and Infosys seems to be using the JV route in the hope that having partners such as Hitachi and Panasonic will help it win customers from Japan.