Infosys will follow two-prong acquisition strategy, says Pravin Rao

COO says the company will look for acquiring companies of smaller sizes for innovative tech and larger ones would be for geographic expansion, vertical growth

Infosys, the country's second-largest information technology (IT) services company, is looking at a two-pronged acquisition strategy.

It would continue to pursue smaller companies for primarily innovative technology. And, keep its radar active for relatively large acquisitions, to help it expand scale in certain regions, divisions, or service lines.

The Bengaluru-based company expects the acquisition size of next-generation tech companies — as of Panaya, the US-based automation technology company it recently acquired — would be smaller, in the absence of larger companies in these space.

However, acquisitions which it expects will enhance presence in a particular region or business segment are bound to be bigger, maybe upwards of $500 million.

Such acquisitions will only be to help in 'accelerating’ the presence it already has, U B Pravin Rao, chief operating officer (COO), told Business Standard.

“We already have presence in geographies and many of the verticals,” he explained.

Rao said there was no fixed limit on how much to pay. “If we have something in (annual) revenues of $100 mn or more, we would be open to look at that and if it is a $500-mn acquisition or something that makes sense, we are open to that,” he added.

Infosys has so far made six acquisitions. Panaya, mentioned earlier, is a US-headquartered but Israel-based automation technologies provider. It acquired Panaya last month, in an all-cash deal of $200 mn ( nearly Rs 1,250 crore). This is its second largest acquisition. The largest was of Lodestone, a Zurich-headquartered management consulting entity, which it bought for $345 mn (close to Rs 1,950 crore) in September 2012.

Infosys is now in the process of integrating Panaya's capabilities with itself, to implement the former’s automation technologies in the existing process. In the second phase, it would try to use Panaya’s platform itself to improve internal efficiency and enhance productivity.

“The expectation is that over a period, once the teams are fully integrated and our team fully understands the capabilities of Panaya, we will start implementing in our projects and in our solutioning for clients,” Rao added.

The company expects Panaya’s technology to help improve productivity by 20-30 per cent, he said. "Again, it depends on how many projects we will be able to apply to and the life cycles.

Past acquisitions

• Australian IT services provider Expert Information Services in 2003, for $23 mn
   
• US-based insurance and financial service back-office service provider McCamish in 2009, for $58 mn in 2009
   
• Captive BPO operations of Dutch consumer electronics giant Philips in 2010, for $28 mn
   
• Australia-based Portland Group in December 2011, for AUD $34 mn
   
• Zurich-headquartered management consultancy firm Lodestone Holding in 2012, for $345 mn
   
• US-headquartered Panaya in Feb 2015, for $200 mn