Merrill Lynch May Pick Stake In Covansys
Investment bank Merrill Lynch has the option of picking up a stake in the Chennai-based Covansys (India) Pvt Ltd, a $404 million software services company.
Merill is one of the clients of the Nasdaq-listed Covansys, which provides software services to the banking and financial services industry.
Covansys Corporation, president and chief operating officer, Marty Clague said: "Nothing has been implemented and the clause in the agreement which provides for them taking a stake in our Indian operations will depend on how long our engagement with them lasts."
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Covansys India, president and managing director, V V Sundaram said the pricing or timing of the deal had not yet been decided.
"The timing will largely depend on how we ramp up on our engagement with them. At present, about 160 personnel are deployed on the Merrill account. As and when we increase it to about 250 then they might look at a stake," Sundaram said.
Merill becomes the second big-ticket name, after Ford Motor Company, to evince interest in the 100 per cent subsidiary of Covansys Corporation.
Covansys has partnered Ford Motor Company to develop e-commerce solutions that will connect Ford with its customers, suppliers and dealers in the Asia Pacific Region.
Covansys will provide applications development, maintenance and support, and management and administration of software projects and is actively involved with the Ford Information Technology Services India (FITSI) in Chennai.
Covansys India had reported export revenues of about $45 million last year (January 2001 to December 2001), while its parent announced a decline in topline growth for the year ended December 2001.
Clague said the company's customers were seeking to support the same level of service requirements with flat to slightly higher budgets for 2002.
"We believe that IT budget pressures will lead many CIO's to seriously consider, in some cases for the first time, offshore services as a high quality low cost solution" he said.