Virtusa to buy 53% stake in Polaris for Rs 1,173 cr

The combination will equip Virtusa to provide end-to-end global BFS, solutions, pursue larger consulting and outsourcing opportunities

A subsidiary of Virtusa Corporation, the US-based global information technology services entity, is acquiring a 53 per cent stake in Polaris Consulting and Services, an India-based provider of financial technology and allied services.

Arun Jain, the promoter of Polaris, will be exiting the company. Virtusa will acquire the shares from some promoter entities, led by Jain, and certain other shareholders, including OrbiTech.

For quite a while, Polaris and its promoters had been denying the company was up for sale, saying the promoters were committed. Virtusa will purchase the shares at Rs 220.73 each, aggregating to Rs 1,173 crore. It will also make an open offer to the public shareholders of Polaris to purchase up to an additional 26 per cent.

Jain said: “This will also enable me to establish and pursue innovative models for social impact using design thinking in the areas of health and education, in addition to my focus on steering Intellect Design Arena Ltd into a global digital products powerhouse.”

Kris Canekeratne, chairman and chief executive at Virtusa, said: “Polaris brings a terrific team and an attractive, blue-chip client base to our organisation. The combination of Virtusa and Polaris enables us to provide end-to-end global BFS (banking & financial services) and solutions, expand our addressable market, and position us to pursue larger consulting and outsourcing opportunities.”

Polaris’ focus has been digital enterprise, payments, risk & compliance systems, and those in data & analytics. It had a net profit after tax of Rs 29.9 crore for the quarter ended September, as compared to Rs 43.8 crore for the quarter ended September 2014. Total income was Rs 475 crore for the quarter, from Rs 433 crore in the same quarter last year. Virtusa and Polaris collectively will have around 18,000 employees, generating $826 million of pro-forma revenue for the 12-month ending September 30, 2015.

Polaris generated total pro-forma revenue of around $150 million. Polaris had cash, cash equivalents and short-term and long-term investments of around $44.8 million as of September 30, 2015.

Virtusa expects to realise over $100 million of cumulative revenue synergies over the next three financial years from the business combination. The Polaris transaction is expected to close during Virtusa’s fourth financial quarter ending March 31, 2016.