Iis Promoters In Board Seat Deal With Fi Group
Existing promoter directors of IIS Infotech, including Saurabh Srivastava, Rohit Chand and Mohit Goel, will continue to function both in the management and the board of the software company as part of the agreement thrashed out between UK-based F.I group and IIS Infotech-the Delhi-based software company.
This imparts a new dimension to the UK-based F.I.Groups (turnover estimated at $200 million) recent offer to acquire all the 14.4 million shares of the IIS Infotech (Rs 43 crore turnover in 1996-97) for a total sum of Rs 145 crore.
Saurabh Srivastava, IIS managing director will also join the executive board of the FI group, while the UK company will only appoint three to four non-executive directors in the IIS Infotech board.
This was disclosed by Srivastava yesterday in an exclusive interview with Business Standard. He disclosed that the initial idea was to go for a share swap between the F.I group and IIS. However, since the proposed share swap could not be executed due to existing rules in India not permitting such an arrangement, the promoters of IIS instead opted for total sell-off of their shares.
Explaining the rationale behind the whole deal, Srivastava said: The company wanted to grow by doubling its turnover and its human resource base from the current level of 700 employees every year. This would not have been possible with our present turnover of Rs 43 crore. Therefore we decided to look for a suitable partner.
IIS initially started negotiations with a few middle ranking software companies, including FI group for possible joint venture alliances, revealed Srivastava. The deal was finally struck with F.I group since the two partners arrived at a consensus on most of the terms of the agreement.
Srivastava pointed out the acquisition would help the F.I group which is predominantly UK based, to gain a foothold in markets outside the UK, especially in the USA, Singapore and South Africa were IIS has done business.
For IIS, the deal would be beneficial since it would help the company move up the value chain in terms of providing more opportunities to its customers, its employees and its shareholders.
Rohit Chand, the other promoter in the company, added that there were pressures from various portfolio investors to give good returns on their investments. However, it was very difficult to declare dividends on the company when the turnover this year was Rs 43 crore with a net profit of mere Rs 8.69 crore, he emphasised.
Saurabh Srivastava, Mohit Goel and Rohit Chand who jointly hold nearly 30% stake in IIS Infotech which has an equity base of Rs 4.5 crore. While Satpal Khattar-a Singapore based non-redient Indian and three of his associates hold 15% in the company, another UK-based NRI Harpal Randhawa and others hold 15% in it.
F.I.Groups has offered to acquire all the 14.4 million shares of IIS Infotech for a total sum of Rs 145 crore, with the offer being Rs 100.90 per share when the scrip is hovering at around Rs 79, the offer price being same for the promoters as well as the public shareholders.
Srivastava said that the valuation was reasonable since the scrip was ruling at an average of Rs 40 at the OTCEI for the last few months while the offer price was more than double of that.
It may be mentioned that the scrip has recovered sharply from last weeks quote of Rs 52.75 to Rs 78 in the beginning of this week after the news of the acquisition spread in the market.
The offer price is more than double the average scrip price of the last 26 week which is the SEBI requirement. The average scrip price works out to be Rs 35 while the offer price if Rs 100.90, says an executive with DSP Merill Lynch, manager to the public offer.
IIS Infotech was earlier incorporated in 1992 with a core capital of a few lakh Rupees under the name of ISCT Information Technology Ltd, says an industry source. Later on, the company was merged with International Informatics Solutions Private Ltd from Aril 1, 1994. The company subsequently changed its name to IIS Infotech Ltd on November 8, 1995.