ICSA plans buyouts in US, SE Asia

ICSA India, a city-based embedded software solutions and technology provider, is planning to adopt the inorganic route for its foray into the US and Southeast Asian markets.

The company, which provides software to monitor and reduce transmission and distribution losses in power, water, oil and gas sectors, is in talks with two players that have a wide network and marketing strengths to reach out to power utilities in the US and Southeast Asia.

“We are looking at a size of between $25 million (around Rs 105 crore) and $50 million (Rs 210 crore) for each acquisition. We expect to strike a deal in the US by this year end and in Southeast Asia next year,” G Bala Reddy, chairman and managing director of ICSA, said.

The company had raised Rs 195 crore from Goldman Sachs. through issuance of foreign currency convertible bonds (FCCBs) in 2007. Around $26 million (Rs 110 crore) of this has already been converted into equity. The company plans to use the remaining funds, besides going in for debt, to fund its proposed buyouts, Reddy said.

He said the company would leverage its recent acquisition of Delhi-based ECE Industries to make meters on its own.

“We will integrate our intelligent automatic meter reading (IAMR) technology, which gives tampering and billing data through remote communications, with the energy meters and sell them to commercial and industrial consumers besides domestic power distribution companies,” Reddy said.

ICSA had spent Rs 4 crore on acquiring ECE’s Hyderabad meter business. It will spend an additional Rs 10 crore on relocating the equipment to its existing facility at Miyapur on the city outskirts and on research and development.

The Centre had recently given its approval to a restructured accelerated power development and reform programme with a total cost of Rs 51,577 crore, which is aimed at curtailing commercial losses of central and state utilities.

Besides, it has been mandated that the existing electro-mechanical meters be replaced with digital electronic meters. New installations of meters in the country are growing at 25 per cent annually. ICSA wants to make the most of this by providing its integrated IAMR technology as an add on to its meters, he said.

“We plan to launch our ‘smart meters’ in the third quarter of the current fiscal and expect the meter business to contribute Rs 40 crore to our revenues from next year,” Reddy added.

For the quarter ended June 30, 2008, ICSA posted a net profit of Rs 40.96 crore on revenues of Rs 242 crore. Its embedded solutions and software services division contributed Rs 173 crore, while its EPC services stood at Rs 68 crore of which revenues from IAMR accounted for 35 per cent.

The scrip of ICSA, which went public in 1999, closed at Rs 356.95 on the Bombay Stock Exchange on Monday.