Infinite looking at acquiring two US firms to boost IP delivery skills

To strengthen its IP-leveraged solutions business and capitalise on opportunities in the telecom sector, Infinite Computer Solutions (ICS) India Limited is looking at acquiring two US-based companies focussed on telecom-specific Intellectual Property (IP)-led solutions. Infinite is looking at acquiring companies with revenues in the $10 million-$15 million range, said Infinite chief executive officer Upinder Zutschi.

"The telecom sector in the US has plenty of upside for us to leverage, especially in the area of IP-led solutions. We are in advanced stages of talks with two companies with whom we expect to tie up agreements by early next year. Both companies have much to offer by way of providing us IP leverage in the telecom domain. For these acquisitions, we will be looking at a combination of upfront cash, a stock component as well as an earnout plan," Zutschi said.

To carry out the strategic acquisitions in the next few months, Bangalore-based ICS will set aside $15 million in funds to be raised via a initial public offer. The Sanjay Govil-promoted company plans to file a Red Herring Prospectus with the SEBI shortly at least 45 days ahead of its IPO.

ICS acquired telecom OEM-focussed firm Comnet International in an all-cash deal in August 2007, which helped it obtain IP domain expertise and integrate IP development into its revenue sharing model. The same year, ICS exited its investments in Datagrid Services, a Hyderabad-based BPO firm, which it had acquired in 2006.

ICS presently derives 17.3 per cent of its total revenues from IP-led solutions, while infrastructure management services, which is emerging as a high margin business for the company, contributes 8.2 per cent. An overwhelming 60 per cent of ICS's topline comes in from custom application development and maintenance projects, while 12 per cent is contributed by testing services.

The company will divest 26.17 per cent equity post-issue, proposing to raise approximately Rs 68 crore, according to market sources. Besides funding the strategic acquisitions, the IPO proceeds will be expended in captive expansion of infrastructure across the company's operations. "Phase I of out expansion plans will be concentrated in our Gurgaon operations, while Phase II will focus on expanding our operations in Chennai," Zutschi said.

ICS operates 12 offices across the globe including in the US, UK, India, China, Malaysia, Singapore and Australia employing 2,700 people. The company runs its delivery centers in Bangalore, Gurgaon, Hyderabad and Chennai.

Top ten clients presently contribute 90 per cent of ICS's revenues and 91 per cent of its clientele are concentrated in the US market. "As we diversify our client base and intensify focus on growth areas like IP-led services and remote infrastructure management, we expect the risk of client concentration to be lowered," Zutschi said.Media Contact: Analytical Co

ICS witnessed almost flat growth in revenues in fiscals 2006 and 2007, but posted 25 per cent revenue jump to Rs 490 crore in fiscal 2009. In 2009, Infinite earned net margins of 9.3 per cent from 6 per cent in 2008. Between 2005 and 2009, the topline showed a compounded annual growth rate of 12 per cent.