Infotech to acquire German company

Technology solutions and engineering design services provider, Infotech Enterprises Limited (IEL), is all set to acquire a German auto engineering company. “Due diligence of the target company is on and we are expecting to close the transaction by this December,” IEL chairman and managing director, BVR Mohan Reddy, told Business Standard.

Stating that it was a fairly large acquisition, he said the German company’s revenues last year stood at $40 million (about Rs 184 crore).

Acquisition of the German company is expected to strengthen IEL’s automobile vertical, which has an addressable market of $30 billion in Europe, Japan and the US.

The Hyderabad-based IEL has recently acquired California-based semiconductor design company Time To Market (TTM) for an undisclosed amount. TTM is expected to post a revenue of $10 million (Rs 46 crore) this year as against $7.5 million (Rs 34.5 crore) last year.

“We will add few more acquisitions to our group,” Reddy said, emphasising that the company’s inorganic growth plan was primarily aimed at customer acquisition and spreading IEL’s geographical presence.

“Indian companies can’t remain as pure outsourcing enterprises any longer. This is not going to give operations of scale. We have to be end-to-end solutions provider, which is only possible through a local presence,” he said.

Last year, IEL had raised $75 million (Rs 345 crore) through private placement of 15 per cent of its equity stake. This money was intended for acquisition of overseas companies.

According to Reddy, the global spend on engineering design services has been about $1 trillion in 2004. Of this, high-technology solutions accounted for $150 billion. Keeping this in view, the company is planning to make three acquisitions in this vertical during the current financial year.

On the domestic front, IEL is expanding its facilities at a cost Rs 160 crore.

It is planning to double its office space to 1.2 million sq ft by 2010 from the existing 600,000 sq ft.

Besides setting up a 600-seat office in Noida at a cost of Rs 20 crore, the company has acquired another property in the Noida Special Economic Zone (SEZ) for about Rs 8 crore. The company proposes to build another floor at this facility at a cost of Rs 12 crore.

This apart, the company is building 500,000 sq ft office space at Manikonda near Hyderabad, a building in Visakhapatnam SEZ at a cost of Rs 25 crore, and also a centre in Kakinada SEZ. All these construction activities are expected to be completed by 2010.

IEL has added 700 people to its workforce of 7,000 in the first half the current year. It intends to recruit 700 people more in the next six months. The company has targeted to achieve a turnover of Rs 900 crore this year as against Rs 678 crore last year.

“I am fairly confident that we will be able to post Rs 900 crore (turnover),” Reddy said.

He, however, stated that things were uncertain at present in the light of the sub-prime crisis in the US. “We are doing well now but we don't know what is in store in the future. We are treading very cautiously,” he added.