LGS Global to raise $30 million via FCCB issue, eyes acquisitions

LGS Global Limited (formerly Lanco Global Systems Limited), a city-based provider of IT services and solutions, will be raising $30 million (approximately Rs 140 crore) through issue of foreign currency convertible bonds (FCCBs) to fuel its organic and inorganic growth plans.

“We had obtained an approval from our shareholders at the AGM held in September 2009. We expect to close the fund-raising process and realise the money into our books by mid August this year,” LGS Global managing director Rao Karusala told Business Standard.

The company has roped in auditing and risk management firm Grant Thornton for doing due diligence on a few targets, which it wants to acquire. LGS already signed letters of intent and extended some token advance, and is expected to seal the two acquisition deals in the healthcare space – one in the US and the other in UK – by the end of September for a total consideration of $20 million (around Rs 93 crore), he added.

LGS, which had acquired US-based software consulting companies Global IT and TechOrbit Inc for $4 million (Rs 18.6 crore) in December 2006, currently garners close to 40 per cent of its overall revenues from the healthcare vertical. “Post the acquisition, we expect these two companies to generate about $30 million revenues in the first year,” he said.

Karusala said the company was looking at tapping the capital-intensive e-governance projects in India and had already been empanelled with the Accelerated Power Development and Reform Programme (APDRP).

In an APDRP tender, which is part of the Rs 50,000-crore power sector modernisation programme, the IT implementation work for the Kerala State Electricity Board (SEB) is expected to be awarded to MIC Electronics-LGS Global consortium. The value of the contract is Rs 200 crore, with Infosys Technologies, TCS and Wipro being among the other bidders. Infosys has won the tender from the Karnataka SEB, while TCS has won the tender for Madhya Pradesh, Andhra Pradesh and West Bengal.

“We are strongly bidding for the contracts in Haryana, tenders for which will be opened in July, Assam, Jharkhand, Maharashtra, Goa and Bihar with the value of the orders ranging from Rs 200 crore to Rs 400 crore. In Kerala, we have emerged as the lowest bidder among the seven shortlisted vendors, and we are positive about winning one or two states,” Karusala said.

Stating that the company was looking at participating in other government computerisation projects in India like ration cards, GPS tracking, Rajiv Yojana Programme, he said they were closely working with HCL for joint bidding. “Close to Rs 500 crore worth of orders from the domestic market, to be executed in the next thee years, are expected to add to the company’s current orderbook of Rs 200 crore this year,” he added.

LGS Global, which reported consolidated revenues of Rs 381 crore last year, is expecting to clock Rs 500 crore this financial year. The company’s scrip rose 5 per cent to end the trade at Rs 135.50 on the BSE on Monday.