Megasoft eyes Rs 200-crore overseas acquisition

Megasoft, a Chennai-based product-based technology company, is planning to acquire a European or US company for around $50 million (Rs 200 crore), to penetrate the European telecom market.

"We are looking for a suitable fit that is engaged in either applications or telecom infrastructure domains or both, serving clients in Europe, to help establish our presence in that market," said GV Kumar, managing director and chief executive officer.

Megasoft is in talks with three firms, and expects to wrap up the deal in the third quarter of the current calendar year.

Stating that the three acquisitions that Megasoft made in the last two years had given it a strong inorganic trajectory in Europe and the Americas, he said the company had installed its first telecom infrastructure platform in Europe for a big-ticket company during the last quarter.

Megasoft had acquired beam AG, a German IT services company with sound knowledge of European telecom business, in July 2005. In October 2006, it acquired Visualsoft Technologies, with the process of amalgamation having completed in March 2007, and Boston Communication Group Inc (bcgi) of the US in August last year.

The company had also revamped its telecom business, XIUS, to rapidly expand the global telecom business in November 2007. Under this dispensation, the company's business and marketing functions are being driven from Bedford in the US while its global delivery, R&D and back-office support systems are running out of its Hyderabad facility.

Megasoft, which follows a January-to-December financial year, expects to gain an additional 25 clients in the telecom space globally, of which around 4 are expected to be based out of Europe. It currently has an active clientele base of 65 worldwide.

"Last year, the North and Latin Americas accounted for nearly 75 per cent of our telecom revenues, while Asia, Europe and West Asia contributed the rest. However, we expect these non-American markets to bring in 35-40 per cent revenues in 2008," he said.

According to Kumar, leveraging the recent acquisitions and the long-term orders that they brought into Megasoft's fold, the company expects to double the topline of its telecom business in 2008.

"The company's profile has changed tremendously after the acquisition of bcgi. The US company has long-term contracts worth $35 million (approximately Rs 140 crore) for providing session control and prepaid platforms for voice, data Internet services provider Sprint, telecommunications operator Telefonica SA and US-based local exchange carrier Embarq, which runs up to 2010. This, coupled with our existing clientele base, are expected to drive our telecom revenues towards crossing the Rs 300-crore mark in 2008, and eventually garner around Rs 700 crore by 2009," he said.

On the sale of 106 acres at Visakhapatnam, an asset which came along through the acquisition of Visualsoft, Kumar said they had recently signed a sale deal with an international builder for around Rs 42 crore.

"The deal will be announced in a couple of weeks. The cash bank raised through the land deal will be utilised for further acquisitions," he added. The public-listed company, which clocked an overall revenue of Rs 290 crore in 2007, expects this to touch Rs 470 crore this year.