Megasoft mulls $25 mn buyout in Latam, Europe

Company’s 3,000-seater Hyderabad campus to be ready by September 2010.

Megasoft Limited, a Chennai-based mobile telecom products and technologies provider, is planning to go in for an acquisition either in Latin America or Europe for around $25 million (approximately Rs 115 crore), said GV Kumar, managing director and chief executive officer.

“Our current focus is on significantly bringing down our debts further and continue with the organic growth momentum. We will look at acquisition opportunities, especially in companies which have patented technologies, in the second half of the 2010 calendar to be consummated in 2011,” he told Business Standard.

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 Hyderabad-based Visualsoft Technologies and completed the process of amalgamation in March 2007, and Boston Communication Group Inc (bcgi) of the US in August 2007.

Till September 2009, Megasoft was operating in two distinctive businesses – IT services (Blue Ally) and telecom software products (Xius-bcgi). The company has completed the process of selling Blue Ally to US-based Trianz Inc for a cash consideration of about $15 million (Rs 69 crore), including the outstanding receivables. As on September, the company had Rs 200-crore debt on its books.

“Despite acquiring a company like Visualsoft, somehow we couldn’t make a mark in the IT industry and witnessed a drop in revenues for seven consecutive quarters. At the same time, we had been seeing a good traction in business for our mobile solutions from whatever we are investing,” Kumar said, adding the company would leverage the 106 acres, an asset which came along through the acquisition of Visualsoft, to fund its proposed acquisition.

Megasoft, which currently employs 850 professional globally of which 700 work out of its Hyderabad facility, is constructing a 500,000-sft campus on 15 acre at Nanakramguda on the outskirts of Hyderabad. The company is investing close to Rs 80 crore in the new facility, funded primarily through loans.

“Our long-term plan is to move our operations to the Nanakramguda premises, which would accommodate 3,000 professional. About 400,000 sft of office space is already done and the rest is expected to be completed in the next 6 to nine months. The new campus will also house an NOC (network operating centre) to centrally manage our clients globally,” he said.

Megasoft, which follows a January-to-December financial year, reported revenues of Rs 170 crore for the nine months ended September 2009. The company’s scrip ended the trade at Rs 26.15 on the BSE on Thursday, up 1.95 per cent over the previous close of Rs 25.65.

Kumar said the company at present had three large customers – US-based Sprint, Telefonica of Latin America and DMO of Venezuela for its mobile carrier-centric mobile commerce, wallet, recharge, money transfer and banking platform Xius Payment Manager.

Currently, mobile network infrastructure platforms like realtime session control, call control and call monitoring account for 60 per cent of Megasoft’s revenues, 15 per cent from mobile commerce, 15 per cent from roaming and the remaining from miscellaneous services.

“We are running a pilot with Airtel in India, while DMO Venezuela will go live with the platform during the April-June time frame,” he said, adding the company expected revenues from its mobile commerce business to double, from the present 15 per cent, from the next calendar.