VirtusaPolaris in tune to achieve target of synergy revenue of $100 mn

Virtusa Corporation, which has acquired 75% stakes in the Chennai-based Polaris Consulting & Services for $250 million, is expected to touch a synergy revenue of $100 million by March 2019, as per its target set during the acquisition, said Kris Canekeratne, Chairman and Chief Executive Officer, VirtusaPolaris. With two-third of its staff in India, the company is expecting to add around 1,300-1,700 employees a year.

"The thesis of the acquisition was primarily driven by the fact that we would be able to identify approximately a $100 million of synergy revenue over three year period and we are very pleased with the progress we have made against the synergy revenue," he said. However, he refused to comment more on the numbers.

At the time of acquisition, Virtusa had around 7,000 employees in US and around 12,000 in India, currently has almost the same number of employees with 18,500 headcount. The company would look at its investments into India at a low double digit and the growth in headcount of around 11-13 per cent with addition of around 1,300 to 1,700 employees to be added a year. He added that the company always has around 25 per cent of its employees onsite and it can manage with the latest regulations coming in US.

Sharing an update on the integration of Polaris with Virtusa, he said that the merger was completed already and the company is pleased with the progress of integration.

"We have seen that the integration itself has happened faster than we expected. A larger part of the reason is that Virtusa has been focusing on retail and consumer banking and Polaris is focused on corporate and investment banking. The majority our work was in these areas and because of this there were very little overlap," he added.

While the company was expecting some headwind in terms of the business from Citi Group, the largest account for the company, after the acquisition, which also took place during the first quarter after the merger, the slow down in insurance segment, some M&A happened in its major clients in Europe and the impact of Brexit, has resulted in unanticipated impact during the first of the fiscal year 2017. However, the revenue started growing gradually from second half of the year, with three per cent growth sequentially in the third quarter and a guidance of four per cent in the fourth quarter, sequentially, against the flat or one per cent growth across the industry.

He said that the revenue from Citi Group at a level of 15-20 per cent of its total revenue would be a comfortable mix for the company. The business from Citi was around 45 per cent of the total business for Polaris before the acquisition, which was a risk to both the companies, has been brought down to around 15 per cent of the revenue following the Virtusa acquisition of Polaris.

As part of the acquisition, the company bought in around 79 per cent share in Polaris and later shelved some shares through offer for sale to keep the shareholding at 75 per cent for the promoter. He added that managing two different entities in US and India does not affect the company's business in terms of its relation with the clients or with the employees and all the process are the same for both the entities.