3i to tap Fortune 100 clients via Regulus

MUMBAI: Mumbai-based IT services firm 3i Infotech acquired US-based Regulus for $80 million in a bid to strengthen transaction processing business and at the same time, get ‘access to Fortune 100 customers’, according to its MD and CEO V Srinivasan.

The acquisition was completed through an all-cash deal funded by debt and was guided by investment banking firm Lane, Berry & Co based in Boston, USA.

Regulus, a provider of document processing services, has a blue  chip client base of one-third of Fortune 50 companies in finance, insurance, telecom and utilities sector in the US.

3i Infotech looks to cross sell its software and services in the banking domain such as its anti-money laundering (AML) solutions in addition to capitalising on the transaction processing business of Regulus. 48% of Regulus’s clients are from the finance sector.
In a report prepared by Krupal Maniar, Sandeep Shah & Sagar Thakkar of ICICI Securities, the analysts observed, “Although products and services (including BPO services) have contributed equally to 3i Infotech till date, the company expects products, IT services and transaction processing services (BPO) to contribute equally in the next 2-3 years, given higher growth in domestic markets.”

For now, the company does not want to look immediately into other businesses such as debt collections that have huge potential for some of the Indian IT service companies.
Srinivasan said, “We may look at the debt collections business probably after a couple of years, when we have settled down with our acquired company.” 3i Infotech will however, continue its acquisition spree with about $ 60 million of remaining debt cash at its disposal. “The deals may be smaller, of around $5-6 million,” added Srinivasan.

The company’s earnings from transaction processing contribute 12% to its annual revenue. In India transaction processing related revenues touched Rs 240 crore in FY08.

However, the analysts downgraded the EPS of the company between 4% to 7.6% owing to ‘low-margin domestic services that are expected to grow more than the company’s average’. The analysts have not factored in the latest acquisitions though.
In its Q4FY08 results the company has provided a guidance of 40% revenue growth in FY09E to Rs1,700 crore, exceeding the market expectations of over 30% and a fully-diluted EPS (FDEPS) of Rs13-13.5 on equity base of 172 million shares.

t_amit@dnaindia.net