BANGALORE: MindTree Ltd, the Bangalore-based global IT and R&D consulting firm, on Monday announced a 2: 11 swap ratio for the merger of Aztecsoft with it.
For MindTree, that’s a better —- or cheaper —- ratio than the 1:4.85 swap announced in May, since it translates into a 1:5.5 ratio now.
The face value of MindTree share is Rs 10, and Rs 3 for Aztecsoft. MindTree bought 80% of Aztecsoft for $ 72 million using its own funds.
Aztecsoft is a provider of outsourced product development (OPD) and independent testing.
The merger added 2,000 employees to MindTree’s 1,000.
The acquisition helps MindTree offer customers a complete end-to-end OPD product stack encompassing embedded, platforminfrastructure, middleware, application, and software-as-a-service and cloud-computing segments. The acquisition will help the company cross-sell services with MindTree’s existing clients.
For instance, MindTree is now offering data warehousing services to its clients. Going forward, the company can also band testing capabilities with better service offerings on board, Rostow Ravanan, chief financial officer, told DNA Money.
Ravanan added that cross-selling will help the company better its margins. “We will open up Aztecsoft’s services in OPD and testing to new markets like Europe, where our sales teams are based. These markets are more profitable and will better our profitability.”
Both firms earn a majority of their income (over 60%) from the US and are looking at newer geographies to diversify their income base. With a strengthened OPD and testing team the company hopes to win more clients with bundled service offerings.
“We are bullish on Germany as we have four major clients there. This geography is open to service providers, though France and Spain will be slower in terms of growth. In Europe, we started our base of power has been the UK. We are also heading Down Under by foraying into the Australian market and looking to expand our revenue base in India,” said Joseph King, senior vice -president, Global Marketing, MindTree, when asked about client diversification outside the US.
The company is not expecting any major employee displacements or reshuffle post the merger as it was looking to ramp up its employee base in testing and OPD space. “We see complementarities in our testing and OPD operations. There is no major reshuffle expected,” said Ravanan.
Around 6% of MindTree’s revenues comes from independent testing. Both companies have not revised their growth targets of between 25-30%. The combined entity will have revenues worth $250 million.
The combined OPD and testing market in India is valued at around $15 billion growing at over 30% year-on-year.
n_pranav@dnaindia.net
