Infotech eyeing more buys on investor pressure

15 Mar 2010

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Hyderabad-based technology solutions provider of engineering and geographic information services, Infotech Enterprises Limited intends to aggressively pursue acquisitions on account of pressure from shareholders.

Infotech chairman and managing director BVR Mohan Reddy said, the company was careful about value buying. There were a couple of transactions that the company was working on and its shareholders were putting a lot of pressure on it as the 4 per cent or 4.5 per cent returns the company has in the bank was not satisfactory, he added. Therefore, he said the company had decided to embark on a more aggressive acquisition strategy.

Reddy was interacting with mediapersons on the sidelines of Information Technology and Services Industry Association of Andhra Pradesh (ITsAP)'s two-day software products showcase and awards event that kicked off in Hyderabad on Friday.

''We currently have Rs400 crore on our books and are accumulating roughly Rs40 crore every quarter. We expect to close one acquisition deal in the first quarter of the next financial year,'' Reddy said. He added the company would only pursue a value based approach to buying. Infotech acquired US-based Daxcon Engineering, a US-based engineering services company in Q3 FY10.

Even as it continues its work in engineering, which currently contributes 66 per cent to its overall revenues, Reddy says the company is looking for adjacencies like avionics, which has a worldwide market of about $20 billion every year.

''We have done some work for people like Airbus on lighting in the cabin (mood lighting). We are now trying to get into cockpit electronics and aircraft engine sound support, which is a big opportunity. Yet another area which is of great interest to us is nuclear power engineering. India is also going to go nuclear in a big way and each plant will cost $1 billion. Ninety per cent of the design work is to be done locally so, we are looking at these two as major thrust areas,'' he added.

According to Reddy the company could expect its earnings before interest, depreciation, taxes and amortisation (Ebidta) for the current fiscal to be at 20 per cen and the sequential revenue growth for the current quarter to be flat. He added that while the general perception was that the worst was over and the recovery had set in, the recovery has been very slow and that was something which we had to reckon with, he said.

Reddy said the company was expecting its earnings before interest, depreciation, taxes and amortisation (Ebidta) for the current financial year to be at 20 per cent and the sequential revenue growth for the current quarter to be flat. ''While we are saying the worst is over and things are recovering, the recovery has been very slow and that's something which we have to reckon with,'' Reddy said.

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