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Cash-rich Indians ready to buy local tech

Paul Smith, AFR | July 24, 2012
Australian technology companies are bracing for an Indian assault as cashed-up outsourcing specialists have instructed the heads of their local operations to target local players in a bid to stimulate slowing growth by opening up access to new customers.

The most recent Indian acquisition was in April this year, when Wipro acquired unlisted Promax Analystic for $35 million. The company could not comment about further local plans, as it is in a quiet period pending a quarterly results announcement.

Geoff Lewis, CEO of ASG Group, one of the companies rumoured to be on acquirers’ radar, confirmed there had been interest in the company from some parties. He said Indian companies had found that customers around the world were looking to sign on with locally based IT suppliers.

“We take our continuous disclosure requirements very seriously, so if something got to the point where it was a capital issue that we needed to make an announcement on, then we would, but yes, we have talked to people,” he said. “The need for Indian providers to buy into customers is not surprising as organisations are starting to realise that an Indian solution has a ticket price cost; but then along with that there is quite a large hidden cost that goes on managing them.”

A spokeswoman for Infosys said its acquisition of Portland Group in January and Gen-i Software last June was an indication that there was an ongoing hunt for strategic acquisitions.

“The focus on IP is particularly important since our strategy is focused on driving a third of global revenues from innovation such as products, platforms and client co-creation,” the spokeswoman said.

Moelis & Co analyst Todd Guyot said NEC’s acquisition of CSG’s IT services business for up to $260 million in May indicated international interest in local players. He said UXC was the best value option of the locally listed tech stocks. “The IT space has ongoing challenges that have arisen with project deferrals and headcount utilisation issues. But if you take a long-term view, and some of these guys are looking to increase their presence here, then now is a pretty good time to be looking for acquisitions,” Mr Guyot said.

The Australian Financial Review


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