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HCL Tech acquires 51 % in Deutsche Software

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CIOL Bureau
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BANGALORE: HCL Technologies has acquired a 51 per cent stake in Deutsche

Software, a Indian subsidiary of Germany's Deutsche Bank AG, which has a 450

member software development unit in Bangalore. The Indian IT giant is also

planning to acquire the remaining 49 per cent over the next three years in

exchange for its shares. Although the financial details of the transaction were

not revealed, HCL chairman, Shiv Nadar, said, "It’s a cash transaction

deal and it’s completed. The value is private information."

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According to the DQ Top 20 issue this year, Deutsche Software, grew by 20 per

cent garnering Rs 56 crore in revenue. This in comparison to its previous two

years, with 28 percent and 47 percent respectively, is a dip. From being a

financial software and solutions provider, Deutsche Software, began its

transformation into a profit center this year, building a sales and marketing

team to cater to the financial segment worldwide. Earlier it was serving

extensively to it holding company, Deutsche Bank.

"The joint venture provides HCL Technologies with a strong platform to

strengthen its global presence in the financial services segment, one of the

largest end-user markets for information technology services globally,"

said Shiv Nadar.

According to the agreement Deutsche Software will continue to have the right

of refusal for seven years on business that is to be sourced by Deutsche Bank

from India. Apparently Deutsche Bank has earmarked a IT budget of over $ 4

billion and IT applications running over $ 2 billion.

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The joint venture is contemplating a name change and is targeted a revenue of

over $ 100 million in its first three years of operation, providing integrated

solutions to the financial segment.

Analysts echoed the optimism, saying that the alliance, which will give HCL

total control over the unit in three years, will have a positive impact on the

company.

"Domain expertise is of critical importance in the banking, financial

services and insurance segment," said Sanjeev Goswami, software analyst at

SSKI Securities, adding that it gained significance in times of vendor

rationalization. "The company has limited presence in the financial

services business area, and this acquisition will help in strengthening this

presence," he said.

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But its shares were sharply down amid worries the company may issue a profit

warning due to the grim outlook in the United States - an important market -

after the deadly attacks on September 11. HCL shares tumbled 11.06 per cent to

Rs113 in afternoon trade, while the benchmark 30-issue Bombay index was up

nearly one percent.

In August, HCL Technologies chairman Shiv Nadar forecast net profit and

revenue to grow more than 25 per cent in the current year to June 2002.

(With inputs from Reuters.)

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