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."
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.
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.
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.)