Prez search leads Mphasis to buy Kshema

BANGALORE: What started as a search for a President for its Technology Group, got IT and BPO services provider, Mphasis BFL Group to acquire Bangalore based software solutions company, Kshema Technologies Limited for a consideration of $21 million. The transaction is in the form of a stock-cash combination, where the cash component is $6.8 million.

"Less than six months back, we initiated the process of head hunting for a President to lead our Technology Group in our company, when we came across an opportunity to acquire Kshema Technologies for its expertise in building technology applications solutions and services for various verticals including life sciences. In the bargain, we have got a President in Anant Koppar, CEO, Kshema Technologies for our technology group," said Jerry Rao, Chairman and CEO, Mphasis BFL.

Established in 1997, Kshema has about 400 employees, all of whom will be absorbed by Mphasis, adding to its existing 6,000 plus workforce. "The Kshema facility in Bangalore is leased until 2012. Mphasis will transfer the lease to its name after the merger is approved. We intent to retain the facility," said Ravi Ramu, CFO, Mphasis BFL.

The ball had been set rolling for Kshema since the past 18 months. Last year, the media speculated that Bangalore-based MindTree Consulting would acquire Kshema and a BPO services company, iVega. Incidentally, all three shared a common shareholder in GTV (Global Technology Ventures), Sivan Securities technology venture capital arm. "It was our strategy to grow inorganically. So the merger is part of our strategy to jump into the higher league of service providers," said Koppar, who will also become a director on the Board of Mphasis Corporation, USA.

While Mphasis BFL is to announce its financial results for its quarter ended March 31, 2004 on April 8^th, it registered revenue close to $31 million the previous quarter. Privately held Kshema, is expected to close the fiscal with revenues of $15 million. It also has cash reserves of Rs 60 crore. In January 2003, Singapore Computer Systems (SCS), acquired 30 per cent stake in Kshema for $9.2 million, which witnessed IL&FS Venture Capital (IVC) and Citibank exit as investors. Post the entry of the new investor, the shareholding pattern for Kshema Technologies stood at GTV and SCS holding stake of 46.8 per cent and 30 percent, respectively. The rest were held promoters and employees of the company. "Both the external investors have exited Kshema. While SCS preferred the cash route, the other has chosen Mphasis’ stock option," added Roa.

Kshema, which was valued at close to $30 million a year back, has been acquired for $21 million by Mphasis in 2004. "We share a common auditor and the company was valued by our internal management team and external financiers," said Rao.

CIOL Bureau