Zensar acquires US IT solution firm Akibia for $66 million

Mumbai: RPG group-owned Zensar Technologies acquired US-based infrastructure management company PSI Holding, which operates under the name Akibia, in an allcash deal of $66 million, the Indian software exporter said at a conference on Monday.

Furthermore, the company will look at more acquisitions in strategic verticals like business intelligence and remote infrastructure management, or the new regions the company hopes to expand into, RPG group chairman, Harsh Goenka said.

RPG operates several other businesses including Ceat tyres, RPG Lifesciences, and an enterprise in rubber plantations Harrisons Malayalam. Mr Goenka said the group plans to double revenue from the current Rs 18,000 crore over the next three years.

The goal is likely to be achieved through 75% of business growth for existing companies, and the rest through acquisitions, he said.

The company that Zensar has acquired has approximately 10% earnings before interest, tax, depreciation, and amortisation, or Ebitda, margin, said Ganesh Natarajan, vice chairman and managing director, Zensar.

There are no overlapping customers between the acquired and parent companies, he added, suggesting that there is ample scope for cross-selling services to clients of each company. Akibia’s revenue in the year to September was $108 million.

Zensar will be paying performance-linked incentives to the current employees of Akibia in addition to the acquisition costs, the company said. Infrastructure management accounts for less than 10% of the company’s revenue at the moment, Mr Natarajan said. However, by 2013 Zensar expects the business will contribute 30% of revenue.

The revenue growth target for Akibia’s existing business over the next year or two is 10-12%, he said. Yet, the new business of Akibia is likely to be partly offshored, which will possibly aid the overall operating margins of the company.

Typically, Indian software companies offshore work from the US to India, thereby reducing the cost for clients, and also increasing their profit margin on the business.