Infosys Technologies has shed its famous conservatism in acquisitions by making the fourth largest overseas buyout by an Indian software company and its own biggest yet.
Becoming bold after two bad quarters in which it missed its marks, the Bangalore-based company, dipping into its Rs. 22,000 crore cash chest, said on Monday that it was buying Switzerland-based Lodestone Holding for 330 million Swiss francs ($350 million or Rs. 1,950 crore) to give it an edge in consulting that yields higher profit margins.
“A key plank of our Infosys 3.0 strategy is to expand our consulting and systems integration business. This acquisition fits perfectly into that strategy,” Infosys chief executive officer SD Shibulal said.
The buyout, expected to be completed in October, will give Infosys access to 750 high-skilled consultants with specialisation in SAP’s corporate management software and 200 clients who could provide it more business.Turnover wise, Lodestone’s Rs. 1,209 crore in 2011 was barely 4% of Infosys revenues. "This is a slight departure from Infosys’ earlier strategy on not looking at acquisitions which would dilute earnings in the short term," said Dipen Shah, head of fundamental research at Kotak Securities.
The acquisition will also give Infosys a big lead into Europe.
The Indian company’s Europe consulting unit will now be called Infosys Lodestone while Lodestone’s operations in the Americas will fold into Infosys.
“There are revenue synergies such as cross-selling Lodestone's capabilities to Infosys clients and Infosys multi-service capabilities to 200 Lodestone clients,” said Rikesh Parikh, vice-president at Motilal Oswal Securities.