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Mastek gears for niche buyouts in insurance

business Updated: Apr 19, 2007 00:51 IST
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Mid-sized software service firm Mastek Ltd is looking at niche acquisitions worth about $10 to 50 million to strengthen its foothold in the insurance sector, where it serves clients by building information technology and business process outsourcing (BPO) services based on industry knowledge.

To further strengthen its foothold in the insurance sector, Mastek is looking at acquisitions in the $10-50 million range.

“We would like to bolster our presence in the insurance sector and are looking at companies with a strong customer base in the US," Sudhakar Ram, Mastek's CEO, told Hindustan Times.

The acquisitions will be funded through a mix of debt and equity.

"Targeted acquisitions in niche areas is the way forward for Indian tier-II software companies,” said Ashish Bhinde, vice-president at investment banking firm Avendus.

Mastek recently sold out its 50 per cent stake in a joint venture with UK’s Deloitte Consulting, which it had entered into in 2001 to offer software application development, implementation and other outsourcing services. The company did not reveal the value of the deal.

Mastek, which derives almost 65 per cent of its revenues from Europe, is trying to make a stronger point in the US market amidst stiff competition from majors such as TCS, Infosys and Genpact.

Mastek’s insurance-centric US operation grew by 40 per cent in the year 2006 and to sustain the growth momentum, the company has to make an acquisition in the US, market analysts say.

Mastek reported a total income of Rs. 214.8 crore for the January-March quarter, an increase of 2.4 per cent and 19.7 per cent over the sequentially preceding quarter this year and the corresponding quarter last year, respectively. “This was driven by noticeably higher contribution from the US operations that posted a 27 per cent growth over the previous quarter,” said Ram.

While Mastek has grown strong in Europe, striking a contrast with many Indian IT peers, some in the industry say it is missing out on some juicy businesses on account of its focus.

“Apart from generating revenues predominantly from the European market as compared with the US market, Mastek is not a big force to reckon with in areas like infrastructure management or ERP (enterprise resource planning) implementation, which are high margin areas for Indian software companies,” said the CEO of a Bangalore-based tier-II IT company.