Sequoia Capital, California-based venture capital firm, is set to pick up a minority stake in Mumbai-based 3i Infotech, a company that makes half its revenues by selling software products to banking and financial services, manufacturing and retail sectors.
Currently, ICICI group holds 48 per cent in 3i Infotech. Investment banking sources said that Sequoia could be part of a consortium, which include global software companies, that is eyeing a majority stake in 3i Infotech.
HT had reported that that ICICI was keen on reducing its stake in 3i Infotech. The 3i stock closed at Rs 238.8, slightly low from previous day close of Rs 239.4. The company CFO Amar Chintopanth said, “We are talking to private equity players. We are yet to finalise the deal.” Sources said that the valuation could be close to $50 million. Sequoia Capital has a $750 million India fund.
According to sources, the fund infusion would be used for fuelling company’s expansion and acquisition plans in North America, Europe and the Middle East.
During the last quarter results, V Srinivasan, MD & CEO, 3i Infotech had said that the company has a two-pronged growth strategy. “While we continue to aggressively grow our existing line of products organically, we are also looking to fill gaps in our offerings through the acquisitions,” he said.
In conjunction with these plans, 3i Infotech issued Foreign Currency Convertible Bonds (FCCB) worth Rs 172.56 crore (€ 30 million) that will be convertible over a five year period and priced at Rs 308.63. The FCCB will be listed on the Singapore Stock Exchange. This is second such issue in last 3 months. In October 2006, it issued FCCB of Rs 86.28 crore (€ 15 million) convertible over a four and a half year period at the Singapore Stock Exchange.
Commenting on the development, Srinivasan said, “To achieve consistent growth, we will adopt a mix of organic and inorganic growth leading to an expansion of our suite of product and services offerings across geographies. We expect to continue this growth trajectory with the help of the current FCCB.”
Software product companies require larger capex as compared to services companies and the return on investments is over a period, said Kanwaljeet Singh, managing partner, Helion Ventures, a venture capital company. In November, 3i Infotech acquired Professional Access , a US-based e-commerce solution provider with clients in BFSI and retail sectors for Rs 51.7 crore ($12 million). Apart from 3i infotech, Sequoia India has invested in firstsource.