Now “Comviva” in the bag!
Yesterday, Tech Mahindra acquired a 51% stake on a fully diluted basis in
Comviva Technologies Ltd, a Bharti group company, and a global leader
in providing mobile valued added services (VAS), mobile money and
mobile payment solutions. The deal consideration is | 260 crore (i.e.
EV/rev of 1.53x), in cash, with | 125 crore made upfront and the
remaining | 135 crore to be paid over five years, on Comviva achieving
mutually agreed performance targets. Other key highlights of the deal are:
Comviva had revenues of $70 million in FY12 (~| 334 crore at average |/$
47.8) while revenues grew at 15-18% CAGR during FY10-12. FY12
margins were mid teens with top 10 clients contributing 85% of revenues
and Airtel being the top client. As of July 2012, the company has | 32
crore of cash and 1500 employees
Our view
Assuming P&L consolidation post November 2012, EBITDA and PAT
margins of 12.5% and 8.1%, respectively, and marginal revenue growth
from cross-selling of services yield incremental earnings of ~| 6 crore in
FY13E and | 18.7 crore in FY14E. However, interest costs of ~| 3.5 crore
and ~| 12 crore could burden earnings assuming borrowing costs of
8.5% on ICDs. Consequently, we maintain our earning estimates and our
target price.
http://content.icicidirect.com/mailimages/ICICIdirect_TechMahindra_QuickComment.pdf
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