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We view acquisition of Proyecta as positive for NIIT Technologies, as the deal will add strategic
new accounts, strengthen presence in Europe and deepen domain expertise in travel and BFSI
verticals. We expect the deal to be marginally EPS accretive.
NIIT Technologies announced the acquisition of Proyecta Sistemas de Informacion S.A.
(Proyecta), a Spain-based software services company.
Management said that NIIT Technologies would pay about US$7m for Proyecta, of which
80% would be paid upfront and the rest will be paid as earn-outs over two years. This values
the company at around 0.7x previous year revenues and approximately 6.4x last year
EBITDA.
Management noted that Proyecta would be a 100% subsidiary of NIIT Technologies and its
financials would be consolidated from the date of announcement, and expects the deal to be
EPS accretive from first year.
Management views Proyecta acquisition as positive for NIIT Technologies as it would help
expand its presence in Europe and also provide a gateway for Latin American markets.
Proyecta focuses on travel and BFSI verticals
Proyecta was founded in 2002 and provides specialized services including revenue/yield
management, CRM, Business Intelligence and Web apps/ mobility. The company primarily
focuses on Travel, which accounts for 68% of revenues, followed by Financial Services
segment (23%).
Proyecta has more than 100 consultants with strong domain expertise serving about 15
clients including marquee names such as Banco Santander, BBVA and Iberia.
For previous year, Proyecta posted revenues of €7.8m (US$10m), down 8% yoy, due to
economic slowdown. Management noted that despite weakness in top line, EBIT margins
improved to 10%.
Management expects marginal (1-2%) decline in Proyecta revenues in the current year,
followed by 14-15% growth driven by demand from existing clients and synergies.
Management noted that while Proyecta’s revenue mix had largely been dependent on
discretionary spending in the past, there has been a shift towards annuity based businesses.
Management does not expect material offshoring potential in the initial year.
Good fit for NIIT Technologies – adds significant new clients
We are positive on the acquisition as the acquisition would add new clients to NIIT
Technologies’ client base and provide significant cross-selling opportunities, given that there
is minimal overlap in terms of client base
The deal complements NIIT Technologies expertise in Travel and BFSI segments, which
contributed 35% and 41% of 1Q12 revenues respectively
The acquisition will strengthen NIIT Technologies’ front-end capabilities which according to us
will help the company in addressing the cultural and language differences and spearheading
its entry into Spanish market. Further, the acquisition also might help in expanding NIIT
Technologies’ presence in Latin American markets
In particular, given that Iberia is one of Proyecta’s major clients, we believe the deal would
provide NIIT Technologies with a strong entry into Iberia account. Further, this will help the
company solidify its position and increase its wallet share at International Consolidated
Airlines Group, formed through the merger of Iberia and British Airways (one of NIIT
Technologies’ top accounts).
Valuation
Based on our quick estimates, we believe that Proyecta acquisition would be marginally EPS
accretive for NIIT Technologies. We expect EPS accretion to be less than 1%, with lower
accretion in FY11 due to expected revenue decline and fewer months of consolidation,
followed by higher contribution to the bottom line in FY12 due to rebound in revenues and full
year consolidation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We view acquisition of Proyecta as positive for NIIT Technologies, as the deal will add strategic
new accounts, strengthen presence in Europe and deepen domain expertise in travel and BFSI
verticals. We expect the deal to be marginally EPS accretive.
NIIT Technologies announced the acquisition of Proyecta Sistemas de Informacion S.A.
(Proyecta), a Spain-based software services company.
Management said that NIIT Technologies would pay about US$7m for Proyecta, of which
80% would be paid upfront and the rest will be paid as earn-outs over two years. This values
the company at around 0.7x previous year revenues and approximately 6.4x last year
EBITDA.
Management noted that Proyecta would be a 100% subsidiary of NIIT Technologies and its
financials would be consolidated from the date of announcement, and expects the deal to be
EPS accretive from first year.
Management views Proyecta acquisition as positive for NIIT Technologies as it would help
expand its presence in Europe and also provide a gateway for Latin American markets.
Proyecta focuses on travel and BFSI verticals
Proyecta was founded in 2002 and provides specialized services including revenue/yield
management, CRM, Business Intelligence and Web apps/ mobility. The company primarily
focuses on Travel, which accounts for 68% of revenues, followed by Financial Services
segment (23%).
Proyecta has more than 100 consultants with strong domain expertise serving about 15
clients including marquee names such as Banco Santander, BBVA and Iberia.
For previous year, Proyecta posted revenues of €7.8m (US$10m), down 8% yoy, due to
economic slowdown. Management noted that despite weakness in top line, EBIT margins
improved to 10%.
Management expects marginal (1-2%) decline in Proyecta revenues in the current year,
followed by 14-15% growth driven by demand from existing clients and synergies.
Management noted that while Proyecta’s revenue mix had largely been dependent on
discretionary spending in the past, there has been a shift towards annuity based businesses.
Management does not expect material offshoring potential in the initial year.
Good fit for NIIT Technologies – adds significant new clients
We are positive on the acquisition as the acquisition would add new clients to NIIT
Technologies’ client base and provide significant cross-selling opportunities, given that there
is minimal overlap in terms of client base
The deal complements NIIT Technologies expertise in Travel and BFSI segments, which
contributed 35% and 41% of 1Q12 revenues respectively
The acquisition will strengthen NIIT Technologies’ front-end capabilities which according to us
will help the company in addressing the cultural and language differences and spearheading
its entry into Spanish market. Further, the acquisition also might help in expanding NIIT
Technologies’ presence in Latin American markets
In particular, given that Iberia is one of Proyecta’s major clients, we believe the deal would
provide NIIT Technologies with a strong entry into Iberia account. Further, this will help the
company solidify its position and increase its wallet share at International Consolidated
Airlines Group, formed through the merger of Iberia and British Airways (one of NIIT
Technologies’ top accounts).
Valuation
Based on our quick estimates, we believe that Proyecta acquisition would be marginally EPS
accretive for NIIT Technologies. We expect EPS accretion to be less than 1%, with lower
accretion in FY11 due to expected revenue decline and fewer months of consolidation,
followed by higher contribution to the bottom line in FY12 due to rebound in revenues and full
year consolidation.
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