Tech Mahindra - Acquires Core Banking Software Company :: Edelweiss

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Tech Mahindra (TECHM) announced the acquisition of SOFGEN Holdings (SOFGEN), a consulting & services company specialising in  private/wealth, commercial and retail banking solutions. Consideration paid for the stake is less than USD30mn and the company expects SOFGEN to contribute USD45mn in FY16E (1% additional revenue growth). It expects to complete the acquisition by Q4FY15. Through this acquisition we believe TECHM plans to augment its core banking expertise and gain access to SOFGEN’s IPs, enabling it to increase wallet share in existing and new client base. The acquisition does not change our estimates meaningfully.

Deal contours and other highlights

TECHM to pay less than USD30mn, of which two third is payable upfront and balance as earn outs over the next 2 years. The transaction is expected to be completed by March 2015.  The company gains access to 450 professionals and expects SOFGEN to contribute USD45mn in FY16E.

SOFGEN: Core banking solutions player

SOFGEN, with relationships across 20 plus Tier 1 clients, provides core banking solutions and has the second largest pool of Avaloq consultants and is Temenos’ most prolific partner. Majority of its revenue is project based and driven via implementations, for which it uses its suite of IPs comprising tools and accelerators.  Its top 5 and 10 clients contribute 30% and 50% of its revenue, respectively.

LINK
https://www.edelweiss.in/research/EdelFlash-Tech-Mahindra--Acquires-Core-Banking-Software-Company/27986.html