Lodestone deal for Rs 1,932 cr is Infosys' biggest buy
Infosys announced its biggest-ever acquisition, a development that could temporarily muffle chatter that the company is too conservative and risk-averse for its own good.
India's second-largest software exporter said it would buy Lodestone Holding, a Switzerland-based consulting company specialising in business software from Germany's SAP, for about $350 million ( Rs 1,932 crore), giving it better reach in continental Europe.
"I don't think Infosys and conservative should be used in the same sentence anymore," Chief Executive SD Shibulal declared, referring not just to the acquisition but also the realignment of the business model, which he called "a bold step". But investors hoping for meaningful deployment of Infosys' Rs 20,000-crore cash pile were not overjoyed. The company's shares closed only 0.6% higher on the Bombay Stock Exchange after having run up about 10% in the last month.
The acquisition of a European consulting outfit drew the inevitable comparison with Axon, a UK-based company in the same line of business that Infosys was keen on buying in 2008. When rival HCL Technologies entered the fray, raising the prospect of a bidding war, Infosys backed out, leaving the Gurgaon-based company to buy Axon for about $650 million.
"After losing out on the Axon acquisition, Infosys organically grew its consulting and system integration revenues to $525 million - 5% compounded quarterly growth rate over the last 20 quarters," said Shashi Bhusan, senior research analyst at brokerage Prabhudas Lilladher.
"After losing out on the Axon acquisition, Infosys organically grew its consulting and system integration revenues to $525 million - 5% compounded quarterly growth rate over the last 20 quarters," said Shashi Bhusan, senior research analyst at brokerage Prabhudas Lilladher.
"We see this acquisition as a much-needed inorganic booster for the company," Bhusan said. Chief Financial Officer V Balakrishnan said it was "worth the wait", referring to the decision to back away from Axon.
Following the acquisition, Infosys may revise its revenue growth guidance for the year to March 2013. This may be done while announcing earnings for the September quarter. The Bangalore-based company is projected to grow 5% in the year to March 2013, compared with 11-14% for the industry.
Lodestone, with 850 employees, including 750 consultants, comes with about 200 clients in the manufacturing, automotive and life sciences sectors. Its 2011 revenues were 207 million Swiss francs, or Rs 1,200 crore. It will take Infosys' SAP practice to about 10,000 professionals and $1 billion in revenues. There is only marginal overlap between clients of Infosys and Lodestone, presenting significant cross-selling opportunities, the companies said.
