The Hindu Business Line : Mahindras to acquire majority stake in IT firm Bristlecone

Mr Padman Ramankutty, Chief Executive Officer, Bristlecone Inc (left), with Mr Anjanikumra Choudhari, Executive Vice-President, Mahindra & Mahindra, at a press conference in Mumbai on Monday. - - Paul Noronha

Mumbai , Feb. 9

THE Mahindra Group today informed that it has agreed to acquire a majority equity stake in Bristlecone Inc, a San Jose-based IT services and solutions company.

Save a cash component of $ 7 million by way of planned investment in the new company, the full acquisition cost has not been disclosed. Deal architecture involves the group consolidating five existing subsidiaries - Mahindra Consulting Ltd, Mahindra Consulting (Singapore) Pte Ltd, Mahindra Consulting GmbH, Mahindra Consulting Inc USA and Mahindra Intertrade (UK) Ltd - with Bristlecone, to form a new overseas entity called Bristlecone Ltd.

Equity therein would be held on a 60:40 ratio between Mahindra and the promoters of Bristlecone. According to Mr Ulhas N. Yargop, President (Telecom & Software Sector), Mahindra & Mahindra Ltd (M&M), the group's 60 per cent stake is a composite of the valuation of the subsidiary companies it brings to the table and the cash component.

However, he declined comment on how much the valuation contributed. Five year-old Bristlecone has a turnover of around $ 10-12 million, while that of the consolidated entity is roughly pegged at $ 22 million.

Mr Padman Ramankutty, CEO, Bristlecone, rated his company as among the "most successful'' in its business segment - extended supply chain and enterprise consulting services - in the US.

Over 2001-2002, it grew at a breezy pace of 20 per cent plus, but last year in tune with the weakness in the US economy, saw a slackening of growth. Recently, it opened an office in Bangalore, attempting to develop skills and solutions here that could then be applied in the US.

The nascent India operations do not overlap with the new markets of Bristlecone Ltd, he said adding the option before Bristlecone's original promoters was not solely one of diluting their equity stake but of putting the business onto a fresh trajectory of growth. "It is a bigger pie, even if the slice of the pie be smaller,'' he said.

Officials from both sides said the fit between the consolidating companies was good. Mahindra's presence is mainly in Europe and Asia-Pacific, while Bristlecone has a strong presence in the US. The latter's expertise extends to the apparel and footwear sectors, semiconductors, consumer goods and the oil and gas sector. It is an implementation and integration partner for SAP applications.

"The acquisition is in line with our strategy to aggressively expand our presence in the US market. In the current scenario, when many Indian companies are perceived as operating at the low end of the IT market, we believe this is a strong affirmation of our strategy to focus on high-end IT consulting opportunities,'' Mr Yargop said.

Bristlecone Ltd will have Mr Anand Mahindra as Chairman, Mr Anjanikumar Choudhari (currently executive Vice-President, M&M) as executive Vice-Chairman and Mr Ramankutty as President & CEO.

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