The Hindu Business Line : Subex buys UK's Azure

Sky's the limit
Azure is the largest player in the revenue assurance space.
Clocked revenues of $31 million last year.
1.3 crore fresh shares to be issued to Azure investors.

Bangalore, April 25

In the largest overseas buyout by an Indian software firm till date, Subex Systems Ltd has acquired the UK-based Azure Solutions Ltd in a stock-plus-cash deal exceeding $140 million (Rs 629 crore).

Azure is a British Telecom (BT) spin-off and is the largest player in the revenue assurance space. It provides solutions for data integrity, wholesale and interconnect billing, international settlements, and fraud management, among others.

Mr Subash Menon, Chairman and CEO of Subex, said that the deal was primarily a stock transaction and the cash involved was 2-3 per cent.

Post-merger, the new entity - Subex Azure - would count among its customers 23 of the world's largest 40 telecom firms, including BT as a marquee customer, and a clientele of 150 installations across 60 countries.

Azure clocked revenues of $31 million for the year ended March 2006; its net profit was not disclosed. "The ratio of valuation to revenues works to 4.5, which is the norm in the telecom software industry," Mr Menon said.

Following the announcement, Subex shares hit an intra-day high of Rs 650, before closing at Rs 633 on the BSE, a gain of 16 per cent over the previous close. Over the past week, the scrip has gained about 40 per cent. Subex expects to close the deal in a month.

Subex Azure would have a 500-strong employee base, including 200 of Azure. The Azure deal is Subex's fifth acquisition till date.

Fresh shares

Mr Menon also said that Subex would be issuing 1.3 crore fresh shares in the form of GDRs to the investors of Azure, who are predominantly venture capitalists. New Venture Partners, Doughty Hanson Technology Ventures, and Intel Capital hold stake in Azure.

With the issue of new shares, Subex's paid-up capital is expected to increase to Rs 36 crore from Rs 23 crore currently.

Post-merger, the three venture capitalists would own about 34 per cent of the new entity, Mr Menon added.

Further, Mr Menon said that the integration would take about 10 months to complete and the real returns from this acquisition would accrue only in 2007-08. Subex expects product revenues to hit $100 million (Rs 450 crore) in 2007-08 and net profit $33 million (Rs 150 crore).

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Subex close to buying US firm

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