The Hindu Business Line : 3i Infotech raises Rs 500-cr debt to fund domestic buys

Mumbai, April 17 City-based IT solutions firm 3i Infotech has raised around Rs 500 crore in debt over the last three-four years, in order to fund its domestic inorganic growth and working-capital requirements.

This debt has been raised by the company, in addition to the Rs 890 crore raised through FCCBs (of which Rs 247 crore was converted till March 31, 2008).

Mr Amar Chintopanth, Executive Director and Chief Financial Officer, told Business Line that his company has utilised some part of the debt for financing domestic acquisitions.

“We are not permitted to bring FCCB money into India for domestic acquisitions, as per RBI guidelines; funds raised through FCCB have to be deployed for overseas buy-outs only,” said Mr Chintopanth.

Growth strategy

Acquisitions have been an integral part of 3i Infotech’s strategy. In the previous financial year alone, the company spent about Rs 500 crore for acquisitions, enabling it to enter niche segments such as factoring software solutions and consulting. The company has utilised about Rs 100 crore of debt in the last few years for making about six-seven domestic acquisitions, Mr Chintopanth said.

Working capital needs

Debt is also deployed for the upfront payment (related to working-capital requirements) the company has to make owing to its business model. Working capital measures how much liquid assets a company has available to build its business. Since 3i Infotech has a near-equal products-services mix in its IT offerings, it has a higher component of revenues that are of a fixed price nature.

In the software products business, clients make payments to the vendor on completion of milestones. However, the vendor has to invest in salaries and other working capital requirements upfront, thereby creating a gap in the cash flow timing, said Mr Chintopanth.

“This gap is funded either through cash credit lines from the banks or working capital term loans from the banks which get repaid with revenues coming in from clients on completion of milestone,” he said. Crisil has assigned a rating of ‘A-/Stable/P1’ to 3i Infotech’s bank facilities.

The company expects to continue pursuing its acquisition-led strategy, said Mr Chintopanth. It is open to acquisitions that will enhance its BPO capabilities.

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