The Hindu Business Line : War-chest of Big 4 crosses $5.2 billion

Inorganic growth
Satyam Computer Services announced a slew of acquisitions over the last six months.
Wipro is learnt to be looking at strengthening its foothold in France and Germany through acquisitions.

Moumita Bakshi Chatterjee

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New Delhi, July 6 Top IT services companies - TCS, Infosys Technologies, Wipro and Satyam Computer Services - together have seen their ‘liquid assets’ surpass $5.2 billion during FY08.

The financial kitty assumes significance as it not only places these service providers in a strong position to pursue strategic overseas buy-outs this year, but also offers comfort at a time when the industry’s largest market – the US - is facing slowdown headwinds.

The liquid assets (including cash and bank balances, as well as investment in liquid and short term mutual funds) of the four Indian IT giants was pegged at almost $4.2 billion in FY07, according to Angel Broking Ltd.

“Most of the Indian IT firms are looking at inorganic route to fill the gaps and fuel growth, and they may go for smaller acquisitions. However, although the valuations are looking attractive, the expectations of target companies have not come down. Also, the dollar appreciation could take some sheen off from buy-outs in the short term,” said a top official of a Bangalore-based IT company.

Satyam Computer Services has announced a slew of acquisitions over the last six months. In April, the company acquired Belgium-based S&V Management Consultants for $35.5 million in an all-cash deal. Satyam also announced the acquisition of the construction equipment maker Caterpillar Inc.’s market research and customer analytics operations for $60 million.

According to sources, Satyam is currently on the prowl for acquisitions in business process outsourcing (BPO), engineering services and infrastructure management services (IMS) space.

Similarly, Wipro Technologies, in August last year, had announced the acquisition of Nasdaq-listed outsourcing firm Infocrossing, provider of IT infrastructure management, enterprise application and business process outsourcing services, for about $600 million in an all-cash deal.

Wipro is learnt to be looking at strengthening its foothold in France and Germany through acquisitions.

Industry observers also point out that besides strategic acquisitions, IT firms are likely to utilise cash to maintain a high dividend payout ratio.

“In the past, companies have followed diverse strategies on utilisation of cash. While some have aggressively gone after acquisitions, others have announced special dividend as pay-out,” Mr Harit Shah, Analyst IT and Telecom, Angel Broking Ltd, said.