The Hindu Business Line : Infotech drops plan to buy co in auto space

Hyderabad, Dec. 5 Infotech Enterprises Ltd has decided not to go ahead with its plans to acquire a multinational, IT company servicing the automotive sector.

“We are not going to acquire the company now due to significant depreciation in the value of the candidate during the last six months,” Mr B.V. R. Mohan Reddy, Chairman and Managing Director, Infotech Enterprises told Business Line here.

The Hyderabad-based company had earlier announced that it would complete the acquisition before the end of 2008. While details were not immediately available, the company had said in September that it is eyeing a European company in the auto-engineering space for an estimated value of between $ 30 million and $ 40 million.

It may be recalled that Infotech acquired US-based Time To Market (TTM) in October, 2008 and forayed into hi-tech design services, VLSI design and software design. I t is now planning to integrate TTM with itself. Infotech Enterprises’ past acquisitions include London-based Dataview Solutions, Germany’s Advanced Graphics Systems and US’ Vargis.

Infotech, which raised $ 75 million from General Atlantic last year, has a cash balance of Rs 400 crore. “While cash is king now, valuations are coming down in general, though some are unwilling to accept this. We will have a prudent balance between cash and acquisitions,” he said.

It is, however, scouting for acquisitions in the medical electronics space, he added.

Slowdown impact

On the likely impact of global slowdown, Mr Reddy said there would be no problem in the short term (for about 12 months) for its engineering business. “There could be some impact in the medium term (in 18-24 months) if the global economy is not going to bounce back,” he said.

The current order book of the company - which has global majors such as Jet engine maker Pratt & Whitney and Bombardier as its clients - is strong, he said. Accepting that acquiring new customers was quite difficult, Mr Reddy said the focus was on retaining and expanding business with existing clients. “I myself have gone and met some of our top 10 customers recently. This helps in not only safeguarding existing assignment, but in constantly engaging the customers,” he said. The 8,200-strong company has slowed down hiring.

“We have made only 294 offers this quarter and are going slow,” he said. In the previous quarter it added over 500 people.

Though many cost-cutting measures such as cuts in travel expenditure have been put in place, there are no lay-offs or wage cuts, he claimed.

``I am also addressing our engineers periodically to reassure them constantly about the safety of their positions,” he added.

On business growth, Mr Reddy said there is no pressure on the business at large. “There are only pricing pressures, but not negative growth,” he said. “Pratt & Whitney has released lot of orders while our recent multi-year contract with Bombardier Transportation is progressing well,” he said.

In the second quarter of current fiscal, Infotech added 23 customers.

The Hyderabad-based company has decided to freeze fresh investments in creating infrastructure. It has facilities in Hyderabad, Bangalore, Noida, Vizag and Kakinada.

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