Expects Rs 1,000-cr revenue from mobility business by March

Tech Mahindra Ltd on Monday acquired 51 per cent stake on a fully diluted basis in Comviva Technologies Ltd for Rs 260 crore. Comviva, majority owned by Sunil Mittal-promoted Bharti Group, provides mobile value-added services (VAS).

The deal will be subject to regulatory approvals, and the new brand identity is called Mahindra Comviva. After this deal, Tech Mahindra’s revenue from mobility solutions business is expected to touch Rs 1,000 crore by March. This will include Comviva’s revenue of Rs 400 crore as on date. The company in the past fiscal had also fully merged CanvasM Technologies into it, which was a joint venture with Motorola Mobility Solutions, for providing VAS.

According to the agreement with Comviva, Tech Mahindra will make an upfront payment of Rs 125 crore towards the stake acquired and the balance Rs 135 crore will be paid over five years, subject to Comviva achieving performance targets. The company did not reveal the targets agreed to by the two.

Vineet Nayyar, Executive Vice-Chairman, Tech Mahindra, said the acquisition will catapult the company’s focus on mobility solutions around the world with Comviva’s reach in 90 countries with 130 customers such as Aircel, Idea Cellular, MTN, NTT Docomo, Uninor and Vodafone.

Sequoia, cisco exit

The current promoters will continue to hold a 20 per cent stake on a fully diluted basis in Comviva, after the deal is closed. Sequoia Capital and Cisco, that had 9 per cent and 6 per cent stake in Comviva respectively, have exited.

WestBridge Capital, that had a 30 per cent stake, remains with 8 per cent now, the company said.

The new company will have around 3,000 employees including Comviva’s 1,500.

Comviva will further bring its managed VAS capabilities to Tech Mahindra, which will increase revenue across VAS services by 20 per cent, speed of going to market by over 40 per cent, and reduce overall VAS delivery and management costs by 35 per cent, C.P. Gurnani, Managing Director, Tech Mahindra, said.

This is Tech Mahindra’s second acquisition this month. It had acquired 100 per cent stake in Hutchison Global Services for around Rs 485 crore earlier.

According to a recent report by Internet and Mobile Association of India, the mobile VAS market in India is expected to reach Rs 33,280 crore by next year from Rs 26,000 crore in 2012.

As of March 2012, there were 48 million mobile Internet users in the country, it said.

Tech Mahindra’s shares closed at Rs 903.45 on the Bombay Stock Exchange on Monday, down 0.69 per cent.


(This article was published on September 17, 2012)
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