Madhumathi D.S.

Bangalore, Oct. 25

ENGINEERING solutions provider QuEST could perhaps be the first in its space in the country to talk of a public offer. QuEST is starting to first upgrade its Bangalore centre into a full-fledged Indian entity prior to tapping the capital market in 2006 or 2007 to raise around Rs 100 crore, its President and co-founder, Mr Aravind Melligeri, told Business Line.

"We are looking at a timeframe of 12-18 months for the IPO. Right now, we are focussing on business growth," Mr Melligeri said, adding that the formalities for converting it to an Indian company had begun.

The proceeds would finance the New York-based company's acquisition plans overseas. QuEST made its first US acquisition in 2000, three years after Mr Melligeri and Mr Ajith Prabhu formed it. In 2003, QuEST got its first venture funding of $6 million from the Carlyle Group, which picked up 24 per cent equity in the company.

Its largest and 650-strong Indian off-shoring hub offers engineering solutions to global original equipment manufacturers such as GE, Smiths Aerospace, Pratt & Whitney, Mitsubishi and Kawasaki in the aerospace, automobile, power, oil, gas and engineering segments. During 2004-05, the company generated revenues of $20 million, which it expects to touch $28 million this fiscal.

Mr Melligeri said QuEST also plans to extend its design activities to manufacturing solutions. It already does prototyping and has a global supply chain in place.

Aerospace engineering solutions account for 30 per cent of QuEST's revenues, said Mr Bijoy George, Vice-President (Marketing and Strategic Initiatives.) For players such as QuEST, the aircraft acquisitions of Indian Airlines and Air India, with a potential offset business of $880 million-$1 billion each from Airbus and Boeing, are of great interest, he said.

Also of promise are upcoming projects of PSU aircraft maker Hindustan Aeronautics Ltd, which plans to outsource 35 per cent of engineering works this year and the indigenous Kaveri aero-engine programme of the Gas Turbine Research Establishment.

If IT made outsourcing to India a profitable trend in the nineties, engineering solutions and product development outsourcing could be the next best thing for the country, a fact that Nasscom has sounded the domestic industry out about, Mr George said. It would be a much smaller pie of around $2-3 billion compared to IT outsourcing, which hovers around $18 billion today, he said. The trend has been rising since 2001, riding on the same ingredients that clicked for IT: a low-cost talent pool, knowledge of English and good IP protection for high-end, low volume services.

To address this growing market, QuEST has tied up with five engineering colleges to build up human resources through industry-relevant training. Nearly 250 of its Indian employees are from these campuses.

(This article was published in the Business Line print edition dated October 26, 2005)
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