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Tech Mahindra’s acquisition of Comviva Technologies will enable the company to grow inorganically and faster than its peers, say analysts. They say that with the acquisitions, the merged entity — Tech Mahindra and Mahindra Satyam — will emerge as a major IT player.
Comviva, a Bharti group company, is into value-added services and mobile payment solutions.
“The company is chasing growth in both volumes and revenues. The acquisition is part of the company’s plans to grow inorganically and to grow faster than the industry. In both these cases, the company gets access to a lot of marquee clients,” Ankita Somani, sector analyst with Angel Broking, said.
“If the company can leverage its balance sheet further, this is the right time for acquisitions. Further, on the completion of the merger, Tech Mahindra-Satyam, the company would be in a financially strong position,” Somani added.
Stabilisation challenge
This is the second acquisition within a month. On September 4, the company had acquired Hutchison Global Services for $87.1 million (about Rs 480 crore).
“Tech Mahindra is trying to grow bigger through acquisitions and post the merger with Mahindra Satyam, it will become the biggest IT company in the country,” said A.K. Prabhakar, Senior Vice-President (Equity Research), Anand Rathi, which has a ‘buy’ rating on the stock.
“The first challenge for Tech Mahindra when it acquired Satyam computers was to stabilise the company. Now, the next step is acquisitions. It is the right strategy that it is adopting,” Prabhakar added.
The company was also looking to acquire more firms. “We are looking at a variety of spaces and we are looking to enhance our capabilities in financial services, healthcare and in other areas like engineering services,” Tech Mahindra Senior Vice-President and Head of Mergers and Acquisitions Manoj Bhat told Business Line after the HGS deal.
It dovetails into two of Tech Mahindra’s stated strategies: investing in emerging areas such as network, mobility, analytics, cloud and security, and further focus on non-linear growth. Comviva’s primary focus and business model is expected to strengthen this aspiration, a Tech Mahindra release said.
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