Virtusa to retain Polaris identity, Indian listing

KV Kurmanath Hyderabad | Updated on January 22, 2018 Published on December 07, 2015

Kris Canekeratne, Chairman and Chief Executive Officer, Virtusa, at the firm’s Hyderabad facility KV KURMANATH

Polaris Consulting gets us new geographies, business: CEO Kris Canekeratne

Kris Canekeratne was just 30 when he co-Founded Virtusa in his Boston basement in 1996. Started off with six people there and another 10 in the offshore facility in the basement of his ancestral house in Colombo, Virtusa, after 20 years, has now grown with 19,000 employees (including Polaris Consulting staff numbers) and with $200 million free cash in the balance sheet.

Looking relaxed after firming up the deal last month as he steps into the conference room at Virtusa’s facility here, the 50-year-old Kris speaks about the rationale behind buying Polaris Consulting, its expectations from the buy and future plans for the company. The firm, which is to pay $180 million for 53 per cent stake in the target firm, has decided to retain the identity of Polaris Consulting. He has a strong reason for that. Polaris is going to give a direct exposure to the lucrative markets of Japan, Australia and Canada, as it brings strengths in banking and financial services.

“Polaris Consulting is to going to complement our strengths. It helps us tap more business from the existing clients and newer business avenues. We see additional revenues of $100 million because of synergies between the two firms in the next three years,” he explains.

The deal provides for buying additional stake to increase its stake to 74.99 per cent and then 100 per cent in the firm. It would have paid $348 million if acquired the complete stake at the same value. “We will close the transaction to acquire 53 per cent (from promoters) as soon as we get SEBI and CCI approval, which we are expecting at the end of December or January,” he said

“We will then issue an open market tender offer to acquire an additional 22.9 per cent for about $90 million of the share capital from public shareholders to get to take the stake to 74.9 per cent as permissible under the Indian takeover law,” he said.

Virtusa, a listed entity in the US, would continue to run Polaris as a majority owned publicly listed (in India) subsidiary. “We believe that there is good value in continuing to run Polaris Consulting Services as a publicly listed company in India for the foreseeable future,” he pointed out.

Post acquisition, the revenue share of North American market would come down to 62-63 per cent from 70 per cent. Ruling out retrenchment, he said there were no redundancies and the firms complemented one another in strengths.

“We see synergies, not redundancies. For one, Jitin Goyal, Chief Executive Officer of Polaris Consulting, would head the Banking and Financial Services Vertical of the combined entity, which constitutes about half of the combined (projected) revenues of about $900 million this financial year,” he said.

He said the firm would use accumulated cash reserves from its Indian operations to part fund the acquisition.

“We have also entered into a debt facility with JP Morgan Chase and Bank of America to the tune of $300 million. We will use it as and when we required it,” he said.

The firm would preserve some equity to retain and reward critical leadership in both the entities.

Published on December 07, 2015
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