Sobha IT firm readies for acquisition

Sobha Renaissance IT Pvt Ltd, a Bangalore-based IT solutions subsidiary of US $ 210 million Sobha Group, is upping its focus on inorganic growth. It has earmarked Rs 50 crore for acquisitions during this fiscal as well as next year.

Having acquired the IPRs of Chennai-based Manmar Technologies Ltd and Bangalore-based InfoHealth about two years ago, the company is about to conclude its talks with a 10-year-old Indian company that operates in the banking and financial space.

When Sobha Renaissance completes this acquisition, it will open up a whole new vertical for the company in banking and financial services. The target company is presently grossing Rs 20 crore in revenue and has more than 40 banks as its customers.

The company is owned 51 per cent by a reputable and large Indian industrial house and the rest by an overseas FI. This company is currently 200-strong.

Without naming the target company, Dr Madhu Nambiar, managing director and CEO, SRIT, said, "Inorganic growth is quite crucial to us. Sometime back we realised that we cannot grow in the healthcare segment with our own product and hence went on to acquire more IPRs. We will opt for the same approach in key segments like banking and financial space."

Sobha Renaissance registered a turnover of Rs 60 crore last fiscal and is planing to grow its topline by nearly 25 per cent in the current fiscal.

Currently, its capabilities include IT consulting and integration which contributes only 3 per cent of its revenues, application re-engineering and maintenance services (35 per cent), product development and software services as well as enterprise application integration (62 per cent).

Sobha Renaissance's thrust on inorganic growth can be gauged by its IPR acquisitions in the recent past. The company has so far acquired three IPRs in the healthcare space, 13 IPRs in the medical imaging space and has 14 IPRs of its own.

Interestingly, the company has identified another 16 IPRs for future acquisitions. Discussions for these acquisitions are in advanced stages.

Unlike its peers like iVega and Kshema, which got acquired by larger companies and whose toplines were US-dependent, Sobha Renaissance clientele is well spread out.

Middle East contributes for nearly 30 per cent its revenues while US and Far East (primarily Japan) contributes for 20 per cent and 14 per cent, respectively. The rest of the revenue is from Germany and Spain.

With the US healthcare spending expected to be about US $ 10 billion in the next two years, SRIT is also betting big on its products and solutions in Environment Health & Safety (EHS) space and solutions catering to multi-specialty, mid-sized and small hospitals.

It is here that its acquisitions of IPRs will pay dividends. In fact, Nambiar is betting big on EHS and is confident that it will contribute for 25 per cent of the company's revenues in five years from now.

Sobha Renaissance is poised to move into new facilities by next month that will accommodate about 1,000 people. The company's own seven-acre campus in the IT corridor is in the pipeline with a budget outlay of Rs 70 crore. By 2007-08, the company intends to register revenues of Rs 500 crore and be nearly 5,000 strong.

The company has already initiated the necessary processes to acquire Six Sigma certification. Pilot projects and associate training in Six Sigma tools and techniques are keeping the company on track towards this achievement by November 2004.