HCL Tech discontinues JV arrangement with DXC, inks IP deal

IT services major HCL Technologies today said it has decided to discontinue its joint venture agreement with DXC Technology and formed a new IP partnership with the company.
HCL Technologies had partnered DXC in July 2015 and had formed two joint venture entities -- CeleritiFinTech Ltd (CFT) and CeleritiFinTech Services (CFTS).
CFT was responsible for sales and marketing of core banking products, while CFTS was mandated with service delivery.
HCL Technologies had 51 per cent stake in CFT and 49 per cent share in CFTS. The remaining was held by DXC in both entities.
"With a view to better leverage the capabilities of HCL and DXC, on September 30, 2017, HCL and DXC decided to discontinue the joint venture arrangement and instead a new arrangement (IP Partnership) has been entered," HCL Technologies said in a BSE filing.

It further added that under the new partnership, HCL will be responsible for product development and modernisation, maintenance and professional services of core banking products.

DXC will be responsible for sales, marketing and client relationship.
"For the financial year ended March 31, 2017, CFT (the results of which entity were being consolidated with that of the company) had revenues of USD 57.7 million and net loss of USD 40,000," the filing said, adding that HCL had done equity pick up of USD 0.3 million for the year ending March 31, 2017 for CFTS.
HCL had invested aggregate USD 11 million in the joint venture companies and had pending commitment of USD 46 million.

With the JV arrangement being discontinued, HCL will no longer be required to make the balance investment and all receivable and payment of liabilities in joint venture entities will be equally distributed between HCL and DXC.
Under the new IP partnership, HCL will acquire exclusive rights for 10 years for the core banking products (earlier with JV companies) and pay USD 50 million.
Of this, USD 25 million is payable now, USD 12.5 million at the end of year 3 and remaining on achievement of certain milestones after three years.
"Further, an amount of USD 65 million is payable at the end of year 5, subject to achievement of certain milestones. On such payment, HCL will get perpetual rights for the core banking products and the derivative IP products," the filing said.