3i Infotech to spend FCCB funds on inorganic growth

3i Infotech, a global provider of IT solutions and services, will be using majority of the $50 million raised via foreign currency convertible bonds (FCCBs) this year, on inorganic growth. The company is eyeing software product companies that have products in the life insurance and trade finance space.

This apart, the Rs 424-crore company is contemplating making a strategic investment in a BPO firm for launching its third party services in that space.

Speaking to Business Standard, Amar Chintopanth, chief financial officer, 3i Infotech Limited, said, "The $50 million that we raised recently via FCCBs will be used mainly for acquisitions. Our primary growth has been through acquisitions and we are evaluating companies that are into life insurance and trade finance products space."

With regard to the size of acquisitions, Chintopanth said that they typically would not spend more than 5-10 per cent of their revenues on acquiring a company.

3i Infotech had acquired Hyderabad-based SDG Software Technologies and Bangalore-based Datacons recently.

Meanwhile, Chintopanth also said that ICICI Bank, which holds 54 per cent stake in the company, could dilute its stake to 42 per cent after five years. This is because the FCCBs of 3i Infotech, which will be redeemable on the expiry of five years, are convertible into equity shares at the option of the bond holders.

3i Infotech that earns 45 per cent of its revenues from the product space and 55 per cent from services is also working towards launching its third-party BPO operations.

At present, its BPO services are restricted to the ones offered to ICICI Bank. "This is likely to be done in two stages. In the first stage, we could make a strategic investment in a BPO firm and in the second stage we could up our stake to acquire the firm," Chintopanth said.