Hexaware plans acquisitions

Tech major to look at companies with a size of $10-15 million.

Software services company Hexaware Technologies is looking out for acquisitions of software companies abroad to leapfrog its business as well as get a wider footprint.

Hexaware Chairman Atul Nishar said that the company was looking at the US and the UK markets for acquisitions. "We will look at companies which are in the same domain, covering enterprise solutions and applications management, to get a larger chunk of clients," Nishar said, adding that Hexaware would look at companies with a size of $10-15 million.

Nishar said the company was already examining some companies and a decision would be taken in a short while. "We will close the deal and complete the acquisition in calendar 2006," he explained.

Nishar said the company recently struck a deal with General Atlantic Partners (GA) under which the US-based venture capital firm would invest $67 million to acquire 14.9 per cent stake in Hexaware.

"The shareholders of the company have approved the investment on April 14 and we are likely to receive the fund in a couple of days. GA will be allotted shares equivalent to 7.49 per cent stake in the company soon afterwards. The conversion of the funds to increase their share to 14.9 per cent will happen in eighteen months from the initial allotment," Nishar elaborated.

Hexaware also opened its Pune development centre today. This is the company's third centre in the country following Mumbai and Chennai. The centre will have an initial capacity to accommodate 250 people and this will be ramped up to 450 in a year.

Rishi Brij, vice-chairman and chief executive officer, said the company was in an expansion mode and would expand centres in Chennai and Pune in addition to opening new centres in the south and east regions.

Hexaware would raise the number of its employees in Chennai to 3,000 in two years. It would recruit people at all its centres to take the total to 10,000 in three years.

"The idea is to have 1,000 and more people at each centre," he said, adding that the company might look at setting up centres in Bhubaneshwar and Kolkata in the east and Bangalore or Hyderabad in the south.

"We have earmarked $20 million for this expansion in the first phase and have enough funds to complete the expansion on its own," Rishi informed. He said the company has a cash build up of $100 million (Rs 450 crore) including the funds committed by GA.

Hexaware is also betting big on its BPO operations as it wants to expand into HR management, health sector, insurance, finance and accounts and knowledge process outsourcing for pharmaceuticals industry.

"We expect a 70 -100 per cent growth in these areas," he added.

Hexaware has made significant inroads in Europe and especially in the Germany market as 25 per cent of its revenues come from this region.

"This is significantly higher than the industry average, as we have won clients such as Deutche Leasing, Lufthansa and Citigroup in Germany," Nishar said.

"About 70 per cent of the company's revenues come from clients in the North American market, major among which are Unisys and Air Canada," he added.