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Tokyo Stock Exchange-listed CAC Corporation is likely to acquire 51 per cent stake in Chennai-based mid-size IT company Accel Frontline Limited (AFL). The value of the deal is estimated to be around Rs 130 crore, including equity and soft loan.
CAC will acquire a minimum of 51 per cent purchase of equity shares from the promoters through an open offer for up to 26 per cent in the company at Rs 45 per equity share. CAC will buy shares through primary, secondary and open offer.
CAC Corporation, which is coming as co-promoter, will infuse around Rs 130 crore into AFL, and this include $6 million as softloan, said N R Panicker, AFL promoter, who will remain as the executive chairman of the company.
Panicker said the company has been looking at various avenues to grow its international business more rapidly. The JV with CAC Corporation will help the company to achieve this global and Corporation's presence in Japan and their client base in US and UK and other countries will give us cross-selling opportunities with company's service offerings.
He said the company has a debt of around Rs 100 crore and this will come down substantially with the announced infusion It will also help it to contain the working capital as the interest outgo will be reduced substantially.At present, the interest outgo is around Rs 6-7 crore each quarter.
Founded in 1991 as Accel Automation, AFL offers engineering and R&D services, outsourced product development, IT infrastructure management, managed services and enterprise applications for banking, telecom and manufacturing sectors.
It clocked a revenue of $67 million in fiscal 2013 and expects to close the fiscal 2014 with a revenue of $78 million.The end-to-end IT solutions provider also operates in six countries including US, Singapore, UAE and others.
In the past, AFL received investment from ICICI Venture, SES division of Fujistu in 1999 and from Intel pacific in 2000. All these investors had exited the company.
The formation of the joint venture (JV) partnership is expected to provide opportunities to both partners. While CAC will gain an immediate platform in the Indian IT services market, Accel Frontline will be able to access CAC's relationship in Japan to provide IT services with India as a service hub. Also, Accel Frontline will not be able to bid for providing IT infrastructure services for the major industrial corridors being built in India by leading Japanese companies.
((The company will be run as a JV between CAC and the AFL who will continue to be significant owners of the Company. As a part of the growth plans for expand its capital base. In addition provide long-term soft loans to the capital, said Company's))
Akhihiko Sako, president and CEO of CAC Corporation commented the JV partnership will achieve the twin objectives of serving the company's Japanese clients in India and leveraging Accel's capability for software development services to serve company's global customers.
Panicker commented the partnership as important milestone for AFL, coming two years after the promoters had bought back the controlling stake in the company from British Telecom in August 2011.
CAC Corporation was established in 1966 as Japan’s first independent software development company. Over the last 47 years, it has expanded to provide range of services, supporting IT utilisation and the integration of IT and business processes. It specialises in providing services to the banking, manufacturing sectors. It has long leading Japanese companies.
