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Information technology (IT) and business process outsourcing (BPO) services firm Syntel, founded by Bharat Desai, is on its way to join the billion-dollar revenue a year club soon. It is gearing up to pursue inorganic growth opportunities.
"We were not very focused on inorganic growth opportunities but now we feel we have got enough space and bandwidth to go for a few acquisitions," said Nitin Rakesh, the chief executive and president of the Nasdaq-listed company.
He said the company was looking at acquisitions to make geographic expansion and getting capabilities in newer technology areas such as digital, mobility and analytics. "We have the strategy in place and the mergers and acquisitions' team is taking it forward," Rakesh said without giving further details.
The last acquisition that Syntel had made was almost 20 years ago when it acquired California-based privately-held company Metier, a provider of data warehousing, e-commerce and ERM solutions. Even though the deal size was not disclosed, Metier, at that point had reported $25 million in revenues.
In its accounting year ended 31 December 2013, Syntel had reported $824.8 million in revenues, a growth of 14 per cent over the previous year. For 2014, the company has given a revenue guidance of $920-940 million. However, the company usually revises its guidance at the end of every quarter, and given the increased spending by clients happening across the industry, experts believe that it may further revise its guidance upwards at the end of the September quarter. In the past four years, Syntel has posted a compound annual growth rate (CAGR) of 18 per cent, much higher than the industry growth rate during the year.
In terms of geographic composition, Syntel is predominantly focused on North America, the region from where the company derives around 91 per cent of the revenue followed by Europe just 8.3 per cent. The share of revenues from India and rest of the world is quite miniscule.
Rakesh said while the company is seeing good traction in most of the segments, the focus of the global corporates to go digital is going to generate enormous opportunities for the industry in coming days. "The common theme if you can notice is that almost everybody has started to think that what's that which will take them to become a digital business."
Among the business verticals, Syntel is majorly focused on banking, financial services and insurance (BFSI) which accounts for around 64 per cent of the overall revenues followed by healthcare and Life Sciences, the second largest service line with a 17 per cent share of overall revenues.
The company would continue to focus on Rs profitable growth' with an increasing drive to bring more automation and leverage the intellectual property assets it has created over the years.
Couple of months ago, Syntel had formalized its focus on automation by launching the managed services organization (MSO). "There is fairly a lot of automation happening in our processes such as production support, maintenance, testing and infrastructure management. We created the MSO with the intent of driving further automation by the use of accelerators and intellectual property assets."
