Xius India to merge with Megasoft

Xius India, a company belonging to the Srini Raju-promoted i-Labs group, will shortly be merged with Chennai based Megasoft. Xius is a high-end telecom solutions provider for the telecom operators and carriers.

"We have appointed PricewaterhouseCoopers (PwC) to evaluate both the companies on all aspects related to accounting, auditing, business projections etc. PwC will also suggest us the merger ratio based upon which both the prties will take the final decision," G V Kumar, the managing director and CEO of Xius India said.

Interestingly, i-Labs group at present has no listed firms in its stable and this will become one of its first moves on to the bourses.

The board of Megasoft will meet on January 20 to consider the acquisition proposal, before which, PwC is expected to submit its report.

"The telecom product business is moving towards a direction in which companies are moving away from buying a product to a pay-per-use model. The telecos are looking at spending more on the operational expenditure than the capital expenditure. To capture opportunities emerging out of this scenario, we need to have a services company that offers some synergies. We chose to merge with Megasoft to emerge as a strong IP driven telecom services bureaux," G V Kumar told Business Standard.

Megasoft, a CMM Level 4 company has a team strength of over 500 associates in its Chennai, US and Hyderabad development centers put together.

The company earns over 60 per cent of its revenues from US and its US subsidiary has clocked revenues of Rs 80 crore last year.

It posted a nominal profit of Rs 13 lakh on a total income Rs 13.5 crore for the half year ended September. Its current paid-up capital stands at Rs 15.11 crore, of which non-promoters' holding is at about 49 per cent.

According to sources, Ravi Reddy, the present chairman and CEO will stay as the chairman of the company while G V Kumar will become the CEO of the merged entity. Srini Raju will remain as a passive investor.

Xius currently has a paid-up capital of Rs 4.25 crore in which the i-Labs group holds 47 per cent, 15 per cent of the stake is held by US based XY-Mobile which has recently picked up the stake.

The rest of the stake in Xius is held by GV Kumar, Mumbai based Zip Telecom and few others.

Xius currently has about 60 people on its rolls and posted a revenue of $4 million last year. It has a $6 million order pipeline, which it won in the past couple of months from Sri Lanka and Middle East.

It expects to double its revenues in the current year. The company expects international revenues to contribute 50 per cent to the overall revenues this year.