3i Infotech buys J&B Soft for $25 mn

3i Infotech, the Rs 670 crore IT products and services company, has acquired US-based J&B Software and its subsidiaries for $25.25 million (around Rs 100 crore).

J&B Software is engaged in the business of providing software products and services related to remittance processing in the US.

It has an operating margin of $3.8 million (EBIDTA) and revenues of around $25 million.

The financial integration of this acquisition, perceived as reasonable by analysts as it works out to about seven times of the EBIDTA, will be seen by the fourth quarter of 2007-08.

The acquisition, the management says, will allow it to cross-sell its other products and services to J&B's exisiting blue-chip BFSI customers in the US. It will also help it to reach other geographies.

Amar Chintopanth, executive director and CFO, 3i Infotech, explained, "The product we have acquired can be used in other developed markets. We have a presence in geographies such as Western Europe, EMEA (Europe, Middle East and Africa) and APAC (Asia-Pacific), where we will try and use this product."

3i Infotech has acquired close to 25 companies since 2000. Formerly promoted by ICICI Bank, the company, unlike its competitors, has been acquiring smaller players. The focus has been either to acquire products or get access to new geographies.

For instance, with the acquisition of Datacons, 3i Infotech acquired a mutual fund products company called SDG Software, which gave it anti-money laundering and surveillance/fraud products to serve the banking and capital markets.

The company's strategy in the business process outsourcing (BPO) too has remained the same.

The acquisition of Delta services and G4 Software Technologies allowed it to offer niche BPO and back-office processing services.

Last year, the company acquired UK-based Rhyme for close to Rs 150 crore, one of the biggest acquisitions for the company. This gave 3i Infotech the capability in revenue asset management as well as a foray into the UK's BFSI segment.

Harit Shah, senior analyst, Angel Brooking, feels the strategy of the company to acquire small companies has worked well.

"They have been able to fill up several gaps in their product offering through these acquisitions," Shah said.

"Besides large acquisitions are a challenge when it comes to integration. However, most importantly, all the companies that they have acquired had good margins. Not necessarily that large companies will give the same margins."

As for funding the acquisitions, the company has been raising funds through the foreign currency convertible bonds (FCCB) route. The company has a total cash reserve of Rs 500 crore.

It had recently announced a successful pricing of its zero-coupon FCCBs offering of $100 million (around Rs 400 crore).

The company will continue to look for acquisitions, mainly in the BPO segment.

With over 500 employees and 20-25 clients, the BPO operations of the company is focused on the domestic market.

Moving ahead, the company will continue its focus on the BFSI segment and acquire companies that will give its further capabilities in serving this sector.