India’s fifth largest IT services firm HCL Technologies is in talks with banks to raise close to $1 billion for its future acquisitions. The company is in talks with a few private banks and has signed on Citibank as one of the bankers to raise these funds, said sources.
When contacted, HCL Technologies and Citibank declined to comment saying that ‘they do not comment on market speculation’.
The Delhi-based firm, with revenues of Rs 7,800 crore, has been acquiring smaller firms and is now targeting larger firms. “Internally, the mandate is to acquire firms that will allow access to new service lines. And the firm is eyeing bigger acquisitions that can allow it to have good customer base as well,” said an official from the company on condition of anonymity.
As of June 30, 2008, HCL Technologies had $572 million (Rs 2,517 crore) in cash reserves. Like the other IT majors, HCL Technologies too has been concentrating on smaller acquisitions that can bridge gaps or enhance capabilities. Since January 2008, the company has acquired three firms for spends between Rs 20 crore and Rs 100 crore. HCL promoters currently holds 67.54 per cent stake in the company.
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Axon bid more of a rumour
Senior HCL officials also said that the firm is looking at enhancing its SAP practice, which is lagging behind competitors such as TCS and Satyam. The company was looking at acquiring a SAP consulting firm, they said stating that the news about HCL bidding for Axon is "more of a rumour."
There have been reports that the HCL Technologies may counter Infosys Technologies acquisition bid of UK-based Axon Group. Last month, India’s second largest IT firm Infosys had declared its intention of acquiring Axon for Rs 3,300 crore. It had made an offer of 600 pence per share.
Meanwhile, Infosys CFO V Balakrishnan said, "We are in the peoples business, and we want the management of the acquired company on our side. The management of Axon is on our side and has supported the bid. In our knowledge, we don't think anybody else has made an offer or is in the process of making an offer."
When asked if HCL did make a bid, would Infosys like to raise the offer price, Balakrishnan said these were all hypothetical questions, and would not like to answer at this point of time. According to an analyst, if HCL bids for Axon that will be no surprise given the fact that the company is already quite strong in Europe and this will give it a scope to cross-sale some of its services to Axon customers.
