Megasoft shifts focus to US, European markets

On the verge of clinching multi-million dollar deals

Megasoft, a technology solutions company operating in the telecom, life sciences and IT services space, is shifting focus to the US and European markets for its telecom business.

The Rs 115-crore company is close to bagging multi-million dollar deals from these markets and is also in parleys for acquiring a US-based company.

"This year, we expect around 70 per cent of our telecom revenues to come from the US and Europe and 30 per cent from Asia. This is a strategic shift from last year when the ratio was 75:25 in favour of Asia," GV Kumar, managing director and chief executive officer of Megasoft, told Business Standard.

One of the reasons for the change in strategy is better deal values. "For some deals in US and Europe, we tend to get three-four times the value than that in India," Kumar said.

In 2005, telecom contributed to 33 per cent of the company's business and its contribution is estimated to grow to 40 per cent this year.

IT services contributed to around 67 per cent of the company's revenues last year and is expected to come down to around 57 per cent this year. One of the driving factors for this is profit margin, which tends to be over 40 per cent in the telecom space as compared to around 11 per cent in the IT services segment.

"We are on the verge of bagging three-four big deals from the US, European and Asian markets," Kumar said. These deals are typically in the range of $5 million-$7 million in size. Last year, the largest deal for the company was $1.2 million in size.

In April this year, the company had announced a three-year deal with Los Angeles-based Xero Mobile, a mobile virtual network operator. The approximately $25 million deal has been the largest for the company so far.

While Megasoft has been on the prowl for quite some time now, Kumar said that they could conclude an acquisition by July-end. "We are in talks with two telecom services companies and may zero in on one shortly," he added.

The acquisition could be in the range of $10 million-$20 million. The company is eyeing a topline of Rs 160 crore-Rs 175 crore and a bottomline of Rs 33 crore-Rs 36 crore this year.