Top IT services companies - TCS, Infosys Technologies, Wipro and
Satyam Computer Services - together have seen their 'liquid assets'
surpass $5.2 billion during FY08.
The financial kitty assumes significance as it not only places these
service providers in a strong position to pursue strategic overseas
buy-outs this year, but also offers comfort at a time when the
industry's largest market – the US - is facing slowdown headwinds.
The liquid assets (including cash and bank balances, as well as
investment in liquid and short term mutual funds) of the four Indian
IT giants was pegged at almost $4.2 billion in FY07, according to
Angel Broking Ltd.
"Most of the Indian IT firms are looking at inorganic route to fill
the gaps and fuel growth, and they may go for smaller acquisitions.
However, although the valuations are looking attractive, the
expectations of target companies have not come down. Also, the dollar
appreciation could take some sheen off from buy-outs in the short
term," said a top official of a Bangalore-based IT company.
Satyam Computer Services has announced a slew of acquisitions over the
last six months. In April, the company acquired Belgium-based S&V
Management Consultants for $35.5 million in an all-cash deal. Satyam
also announced the acquisition of the construction equipment maker
Caterpillar Inc.'s market research and customer analytics operations
for $60 million.
According to sources, Satyam is currently on the prowl for
acquisitions in business process outsourcing (BPO), engineering
services and infrastructure management services (IMS) space.
Similarly, Wipro Technologies, in August last year, had announced the
acquisition of Nasdaq-listed outsourcing firm Infocrossing, provider
of IT infrastructure management, enterprise application and business
process outsourcing services, for about $600 million in an all-cash
deal.
Wipro is learnt to be looking at strengthening its foothold in France
and Germany through acquisitions.
Industry observers also point out that besides strategic acquisitions,
IT firms are likely to utilise cash to maintain a high dividend payout
ratio.
"In the past, companies have followed diverse strategies on
utilisation of cash. While some have aggressively gone after
acquisitions, others have announced special dividend as pay-out," Mr
Harit Shah, Analyst IT and Telecom, Angel Broking Ltd, said.
Source: Business Line
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