Mumbai: I-flex Solutions, India’s largest software products company, plans to leverage the balance sheet of Oracle Corp., which holds a 83% stake in it, to fund large acquisitions, according to its chairman and managing director, Rajesh Hukku.
The Rs1,824 crore maker of banking software funded its recent $122.6 million (Rs535.6 crore) acquisition of US-based Mantas, an anti-money laundering software vendor, by way of a $125 million preferential allotment of equity shares to Oracle in August 2006.
“In cases where speed is very important and the acquisition is large like over $100 million, doing a preferential issue of shares to Oracle may be the quickest way to close a deal,” said Hukku. “Of course, if the acquisition is a $1 billion then we may instead ask Oracle to do it directly,” he added.
It could be in Oracle’s interest to fund i-flex’s acquisition. It had previously made an open offer to raise its stake in i-flex to around 90% and then delist the company (according to Indian law, a minimum public shareholding of 10% is needed for a company to stay listed). The open offer did not go through completely.
I-flex feels the need to acquire companies because it wants to widen its focus from banking software to software for the entire financial services industry.
“We want to paint the whole canvas of the financial services industry using a build, buy and ally strategy,” said Hukku.
After having built Flexcube, an enterprise-wide banking solution, and Reveleus, which banks use to decide how much capital they need to have to back each of their loans, i-flex has been aligning with other companies to enter related spaces.
It has also acquired stakes in Castek, a Canadian insurance software company and Login S.A., a firm that specialises in front end treasury systems.
“It will probably take us four-five years to build the best private wealth management, fund management and insurance solutions in house so we will evaluate build vs buy in everything new we want to build. We will acquire companies to complete our offering and get better customers faster,” said Hukku.
I-flex Solutions is also leveraging its Oracle connection to reach out to customers. “When we launched Flexcube, we started with customers in the African continent. Today, Reveleus has started with the biggest banks in the US,” said Hukku. In several cases, especially those involving mid- sized US banks such as the People’s Bank in Connecticut, the contract is often signed by Oracle on behalf of the Indian subsidiary.
Hukku said 70% of the biggest banks in the world are still running older software that can be replaced by its Flexcube.
He added that the company also hoped to use its Oracle connection to sell in more countries than it does.
I-flex has offices in 22 countries. “Oracle has sales and support infrastructure in many companies where we do not have any. For instance, we have signed a deal in Honduras where none of our sales personnel has ever called thanks to Oracle,” said Hukku.