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Accel Frontline seeks acquisitions

Accel Frontline seeks acquisitions
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First Published: Tue, Oct 04 2011. 10 32 PM IST
Updated: Tue, Oct 04 2011. 10 32 PM IST
Chennai: Information technology services company Accel Frontline Ltd plans to spend as much as $25 million to buy several small companies as it seeks to boost revenue sixfold by 2017.
It aims to raise $10-15 million by selling shares to private equity (PE) funds to partially fund the acquisitions, chief executive N.R. Panicker said in an interview. The company aims to increase revenue to Rs 2,500 crore in the next five-six years from Rs 396 crore in the year ended 31 March, he said.
“The next five years will be the growth phase,” said Panicker, who founded the flagship company in 1991. “We will be looking at inorganic growth. We want to get geographical reach.”
The company is in preliminary talks with PE investors, though the need for funding and its size will depend on the companies identified for purchase, Panicker said, adding that he hopes to invest $20-25 million in acquisitions over the next 18 months. The company could fund acquisitions of up to $10 million through internal accruals, he said.
Accel Frontline plans to expand its core business of domestic technology infrastructure management; add business through an embedded software company, Ushus Technologies, which it acquired last month from a group firm; and expand overseas through acquisitions of companies in the US or West Asia with sales of $10-50 million, or Indian companies with a sizeable export business, Panicker said.
The long-term plan is to use the combined strength of these small acquisitions to undertake a leveraged buy-out of a larger company down the line, he said.
“The IT (information technology) services industry redefines itself every two-three years,” said Ankit Pande, a technology analyst with SBI Capital Securities. “Any wave of industrial revolution takes 70-80 years, and tech is really only about 20 years old. IT will continue to see sustained growth.”
The company’s core area of operation, the IT infrastructure management industry, has grown 40% year-on-year for the last three years, said Milan Sheth, partner, IT advisory, Ernst and Young.
Group company Accel Media Ventures Ltd is also looking for PE funding of about $15-20 million to strengthen its media production, distribution, licensing, merchandising and education operations. It has bid to set up an international animation and gaming school planned as a public-private partnership venture in Thiruvananthapuram.
Accel Frontline bought out the 51% stake of its joint venture partner, BT Frontline—a unit of British Telecommunications (BT)—in August because BT had seemed to shift its focus away from IT, Panicker said. This fiscal, with Ushus Technologies contributing about half the year’s revenue, the company expects to report revenue of Rs 570 crore through organic growth of about 44%.
Deals India, published jointly by Mint, Dow Jones Newswires and The Wall Street Journal, is a one-stop destination for investment professionals following deal flow, deals news, private equity and venture capital activity in India.
vidya.p@livemint.com
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First Published: Tue, Oct 04 2011. 10 32 PM IST