Bangalore: Mid-sized information technology (IT) consulting and services firm KPIT Cummins Infosystems Ltd has agreed to buy Sparta Consulting Inc. for up to $38 million (around Rs180 crore), giving the Pune firm access to a higher revenue-generating platform in the US.
Sparta is a US IT firm that specializes in implementing SAP AG’s business software.
KPIT will initially pay around Rs50 crore in cash to the promoters of Sparta, with the rest disbursed over three years based on business performance. The acquisition is expected to be completed by December.
Key strength: KPIT Cummins MD and CEO Kishor Patil.
In recent years, Indian IT firms have acquired overseas companies to build capabilities in areas such as business software consulting that can boost their revenue. Last year, HCL Technologies Ltd outbid larger rival Infosys Technologies Ltd to buy British consulting firm Axon Plc to gain such expertise.
Sparta, founded 18 months ago, has generated revenue of $26 million over the period and is KPIT Cummins’ sixth buy since 2003. The Pune firm’s earlier purchases have helped it build capabilities in areas such as automotive electronics and engineering design services.
“With this, we will have 1,000-plus SAP consulting practice, which is a significant strength and one that will allow us to bid for Rs100 crore-plus deals,” Kishor Patil, managing director and chief executive of KPIT Cummins, said over the phone.
With global demand for SAP-based services growing at more than 24%, the SAP-led consulting practice has the potential to grow into a $100-million business over the next three years, the firm said in a statement on Friday.
“It is an investment for the long-term. This could help KPIT earn better margins and higher revenue when discretionary spend is back in the IT business,” said Shashi Bhushan, IT analyst at Prabhudas Lilladher Pvt. Ltd, a Mumbai brokerage.
Discretionary spending is the optional money customers keep aside to spend over their planned budget.
KPIT will also start offering SAP’s business software to customers in energy and utilities sector, besides auto and technology verticals.
California-based Sparta has operations in Noida on the outskirts of New Delhi and Pune. Paul Freudenberg, its president and chairman, and Lokesh Sikaria, chief executive and co-chairman, will now work with KPIT.
KPIT has reported profit of Rs21.19 crore on revenue of Rs176.98 crore for the September quarter. On Friday, its shares closed at Rs79.90, up 3.63%, on the Bombay Stock Exchange.