Mastek readies new product; looks at US, UK acquisitions

Mastek readies new product; looks at US, UK acquisitions

Bangalore: Midsized IT services firm Mastek Ltd expects to roll out its Web-enabled insurance software product, dubbed Core Elixir, by July.

The company is developing the product, which is based on the so-called service-oriented architecture, with built-in functionalities such as policy administration, underwriting, channel management and new business development.

“We have already developed some six to seven major modules and plan to add another four to six modules either by building internally or through acquisitions," said R.S. Desikan, group chief financial officer. Such architecture refers to a loosely tied collection of software applications designed to carry out individual tasks that communicate with each other. The architecture reduces the cost of deployment and increases flexibility.

Core Elixir would replace Mastek’s decade-old product Elixir, which has an installed customer base of some 20 companies, including insurance firms in India such as Tata AIG, Birla Sun Life and Max New York Life.

Mastek is looking at acquiring intellectual property-oriented solution companies in the US and the UK also to add to its portfolio.

“We are currently in talks with about four to five (companies) in the US and the UK market, and the deal sizes could in the range of $10-20 million (about Rs39-79 crore)," Desikan said.

A zero-debt company, Mastek also has about Rs200 crore in cash. It also plans to raise $35 million through a combination of foreign currency convertible bonds and external commercial borrowings. Of this, $20 million will be through convertible bonds, said Desikan.

Mastek has said it plans to buy back about 25% of its equity at a price not exceeding Rs750 per share through the open market.

The company expects shareholder approval for the buyback by 26 November and has set aside Rs65 crore for it. Following the buyback announcement, Mastek shares touched a 52-week high of Rs416.70 on 12 October, but they have fallen 29% since then, to close at Rs281.55 on the Bombay Stock Exchange on Wednesday.

Separately, the company is investing $10 million in a development centre in Chennai, where it plans to have some 8,000-10,000 seats over the next few years.

“Initially, we plan to start small with about 1,000 seats and scale up...," Desikan added. Mastek commissioned a 1,500-seat facility in Mahape, Mumbai, earlier this year, of which 600 are already occupied. The company has 3,300 employees.

Further, Desikan said, the appreciating rupee has not had any impact on Mastek’s earnings as the company derives about 65% of its revenues from Europe.

Mastek reported a net profit of Rs16.95 crore on sales revenue of Rs145 crore for the quarter ended September.