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IT and ITES Monthly Update, Issue 53, March 2014

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KPMG Corporate Finance practice is pleased to release the fifty third issue of 'IT and IT Enabled Services Monthly Update'. …

KPMG Corporate Finance practice is pleased to release the fifty third issue of 'IT and IT Enabled Services Monthly Update'.

This monthly update will highlight select M&A transactions announced in February 2014, and provide trading multiples for key IT and ITES companies.

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  • 1. IT AND IT ENABLED SERVICES MONTHLY UPDATE 10 March 2014 KPMG Corporate Finance practise in India is pleased to release the fifty third issue of the 'IT and ITES Monthly Update'. This monthly update will highlight select M&A transactions announced in February 2014 and provide trading multiples for key IT and ITES companies. Contents M&A update for IT and ITES industry Page 2 Valuations update for the IT industry Page 3 Valuations update for the ITES industry Page 4 KPMG's Corporate Finance practice provides a wide range of investment banking and strategic advisory services to clients, advising on mergers and acquisitions, divestitures, financing, and other strategic initiatives. KPMG in India contacts: Anand Vermani Partner Corporate Finance avermani@kpmg.com Tel: +91 124 334 5121 Gaurav Gupta Associate Director Corporate Finance gauravgupta3@kpmg.com Tel: +91 22 3090 2413 IT AND IT ENABLED SERVICES MONTHLY UPDATE / Advisory / 10 March 2014 © 2014, KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  • 2. M&A update for the IT and ITES industry Key deals in February 2014 Sequoia India leads Truecaller funding round Truecaller, a Sweden-based caller id company, has secured USD 18.8 million (INR 117.5 crore) in a series B funding round led by Sequoia Capital's Indian arm, highlighting the importance of the country in the application's growth. Truecaller operates as a crowd-sourced phone directory. The company has 40 million users globally, more than half of them in India. Last July, Truecaller tied up with Innoz, a mobile and wireless services company, to create an SMSbased service to enable non smart phone users identify unknown numbers. Source: Economic times Link: http://articles.economictimes.indiatimes.com/2014-02-07/news/47126413_1_truecaller-40-million-users-indian-users Farfaria raises USD 3.25 million to bring children’s books to the iPad FarFaria, which has built a children’s subscription book service for the iPad, is announcing that it has raised USD 3.25 million in Series A funding. The round was led by Inventus Capital Partners, with Inventus’ Manu Rekhi joining the board of directors. Source: Techcrunch Link:http://techcrunch.com/2014/02/04/farfaria-series-a/ Carlyle Group to sell 80% stake in Cyberoam Technologies to Sophos Group for INR 500 crore American private equity fund The Carlyle Group will sell its 80 per cent stake in unlisted network security solutions provider Cyberoam Technologies to the UK-based Sophos Group for INR 500 crore, a person with direct knowledge of the development said. Carlyle's Growth Capital Fund, which invests its capital in small and medium size companies, made a six-fold return. Source: Economic times Link: http://articles.economictimes.indiatimes.com/2014-02-07/news/47127330_1_south-indian-bank-india-infoline-tirumala-milk Key IT and ITES transactions (February 2014) Announced Date Target Country Target Deal Type Acquirer/Investor Acquirer Country Deal Size (USD m n) 2/7/2014 TrueCaller India PE investment Sequoia Capital India 19 2/7/2014 Cyberoam Technologies India Acquisition Sophos Group India 80 2/4/2014 FarFaria India PE investment Inventus Capital India 3.25 Source: Mergermarket website: www.mergermarket.com ISI Emerging Markets © 2014, KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  • 3. Valuations update for the Information Technology industry (February 28, 2014) INR million, except share price Com pany Market Cap (1) Share price (2) 52 Wk High 52 Wk Low Net Sales (3) EBITDA (4) EBITDA Margin Net Profit Net Profit Margin EV (5) EV (5)/ Sales (3) EV (5)/ EBITDA(4) P/E Com m ercial IT Services - Large Cap HCL Technologies Ltd. 1,101,990 1,576 1,589 674 276,888 67,429 24% 48,967 18% 1,048,743 3.8x 15.6x 22.5x Infosys Ltd. 2,182,872 3,820 3,832 2,190 502,416 132,819 26% 106,007 21% 1,920,981 3.8x 14.5x 20.6x Tata Consultancy Services Ltd 4,451,797 2,273 2,384 1,364 766,884 232,269 30% 174,219 23% 4,340,320 5.7x 18.7x 25.6x Wipro Ltd. 1,461,567 597 611 315 374,256 80,349 21% 61,684 16% 1,334,204 3.6x 16.6x 23.7x Commercial IT Services - Large Cap M ean 26% 19% 4.2x 16.3x 23.1x Commercial IT Services - Large Cap M edian 25% 19% 3.8x 16.1x 23.1x Com m ercial IT Services - Mid Cap 3i Infotech Limited CMC Limited Geometric Limited 4,747 8 9 4 13,109 334 3% (3,295) -25% 25,784 2.0x NM NM 45,344 1,497 1,780 1,107 21,324 3,347 16% 2,523 12% 43,063 2.0x 12.9x 18.0x 7,465 118 124 61 10,692 1,597 15% 506 5% 6,695 NM 4.2x 14.7x Hexaw are Technologies Limited 48,058 160 167 72 22,854 5,020 22% 3,791 17% 41,669 1.8x 8.3x 12.7x Infotech Enterprises Limited 40,974 366 389 157 20,760 3,577 17% 2,504 12% 34,846 1.7x 9.7x 16.4x KPIT Cummins Infosystems Ltd. 32,928 170 189 92 25,638 3,938 15% 2,388 9% 32,950 1.3x 8.4x 13.8x 5,158 209 225 103 9,430 795 8% 499 5% 2,664 NM 3.4x 10.3x MindTree Limited 68,254 1,639 1,725 783 28,094 5,382 19% 4,261 15% 61,942 2.2x 11.5x 16.0x NIIT Technologies Limited 26,945 444 477 234 20,214 3,137 16% 2,132 11% 24,936 1.2x 7.9x 12.6x Mastek Limited Nucleus Softw are Exports Ltd. 6,741 208 217 65 3,320 551 17% 560 17% NM NM NM NM 261,502 3,108 3,415 2,350 37,276 14,041 38% 13,299 36% 206,782 5.5x 14.7x 19.7x Persistent Systems Limited 45,234 1,131 1,158 477 15,564 3,868 25% 2,340 15% 40,363 2.6x 10.4x 19.3x Polaris Financial Technology Limited 15,430 155 168 96 23,586 2,814 12% 1,763 7% 11,396 NM 4.1x 8.8x 7,808 229 68 20 5,961 756 13% 527 9% 6,793 1.1x 9.0x 14.8x Oracle Financial Services Softw are Ltd. R Systems International Ltd. Rolta India Ltd. 12,213 76 79 50 25,793 9,217 36% -32% 49,461 1.9x 5.4x NM Sasken Communication Technologies Ltd. 3,907 182 216 101 4,550 542 12% 494 11% 2,030 NM NM 7.9x Sonata Softw are Limited 5,389 51 53 22 14,842 957 6% 612 4% 4,048 NM NM NM Take Solutions Ltd. 4,422 37 42 20 8,142 1,168 14% 605 7% 5,516 0.7x 4.7x 7.3x Tech Mahindra Limited (8,279) 436,411 1,871 1,906 895 143,320 30,633 21% 21,458 15% 405,313 2.8x 13.2x 20.3x Xchanging Solutions Limited 1,817 16 19 7 2,088 175 8% 123 6% 1,410 NM 8.0x 14.8x Zensar Technologies Limited 17,305 396 430 181 22,212 3,189 14% 2,214 10% 16,230 0.7x 5.1x 7.8x Commercial IT Services - M id Cap M ean 17% 8% 2.0x 8.3x 13.8x Commercial IT Services - M id Cap M edian 15% 10% 1.9x 8.3x 14.7x Source: CapitalIQ, website: www.capitaliq.com Note: (1) Market Capitalisation amounts are based on closing share prices as of February 28, 2014 (2) Share prices are in INR (3) Net sales (does not include other income) and valuation multiples are based on latest available TTM data (4) EBITDA equals Profit before Interest, Taxes, Depreciation and Amortization (5) Enterprise Value (EV) equals market cap plus total debt, minority interest, preference shares minus cash and cash equivalent and investment in associates © 2014, KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  • 4. Valuations update for the ITES industry (February 28, 2014) INR million, except share price Com pany Market Cap(1) Share price (2) 52 Wk High 52 Wk Low Net Sales (3) EBITDA(4) EBITDA Margin Net Profit (5) Net Profit Margin EV (6)/ Sales (3) EV (6) EV (6)/ EBITDA(4) P/E Com m ercial ITES Services- India Allsec Technologies Limited 407 27 59 18 2,297 (204) -9% (174) -8% 260 NM NA NA 3,213 Datamatics Global Services Ltd 55 60 19 6,693 797 12% 425 6% 3,725 NM 4.7x 7.6x eClerx Services Limited 40,000 1,329 1,370 599 7,984 3,281 41% 2,394 30% 37,425 4.7x 11.4x 16.7x Firstsource Solutions Limited 18,512 28 30 9 30,089 3,515 12% 1,743 6% 27,525 NM 7.8x 10.6x Hinduja Global Solutions Ltd 12,078 586 632 218 23,896 3,202 13% 1,748 7% 12,094 NM 3.8x 6.9x 1,146 92 122 20 140 -11% 49 35% 1,097 HOV Services Limited 7.8x NA 23.5x Commercial ITES - India listed M ean (15) 10% 13% 6.3x 6.9x 13.1x Commercial ITES - India listed M edian 12% 7% 6.3x 6.3x 10.6x Source: CapitalIQ, website: www.capitaliq.com USD million, except share price Com pany Market Cap(1) Share price (2) 52 Wk High 52 Wk Low Net Sales (3) EBITDA(4) EBITDA Margin Net Profit (5) Net Profit Margin EV (6) EV (6)/ Sales (3) EV (6)/ EBITDA(4) P/E Com m ercial ITES Services - US listed 922 28 33 23 479 93 19% 48 10% 786 1.6x 8.5x 19.2x Genpact Ltd. Exlservice Holdings, Inc. 3,865 17 21 14 2,132 384 18% 230 11% 3,953 1.9x 10.3x 16.8x WNS (Holdings) Ltd. 1,018 20 23 13 492 89 18% 36 7% 983 28.0x 2.0x 11.1x Commercial ITES - US listed M ean 18% 9% 1.8x 10.0x 21.3x Commercial ITES - US listed M edian 18% 10% 1.9x 10.3x 19.2x Source: CapitalIQ, website: www.capitaliq.com Note: (1) Market Capitalisation amounts for Indian listed companies are in INR million and Market Capitalisation amounts for US listed companies are in USD million, based on closing share prices as of February 28, 2014 (2) Share prices for Indian listed companies are in INR and share prices for US listed companies are in USD (3) Net sales and valuation multiples are based on latest available TTM numbers (4) EBITDA equals Earnings before Interest, Taxes, Depreciation and Amortization (5) Net profit is after minority interest, but before extra-ordinary items (6) Enterprise Value (EV) equals market cap plus total debt, minority interest, preference shares minus cash and cash equivalent and investment in associates Total debt, Cash and Cash equivalent are as per latest available quarterly numbers KPMG, Lodha Excellus, 1st Floor, Apollo Mills Compound, Mumbai Maharashtra - 400011. Phone: +91 22 3090 2007/3428, Fax: +91 22 3090 2166 The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2014, KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. This document is meant for e-communications only kpmg.com/in The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International.