IT and ITES Monthly Update - Issue 57, July 2014

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

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

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

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  • 1. IT AND IT ENABLED SERVICES MONTHLY UPDATE / Advisory / 8 July 2014 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 in India's Corporate Finance practice is pleased to release the fifty seventh issue of the 'IT and ITES monthly update'. This monthly update will highlight select M&A transactions announced in June 2014 and provide trading multiples for key IT and ITES companies. KPMG's Corporate Finance practice provides a wide range of investment banking and strategic advisory services to clients, advises on mergers and acquisitions, divestitures, financing, and other strategic initiatives. IT AND IT ENABLED SERVICES MONTHLY UPDATE 8 July 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. Gaurav Gupta Associate Director Corporate Finance gauravgupta3@kpmg.com Tel: +91 22 3090 2413 KPMG in India contacts: Anand Vermani Partner Corporate Finance avermani@kpmg.com Tel: +91 124 334 5121
  • 2. Key deals in June 2014 Raleigh-based I-Cubed is acquired by KPIT Technologies KPIT Technologies has acquired I-Cubed, Inc., the US-based company engaged in the areas of product lifecycle management (PLM) consulting, data migration, PLM technical services and customisation, and managed services. KPIT Technologies will pay a consideration of USD 14.5 million. The acquisition will enable KPIT to delivery Product Lifecycle Management (PLM) services to its global clients. The acquisition will enhance KPIT’s PLM capabilities with PLM business process reengineering and strategy consulting. Mycom acquires OSI from Sobha Developers OSI Inc. of Folsom was bought by a subsidiary of Mycom Group. Both companies provide software and support to very large network data carriers, such as phone companies, internet service providers and networking companies. The seller is Sobha Renaissance Information Technology Private Limited, the India-based company engaged in offering interconnect billing and healthcare management software solutions. Key IT and ITES transactions (June 2014) 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. M&A update for the IT and ITES industry Source: BizJournals Link: http://www.bizjournals.com/sacramento/news/2014/06/03/folsom-telecom-company-osi-acquired-by-mycom.html Source: BizJournals Link: http://www.bizjournals.com/triangle/blog/techflash/2014/06/raleigh-based-i-cubed-is-acquired-by.html Announced date Target Target country Deal type Acquirer/investor Acquirer country Deal size (USD mn) 6/12/2014 i-Cubed United States Acquisition KPIT Technologies India 14.5 6/3/2014 Objective Systems Integrators India Acquisition Mycom Group India NA
  • 3. Valuations update for the Information Technology industry (June 30, 2014) INR million, except share price © 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. Source: CapitalIQ, website: www.capitaliq.com Company 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 Commercial IT Services - Large Cap HCL Technologies Ltd. 1,047,550 1,497 1,589 756 283,840 72,896 26% 52,740 19% 983,595 3.5x 13.5x 19.9x Infosys Ltd. 1,855,030 3,246 3,847 2,393 491,558 135,269 28% 104,342 21% 1,564,957 3.2x 11.6x 17.8x Tata Consultancy Services Ltd 4,739,044 2,419 2,427 1,465 818,094 251,510 31% 191,639 23% 4,593,090 5.6x 18.3x 24.7x Wipro Ltd. 1,335,452 545 611 341 434,190 97,310 22% 77,967 18% 1,200,417 2.8x 12.3x 17.1x Commercial IT Services - Large Cap M ean 27% 20% 3.8x 13.9x 19.9x Commercial IT Services - Large Cap M edian 27% 20% 3.3x 12.9x 18.8x Commercial IT Services - Mid Cap 3i Infotech Limited 6,305 11 14 4 13,079 (658) -5% (3,576) -27% 29,200 2.2x NA NA CMC Limited 59,085 1,950 2,006 1,107 22,309 3,655 16% 2,804 13% 55,799 2.5x 15.3x 21.1x Geometric Limited 9,209 145 155 61 10,955 1,146 10% 462 4% 8,585 0.8x 7.5x 19.9x Hexaw are Technologies Limited 47,481 158 180 86 23,665 5,237 22% 3,702 16% 41,093 1.7x 7.8x 12.8x Infotech Enterprises Limited 39,381 351 389 165 22,064 3,853 17% 2,660 12% 32,126 1.5x 8.3x 14.8x KPIT Cummins Infosystems Ltd. 33,538 172 189 116 26,940 3,992 15% 2,490 9% 34,279 1.3x 8.6x 13.5x Mastek Limited 4,062 183 228 103 9,230 803 9% 518 6% 2,370 0.3x 3.0x 7.8x MindTree Limited 73,980 885 925 403 30,194 5,946 20% 4,519 15% 67,394 2.2x 11.3x 16.4x NIIT Technologies Limited 26,845 442 477 234 23,050 3,334 14% 2,305 10% 24,362 1.1x 7.3x 11.6x Nucleus Softw are Exports Ltd. 6,749 208 251 65 3,462 639 18% 643 19% 3,781 1.1x 5.9x 10.5x Oracle Financial Services Softw are Ltd. 263,527 3,132 3,415 2,590 37,413 13,994 37% 13,593 36% 196,801 5.3x 14.1x 19.4x Persistent Systems Limited 43,416 1,085 1,220 477 16,692 3,927 24% 2,493 15% 38,415 2.3x 9.8x 17.4x Polaris Financial Technology Limited 20,975 210 236 97 24,237 2,390 10% 1,992 8% 14,992 0.6x 6.3x 10.5x R Systems International Ltd. 6,018 47 68 20 6,275 914 15% 619 10% 5,008 0.8x 5.5x 9.7x Rolta India Ltd. 18,125 112 118 53 33,356 11,341 34% 3,783 11% 55,749 1.7x 4.9x 4.8x Sasken Communication Technologies Ltd. 4,710 221 235 101 4,580 530 12% 515 11% 3,333 0.7x 6.3x 9.1x Sonata Softw are Limited 8,786 84 84 22 15,646 1,059 7% 778 5% 6,392 0.4x 6.0x 11.3x Take Solutions Ltd. 4,524 38 42 28 8,155 769 9% 580 7% 5,444 0.7x 7.1x 7.8x Tech Mahindra Limited 504,456 2,153 2,159 965 188,314 38,354 20% 30,288 16% 470,692 2.5x 12.3x 16.7x Xchanging Solutions Limited 2,184 20 22 7 2,431 176 7% 303 12% 1,450 0.6x 8.2x 7.2x Zensar Technologies Limited 19,263 439 445 181 23,156 3,441 15% 2,375 10% 17,307 0.7x 5.0x 8.1x Commercial IT Services - M id Cap M ean 16% 10% 1.5x 8.0x 12.5x Commercial IT Services - M id Cap M edian 15% 11% 1.1x 7.4x 11.5x Note: (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 (1) Market Capitalisation amounts are based on closing share prices as of June 30, 2014
  • 4. Valuations update for the ITES industry (June 30, 2014) INR million, except share price Source: CapitalIQ, website: www.capitaliq.com Source: CapitalIQ, website: www.capitaliq.com USD million, except share price 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 The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International. kpmg.com/in Company 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 Commercial ITES Services- India Allsec Technologies Limited 495 33 39 18 1,996 (277) -14% (250) -13% 444 0.2x NA NA Datamatics Global Services Ltd 3,540 60 64 19 7,338 865 12% 487 7% 3,666 0.5x 4.2x 7.3x eClerx Services Limited 35,180 1,164 1,370 696 8,410 3,518 42% 2,557 30% 31,620 3.8x 9.0x 13.8x Firstsource Solutions Limited 27,100 41 42 9 31,270 3,652 12% 1,930 6% 34,326 1.1x 9.4x 14.0x Hinduja Global Solutions Ltd 10,895 528 632 221 25,049 3,067 12% 1,696 7% 12,686 0.5x 4.1x 6.4x HOV Services Limited 1,068 85 122 22 140 (15) -11% 49 35% 1,086 7.7x NA 21.9x Commercial ITES - India listed M ean 9% 12% 2.3x 6.7x 12.7x Commercial ITES - India listed M edian 12% 7% 0.8x 6.6x 13.8x Company 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 Commercial ITES Services - US listed Exlservice Holdings, Inc. 988 29 31 23 484 96 20% 50 10% 840 1.7x 8.8x 20.0x Genpact Ltd. 3,788 18 21 14 2,156 385 18% 234 11% 3,882 1.8x 10.1x 16.2x WNS (Holdings) Ltd. 985 19 23 17 503 97 19% 42 8% 952 1.9x 9.8x 23.7x 19% 10% 1.8x 9.6x 20.0x Commercial ITES - US listed M edian 19% 10% 1.8x 9.8x 20.0x Commercial ITES - US listed M ean 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 June 30, 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