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IT and ITES Monthly Update, Issue 51, January 2014
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IT and ITES Monthly Update, Issue 51, January 2014

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This monthly update will highlights select M&A transactions announced in December 2013, and provide trading multiples for key IT and ITES companies.

This monthly update will highlights select M&A transactions announced in December 2013, and provide trading multiples for key IT and ITES companies.


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  • 1. IT AND IT ENABLED SERVICES MONTHLY UPDATE 08 January 2014 KPMG India’s Corporate Finance practise is pleased to release the fifty first issue of the 'IT and ITES Monthly Update'. This monthly update will highlight select M&A transactions announced in December 2013 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: Pradeep Udhas Head of Markets pudhas@kpmg.com Tel: +91 22 3090 2040 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 / 08 January 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 December 2013 India Property raises USD 12 million fund Indiaproperty.com, subsidiary of India Property Online Private Limited, has raised a Series B funding of USD 12 million by Bertelsmann with participation from existing investors Canaan Partners (Canaan) and Mayfield Fund (Mayfield). The funds will be used to bolster product portfolio as well as geographic expansion. Further, the company plans to invest in brand building initiatives. Source: Business Standard http://www.business-standard.com/article/companies/india-property-raises-12-mn-from-cannan-partners-mayfield-fund-113121900732_1.html Citrus Payment raises USD 5.5 million for expansion plans Citrus Payment Solutions, a Mumbai based mobile payment solution provider, has raised Series B funding of USD 5.5 million from a Japan based online payments company econtext Asia and Beenos Asia, a wholly-owned subsidiary of Japanese e-commerce and incubation major Netprice. Additionally, existing venture capital provider, Sequoia Capital, has also participated in the latest round. The company plans to utilize the funds for developing its mobile payment technology, and expand its presence in global markets. Source: The Economic Times http://articles.economictimes.indiatimes.com/2013-12-09/news/44989106_1_winvest-holdings-prizm-payment-payment-processing Heckyl Technologies raises Series B funding Heckyl Technologies Pvt Ltd, a Mumbai and U.K. based firm, which offers a Big Data-based analytical platform for investors, traders and researchers, has secured over USD 3.5 million in Series B round of funding led by IDG Ventures India, with participation from existing investor Seedfund Advisors. The company will leverage the funds for geographic expansion and as part of the deal – Venkatesh Peddi from IDG Ventures will join the board of directors of Heckyl. Source: The Hindu http://www.thehindu.com/business/Industry/sqs-to-pick-up-majority-stake-in-thinksoft/article5330430.ece Key IT and ITES Transactions (December 2013) Announced Date Target Country Target Deal Type Acquirer/Investor Acquirer Country Deal Size (USD m n) Germany; US 12 12/19/2013 IndiaProperty.com India PE investment Bertelsmann,Canaan Partners and Mayfield 12/11/2013 Heckyl Technologies India PE investment IDG Ventures India and Seedfund Advisors India 4 12/9/2013 Citrus Payment Solutions India PE investment econtext Asia, Beenos Asia and Sequoia Capital Japan;US 6 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 (December 31, 2013) 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. 882,686 1,263 1,269 620 262,774 59,744 23% 44,155 17% 841,639 3.2x 14.1x 20.0x 1,991,624 3,486 3,575 2,190 489,263 129,959 27% 103,905 21% 1,733,105 3.5x 13.3x 19.2x Tata Consultancy Services Ltd 4,252,301 2,171 2,258 809 714,643 212,011 30% 156,381 22% 4,198,484 5.9x 19.8x 27.2x Wipro Ltd. 1,369,043 559 561 315 374,256 80,349 21% 61,684 16% 1,259,095 3.4x 15.7x 22.2x Infosys Ltd. Commercial IT Services - Large Cap M ean 25% 19% 4.0x 15.7x 22.1x Commercial IT Services - Large Cap M edian 25% 19% 3.5x 14.9x 21.1x Com m ercial IT Services - Mid Cap 3i Infotech Limited 4,570 8 10 4 13,309 504 4% (3,258) -24% 25,607 1.9x NM NM 49,450 1,632 1,664 1,107 20,641 3,279 16% 2,428 12% 47,169 2.3x 14.4x 20.4x 6,476 102 117 61 10,448 1,823 17% 622 6% 5,707 NM 3.1x 10.4x Hexaw are Technologies Limited 39,509 132 139 72 21,676 4,602 21% 3,421 16% 33,962 1.6x 7.4x 11.5x Infotech Enterprises Limited 38,122 341 350 157 19,728 3,321 17% 2,428 12% 31,994 1.6x 9.6x 15.7x KPIT Cummins Infosystems Ltd. 33,172 172 186 92 24,491 3,775 15% 2,285 9% 33,193 1.4x 8.8x 14.5x 3,920 159 178 103 9,213 736 8% 500 5% 1,425 NM 1.9x 7.8x MindTree Limited 63,715 1,531 1,599 683 26,198 5,109 20% 4,418 17% 58,479 2.2x 11.4x 14.4x NIIT Technologies Limited 21,859 361 366 234 20,214 3,137 16% 2,132 11% 18,980 0.9x 6.1x 10.3x 4,518 140 144 65 3,166 499 16% 449 14% NM NM NM NM 276,475 3,287 3,414 2,350 35,986 13,205 37% 12,753 35% 221,755 6.2x 16.8x 21.7x Persistent Systems Limited 39,202 980 1,058 477 14,566 3,560 24% 2,193 15% 34,590 2.4x 9.7x 17.9x Polaris Financial Technology Limited 13,508 136 155 96 22,881 2,503 11% 1,663 7% 9,475 NM 3.8x 8.1x 14.0x CMC Limited Geometric Limited Mastek Limited Nucleus Softw are Exports Ltd. Oracle Financial Services Softw are Ltd. R Systems International Ltd. 4,750 229 375 194 5,521 479 9% 10,817 67 77 50 23,364 9,617 41% Sasken Communication Technologies Ltd. 4,034 188 192 101 4,587 516 11% Sonata Softw are Limited 4,291 41 43 22 14,925 791 Take Solutions Ltd. 4,122 34 36 20 8,090 1,212 428,545 1,838 1,875 895 143,320 30,633 21% Rolta India Ltd. Tech Mahindra Limited 338 6% 4,023 0.7x 8.4x -36% 45,653 2.0x 4.7x NM 488 11% 2,157 NM NM 8.3x 5% 482 3% 2,949 NM NM NM 15% 616 8% 5,216 0.6x 4.3x 6.7x 21,458 15% 397,447 2.8x 13.0x 20.0x 11.0x (8,322) Xchanging Solutions Limited 1,354 12 19 7 2,088 175 8% 123 6% 947 NM 5.4x Zensar Technologies Limited 15,552 356 361 181 21,540 3,055 14% 2,194 10% 14,476 0.7x 4.7x 7.1x Commercial IT Services - M id Cap M ean 15% 4% 1.9x 8.1x 12.8x Commercial IT Services - M id Cap M edian 16% 10% 1.8x 7.9x 11.4x Source: CapitalIQ, website: www.capitaliq.com Note: (1) Market Capitalisation amounts are based on closing share prices as of December 31, 2013 (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 (December 31, 2013) 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 320 21 84 18 2,637 (109) -4% (129) -5% 173 NM NA NA 2,326 39 39 19 6,096 703 12% 359 6% 2,838 NM 4.0x 6.5x eClerx Services Limited 32,151 1,069 1,248 599 7,497 3,042 41% 2,260 30% 29,576 3.9x 9.7x 14.2x Firstsource Solutions Limited 14,558 22 24 9 29,291 3,312 11% 1,675 6% 23,571 NM 7.1x 8.7x Hinduja Global Solutions Ltd 10,160 493 523 218 22,539 2,800 12% 1,407 6% 10,177 NM 3.6x 7.2x 991 79 98 20 140 -11% 49 35% 941 6.7x NA 20.3x Datamatics Global Services Ltd HOV Services Limited (15) Commercial ITES - India listed M ean 10% 13% 5.3x 6.1x 11.4x Commercial ITES - India listed M edian 11% 6% 5.3x 5.6x 8.7x 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 910 28 33 23 472 86 18% 44 9% 774 1.6x 9.0x 20.5x Genpact Ltd. Exlservice Holdings, Inc. 4,229 18 21 15 2,081 385 18% 234 11% 4,395 2.1x 11.4x 18.0x WNS (Holdings) Ltd. 1,117 22 23 10 485 83 17% 30 6% 1,100 2.3x 13.3x 36.9x Commercial ITES - US listed M ean 18% 9% 2.0x 11.2x 25.1x Commercial ITES - US listed M edian 18% 9% 2.1x 11.4x 20.5x 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 December 31, 2013 (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.