IT AND IT ENABLED SERVICES MONTHLY UPDATE / Advisory / 8 April 2014
Contents
M&A update for IT and
ITES industry
Page 2
Va...
Key deals in March 2014
General Atlantic acquires stake in Citiustech
General Atlantic LLC, the US-based PE/VC firm has ac...
Valuations update for the Information
Technology industry
(March 31, 2014)
INR million, except share price
© 2014, KPMG, a...
Valuations update for the ITES industry
(March 31, 2014)
INR million, except share price
Source: CapitalIQ, website: www.c...
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IT and ITES Monthly Update - Issue 54, April 2014

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

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

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IT and ITES Monthly Update - Issue 54, April 2014

  1. 1. IT AND IT ENABLED SERVICES MONTHLY UPDATE / Advisory / 8 April 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 fourth issue of the 'IT and ITES Monthly Update'. This monthly update will highlight select M&A transactions announced in March 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 April 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. 2. Key deals in March 2014 General Atlantic acquires stake in Citiustech General Atlantic LLC, the US-based PE/VC firm has acquired an undisclosed stake in CitiusTech Inc, the India-based company engaged in providing healthcare technology consulting and business process services to healthcare providers. The deal is estimated to be around USD 100 million, and the stake is estimated at ~26-30%. Prime Focus Technologies to buy Culver City firm Dax Prime Focus, the India-based post-production and media technology company, has signed an agreement to acquire DAX, a fast-growing Culver City company that helps major studios manage their digital work flow needs. Prime Focus Technologies will pay up to USD 12.5 million over three years to acquire the assets of DAX, which is best known for a service that enables studio executives and filmmakers to watch digital dailies - scenes from movies and TV shoots - on their iPads. Infotech Enterprises to acquire US-based Softential Engineering solutions provider InfoTech Enterprises Ltd. acquired US-based Softential Inc. in an all-cash transaction. Virginia-headquartered Softential provides service management and service assurance solutions for telecommunications and cable operators, enterprises and the public sector. InfoTech expects to broaden its service portfolio for existing customers and enter newer markets with this acquisition. InfoTech will add Softential’s 140 employees to its 2,500- employee strong telecommunications business unit once the acquisition is completed. Key IT and ITES transactions (March 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: LA Times Link:http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-prime-focus-dax-20140310,0,2547788.story#axzz2xcE4PAk6 Source: LiveMint Link: //www.livemint.com/Companies/dJ4FR2n0cpCsgq8DYK49gL/CitiusTech-raises-capital-from-General-Atlantic.html Source: LiveMint Link: http://www.livemint.com/Companies/zWBxLzLENqC4WUua5Ga3dK/Infotech-Enterprises-to-acquire-USbased-Softential.html Announced Date Target Target Country Deal Type Acquirer/Investor Acquirer Country Deal Size (USD mn) 3/20/2014 CitiusTech India PE Investment General Atlantic United States 100 3/10/2014 DAX United States Acquisition Prime Focus Technologies India 13 3/10/2014 Softential Inc United States Acquisition InfoTech Enterprises India 20
  3. 3. Valuations update for the Information Technology industry (March 31, 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 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 March 31, 2014 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. 972,549 1,391 1,589 674 269,081 65,528 24% 47,586 18% 919,303 3.4x 14.0x 20.4x Infosys Ltd. 1,873,543 3,279 3,847 2,190 488,250 129,074 26% 103,018 21% 1,611,653 3.3x 12.5x 18.2x Tata Consultancy Services Ltd 4,168,663 2,128 2,384 1,364 766,884 232,269 30% 174,219 23% 4,057,186 5.3x 17.5x 23.9x Wipro Ltd. 1,329,195 543 611 315 374,256 80,349 21% 61,684 16% 1,201,832 3.2x 15.0x 21.5x Commercial IT Services - Large Cap M ean 26% 19% 3.8x 14.7x 21.0x Commercial IT Services - Large Cap M edian 25% 19% 3.4x 14.5x 21.0x Commercial IT Services - Mid Cap 3i Infotech Limited 4,449 8 9 4 13,109 334 3% (3,295) -25% 25,486 1.9x NM NM CMC Limited 41,982 1,386 1,780 1,107 21,324 3,347 16% 2,523 12% 39,701 1.9x 11.9x 16.6x Geometric Limited 7,382 116 130 61 10,692 1,597 15% 506 5% 6,613 NM 4.1x 14.6x Hexaw are Technologies Limited 45,205 151 167 72 22,854 5,020 22% 3,791 17% 38,817 1.7x 7.7x 11.9x Infotech Enterprises Limited 36,612 327 389 157 20,760 3,577 17% 2,504 12% 30,485 1.5x 8.5x 14.6x KPIT Cummins Infosystems Ltd. 31,187 161 189 93 25,638 3,938 15% 2,388 9% 31,209 1.2x 7.9x 13.1x Mastek Limited 4,586 207 228 103 9,430 795 8% 499 5% 2,092 NM 2.6x 9.2x MindTree Limited 54,916 1,319 1,725 783 28,094 5,382 19% 4,261 15% 48,604 1.7x 9.0x 12.9x NIIT Technologies Limited 24,378 402 477 234 20,214 3,137 16% 2,132 11% 22,369 1.1x 7.1x 11.4x Nucleus Softw are Exports Ltd. 7,027 217 248 65 3,320 571 17% 560 17% NM NM NM NM Oracle Financial Services Softw are Ltd. 259,665 3,086 3,415 2,350 37,276 14,041 38% 13,299 36% 204,944 5.5x 14.6x 19.5x Persistent Systems Limited 41,908 1,048 1,220 477 15,564 3,868 25% 2,340 15% 37,037 2.4x 9.6x 17.9x Polaris Financial Technology Limited 19,134 192 207 96 23,586 2,814 12% 1,763 7% 15,100 NM 5.4x 10.9x R Systems International Ltd. 4,834 229 68 20 5,961 756 13% 527 9% 3,818 0.6x 5.0x 9.2x Rolta India Ltd. 11,825 73 80 50 25,793 9,217 36% (8,279) -32% 49,073 1.9x 5.3x NM Sasken Communication Technologies Ltd. 3,928 183 216 101 4,550 542 12% 494 11% 2,051 NM NM 7.9x Sonata Softw are Limited 4,627 44 53 22 14,842 957 6% 612 4% 3,286 NM NM NM Take Solutions Ltd. 3,942 33 42 20 8,142 1,168 14% 605 7% 5,036 0.6x 4.3x 6.5x Tech Mahindra Limited 418,979 1,795 1,936 895 143,320 30,633 21% 21,458 15% 387,881 2.7x 12.7x 19.5x Xchanging Solutions Limited 2,044 18 22 7 2,431 165 7% 303 12% 1,306 NM 7.9x 6.7x Zensar Technologies Limited 16,382 374 430 181 22,212 3,189 14% 2,214 10% 15,307 0.7x 4.8x 7.4x Commercial IT Services - M id Cap M ean 16% 8% 1.8x 7.6x 12.3x Commercial IT Services - M id Cap M edian 15% 11% 1.7x 7.7x 11.9x
  4. 4. Valuations update for the ITES industry (March 31, 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 472 31 59 18 2,297 (204) -9% (174) -8% 325 NM NA NA Datamatics Global Services Ltd 2,906 49 60 19 6,693 797 12% 425 6% 3,419 NM 4.3x 6.8x eClerx Services Limited 31,953 1,059 1,370 600 7,984 3,281 41% 2,394 30% 29,378 3.7x 9.0x 13.3x Firstsource Solutions Limited 16,625 25 30 9 30,089 3,515 12% 1,743 6% 25,638 NM 7.3x 9.5x Hinduja Global Solutions Ltd 11,269 547 632 221 23,896 3,202 13% 1,748 7% 11,286 NM 3.5x 6.4x HOV Services Limited 1,087 87 122 22 140 (15) -11% 49 35% 1,038 7.4x NA 22.3x Commercial ITES - India listed M ean 10% 13% 5.5x 6.0x 11.7x Commercial ITES - India listed M edian 12% 7% 5.5x 5.8x 9.5x 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. 922 28 33 23 479 93 19% 48 10% 786 1.6x 8.5x 19.2x Genpact Ltd. 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 2.0x 11.1x 28.0x 18% 9% 1.8x 10.0x 21.3x Commercial ITES - US listed M edian 18% 10% 1.9x 10.3x 19.2x 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 March 31, 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

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