IT AND IT ENABLED SERVICES MONTHLY UPDATE / Advisory / 4 June 2014
Contents
M&A update for IT and
ITES industry
Page 2
Val...
Key deals in May 2014
PubMatic acquired Ad Serving company Mocean Mobile
PubMatic Inc, a California-headquartered digital ...
Valuations update for the Information
Technology industry
(May 31, 2014)
INR million, except share price
© 2014, KPMG, an ...
Valuations update for the ITES industry
(May 31, 2014)
INR million, except share price
Source: CapitalIQ, website: www.cap...
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IT and ITES Monthly Update - Issue 56, June 2014

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

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IT and ITES Monthly Update - Issue 56, June 2014

  1. 1. IT AND IT ENABLED SERVICES MONTHLY UPDATE / Advisory / 4 June 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 sixth issue of the 'IT and ITES monthly update'. This monthly update will highlight select M&A transactions announced in May 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 4 June 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 May 2014 PubMatic acquired Ad Serving company Mocean Mobile PubMatic Inc, a California-headquartered digital advertising solutions firm with offices in India, Europe and Australia, has acquired New York-based mobile ad server and monetisation company Mocean Mobile Inc (formerly Mojiva). The combination broadens PubMatic’s existing mobile offering by supplementing its mobile app, mobile web and tablet capabilities with a mobile ad server. Flipkart acquired online fashion retailer Myntra E-retailer Flipkart has acquired online fashion retailer Myntra. Flipkart, which started in 2007 as an online bookstore, sells products across categories, including fashion and electronics. It also sells white goods and furniture. The move is expected to help Flipkart strengthen its apparel portfolio and compete more aggressively with peers like Amazon and Snapdeal. MasterCard acquired Pune-based ElectraCard Services Financial services giant MasterCard acquired Pune-based information technology services company Opus Software's subsidiary, ElectraCard Services (ECS). ElectraCard is a provider of software products and processing services for electronic payments. Key IT and ITES transactions (May 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: Times of India Link: http://timesofindia.indiatimes.com/tech/tech-news/Flipkart-acquires-Myntra/articleshow/35472797.cms Source: VCCircle Link: http://www.vccircle.com/news/technology/2014/05/20/pubmatic-acquires-ad-serving-company-mocean-mobile Source: Economic Times Link: http://articles.economictimes.indiatimes.com/2014-05-19/news/49949201_1_mastercard-electracard-services-opus-software Announced date Target Target country Deal type Acquirer/investor Acquirer country Deal size (USD mn) 5/19/2014 Mocean Mobile United States Acquisition PubMatic United States/India 16 5/21/2014 Myntra India Acquisition Flipkart India 330 5/19/2014 Electracard Services India Acquisition MasterCard United States NA
  3. 3. Valuations update for the Information Technology industry (May 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 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. 991,753 1,417 1,589 721 281,721 72,351 26% 52,346 19% 927,799 3.3x 12.8x 18.9x Infosys Ltd. 1,680,781 2,942 3,847 2,343 487,887 134,259 28% 103,563 21% 1,390,708 2.9x 10.4x 16.2x Tata Consultancy Services Ltd 4,199,905 2,144 2,384 1,382 818,094 250,997 31% 191,639 23% 4,053,525 5.0x 16.1x 21.9x Wipro Ltd. 1,237,513 505 611 315 434,190 97,310 22% 77,967 18% 1,102,478 2.5x 11.3x 15.9x Commercial IT Services - Large Cap M ean 27% 20% 3.4x 12.7x 18.2x Commercial IT Services - Large Cap M edian 27% 20% 3.1x 12.1x 17.6x Commercial IT Services - Mid Cap 3i Infotech Limited 5,137 9 11 4 13,079 (658) -5% (3,576) -27% 28,031 2.1x NA NA CMC Limited 45,450 1,500 1,780 1,107 22,309 3,807 17% 2,804 13% 42,164 1.9x 11.1x 16.2x Geometric Limited 34,318 306 389 162 22,064 3,822 17% 2,660 12% 27,063 1.2x 7.1x 12.9x Hexaw are Technologies Limited 8,938 140 155 61 10,955 1,146 10% 462 4% 8,315 0.8x 7.3x 19.3x Infotech Enterprises Limited 43,052 143 180 72 23,665 5,237 22% 3,702 16% 36,663 1.5x 7.0x 11.6x KPIT Cummins Infosystems Ltd. 30,984 160 189 106 26,940 4,183 16% 2,490 9% 31,724 1.2x 7.6x 12.4x Mastek Limited 3,814 172 228 103 9,096 772 8% 518 6% 2,116 0.2x 2.7x 7.4x MindTree Limited 62,649 750 862 391 30,194 5,946 20% 4,519 15% 56,332 1.9x 9.5x 13.9x NIIT Technologies Limited 23,637 389 477 234 23,050 3,216 14% 2,305 10% 21,628 0.9x 6.7x 10.3x Nucleus Softw are Exports Ltd. 6,174 191 251 65 3,462 636 18% 643 19% 3,283 0.9x 5.2x 9.6x Oracle Financial Services Softw are Ltd. 238,710 2,837 3,415 2,582 37,413 13,994 37% 13,593 36% 171,984 4.6x 12.3x 17.6x Persistent Systems Limited 42,644 1,066 1,220 477 16,692 3,927 24% 2,493 15% 37,643 2.3x 9.6x 17.1x Polaris Financial Technology Limited 20,920 210 224 97 25,281 3,374 13% 1,992 8% 14,937 0.6x 4.4x 10.5x R Systems International Ltd. 5,884 46 68 20 6,275 914 15% 619 10% 4,875 0.8x 5.3x 9.5x Rolta India Ltd. 17,214 107 113 50 33,356 11,341 34% 3,783 11% 54,838 1.6x 4.8x 4.6x Sasken Communication Technologies Ltd. 4,318 203 235 101 4,580 530 12% 515 11% 2,942 0.6x 5.5x 8.4x Sonata Softw are Limited 6,625 63 65 22 15,660 1,059 7% 778 5% 4,231 0.3x 4.0x 8.5x Take Solutions Ltd. 4,224 35 42 26 8,155 769 9% 580 7% 5,144 0.6x 6.7x 7.3x Tech Mahindra Limited 447,370 1,915 1,936 910 188,314 38,354 20% 30,288 16% 413,606 2.2x 10.8x 14.8x Xchanging Solutions Limited 2,005 18 22 7 2,431 176 7% 303 12% 1,272 0.5x 7.2x 6.6x Zensar Technologies Limited 16,055 366 430 181 23,156 3,441 15% 2,375 10% 14,099 0.6x 4.1x 6.8x Commercial IT Services - M id Cap M ean 16% 10% 1.3x 6.9x 11.3x Commercial IT Services - M id Cap M edian 15% 11% 0.9x 6.9x 10.4x 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 May 31, 2014
  4. 4. Valuations update for the ITES industry (May 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 427 28 40 18 2,297 (204) -9% (174) -8% 280 0.1x NA NA Datamatics Global Services Ltd 2,924 50 60 19 7,338 865 12% 487 7% 3,050 0.4x 3.5x 6.0x eClerx Services Limited 33,115 1,097 1,370 680 8,410 3,433 41% 2,557 30% 29,554 3.5x 8.6x 13.0x Firstsource Solutions Limited 21,032 32 34 9 31,270 3,652 12% 1,930 6% 28,258 0.9x 7.7x 10.9x Hinduja Global Solutions Ltd 10,042 487 632 221 23,896 3,202 13% 1,748 7% 11,034 0.5x 3.4x 5.7x HOV Services Limited 958 77 122 22 140 (15) -11% 49 35% 909 6.5x NA 19.6x Commercial ITES - India listed M ean 10% 13% 2.0x 5.8x 11.0x Commercial ITES - India listed M edian 12% 7% 0.7x 5.6x 10.9x 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. 951 28 31 23 484 96 20% 50 10% 803 1.7x 8.4x 19.2x Genpact Ltd. 3,641 17 21 14 2,156 385 18% 234 11% 3,735 1.7x 9.7x 15.6x WNS (Holdings) Ltd. 922 18 23 16 503 97 19% 42 8% 889 1.8x 9.2x 22.2x 19% 10% 1.7x 9.1x 19.0x Commercial ITES - US listed M edian 19% 10% 1.7x 9.2x 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 May 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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