IT and ITES Monthly Update - Issue 58, August 2014
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IT and ITES Monthly Update - Issue 58, August 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 July 2014, and provide trading multiples for key IT and ITES companies.

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IT and ITES Monthly Update - Issue 58, August 2014 Document Transcript

  • 1. IT AND IT ENABLED SERVICES MONTHLY UPDATE / Advisory / 8 August 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 eighth issue of the 'IT and ITES monthly update'. This monthly update will highlight select M&A transactions announced in July 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 August 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 July 2014 Wipro acquires Canadian firm ATCO’s IT arm for USD 195 million Wipro acquired ATCO I-Tek, an IT business of Canadian firm ATCO for USD 195 million in an all cash transaction. Wipro will acquire all the shares of ATCO I-Tek, including current contracts and employees, as well as the assets of ATCO I-Tek Australia. This acquisition will help Wipro to further strengthen its IT services delivery model in North America and Australia. This is part of a much larger outsourcing deal where Wipro will provide ATCO with a complete suite of IT services over a 10 year period, which will bring in annual revenues of over USD 112 million for Wipro annually up to December 2024. Flipkart raises USD 1 billion from Tiger Global, Naspers, Singapore’s GIC and others Flipkart.com has raised USD 1 billion in a fresh funding round co-led by two of its existing investors Tiger Global and Naspers. One of the two sovereign wealth funds of Singapore, GIC, along with other existing investors Accel Partners, DST Global, ICONIQ Capital, Morgan Stanley Investment Management and Sofina, also participated in this latest financing round. Flipkart plans to use the money for long-term strategic investments in India, especially in mobile technology. This development takes the total fundraise by Flipkart to date to around USD 1.75 billion, making it not just India’s but one of the single-biggest private funding rounds for a tech venture globally. Key IT and ITES transactions (July 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: VC Circle Link: http://techcircle.vccircle.com/2014/07/29/flipkart-raises-1b-from-tiger-global-naspers-singapores-gic-others/ Source: VC Circle Link: http://www.vccircle.com/news/technology/2014/07/18/wipro-acquire-canadian-firm-atcos-it-arm-195m Announced date Target Target country Deal type Acquirer/investor Acquirer country Deal size (USD mn) 7/18/2014 ATCO I-Tek Canada Acquisition Wipro India 195 7/29/2014 Flipkart India PE Investment Tiger Global, Naspers, Singapore GIC India 1,000
  • 3. Valuations update for the Information Technology industry (July 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. 1,089,172 1,555 1,630 872 327,213 86,149 26% 63,304 19% 1,004,600 3.1x 11.7x 17.2x Infosys Ltd. 1,923,170 3,366 3,847 2,888 512,271 141,697 28% 110,806 22% 1,639,041 3.2x 11.6x 17.4x Tata Consultancy Services Ltd 5,048,230 2,577 2,613 1,691 859,334 263,094 31% 208,919 24% 4,913,890 5.7x 18.7x 24.2x Wipro Ltd. 1,332,349 544 611 428 448,267 102,665 23% 82,766 18% 1,175,798 2.6x 11.5x 16.1x Commercial IT Services - Large Cap M ean 27% 21% 3.7x 13.3x 18.7x Commercial IT Services - Large Cap M edian 27% 20% 3.1x 11.6x 17.3x Commercial IT Services - Mid Cap 3i Infotech Limited 5,049 9 14 4 13,710 (231) -2% (3,775) -28% 27,943 2.0x NA NA CMC Limited 58,294 1,924 2,114 1,107 23,375 3,733 16% 2,857 12% 55,008 2.4x 14.7x 20.4x Geometric Limited 9,114 143 163 61 11,040 2,051 19% 500 5% 8,490 0.8x 4.1x 18.2x Hexaw are Technologies Limited 42,736 142 180 110 24,403 4,979 20% 3,488 14% 38,962 1.6x 7.8x 12.3x Infotech Enterprises Limited 42,835 382 389 165 23,442 3,944 17% 2,802 12% 35,580 1.5x 9.0x 15.3x KPIT Cummins Infosystems Ltd. 30,334 156 191 123 27,705 3,778 14% 2,396 9% 31,633 1.1x 8.4x 12.7x Mastek Limited 4,278 192 228 103 9,250 658 7% 456 5% 2,585 0.3x 3.9x 9.4x MindTree Limited 87,654 1,049 1,080 467 32,140 6,393 20% 4,425 14% 80,783 2.5x 12.6x 19.8x NIIT Technologies Limited 22,832 376 486 234 23,407 3,232 14% 2,205 9% 21,245 0.9x 6.6x 10.4x Nucleus Softw are Exports Ltd. 6,691 207 251 65 3,393 580 17% 648 19% 3,722 1.1x 6.4x 10.3x Oracle Financial Services Softw are Ltd. 278,199 3,306 3,470 2,753 37,413 13,994 37% 13,593 36% 211,473 5.7x 15.1x 20.5x Persistent Systems Limited 50,084 1,252 1,400 508 17,469 4,102 23% 2,610 15% 45,501 2.6x 11.1x 19.2x Polaris Financial Technology Limited 21,195 213 267 99 24,399 2,135 9% 1,943 8% 15,212 0.6x 7.1x 10.9x R Systems International Ltd. 6,942 55 68 20 6,459 1,009 16% 681 11% 6,024 0.9x 6.0x 10.2x Rolta India Ltd. 17,222 107 122 53 33,356 11,341 34% 3,783 11% 54,846 1.6x 4.8x 4.6x Sasken Communication Technologies Ltd. 6,634 312 342 101 4,508 473 10% 423 9% 5,258 1.2x 11.1x 15.7x Sonata Softw are Limited 8,045 77 85 23 15,660 1,070 7% 778 5% 5,651 0.4x 5.3x 10.3x Take Solutions Ltd. 4,152 35 42 28 8,155 769 9% 580 7% 5,072 0.6x 6.6x 7.2x Tech Mahindra Limited 504,930 2,150 2,198 1,203 198,497 42,633 21% 29,732 15% 474,272 2.4x 11.1x 17.0x Xchanging Solutions Limited 2,278 20 25 7 2,431 176 7% 303 12% 1,545 0.6x 8.8x 7.5x Zensar Technologies Limited 18,555 423 474 181 23,907 3,579 15% 2,325 10% 17,330 0.7x 4.8x 8.0x Commercial IT Services - M id Cap M ean 16% 10% 1.5x 8.3x 13.0x Commercial IT Services - M id Cap M edian 16% 11% 1.1x 7.5x 11.6x 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 July 31, 2014
  • 4. Valuations update for the ITES industry (July 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 - US listed Exlservice Holdings, Inc. 919 28 31 23 488 89 18% 48 10% 753 1.5x 8.4x 19.1x Genpact Ltd. 3,803 18 21 14 2,183 381 17% 219 10% 4,262 2.0x 11.2x 17.4x WNS (Holdings) Ltd. 1,037 20 23 17 512 102 20% 47 9% 964 1.9x 9.4x 22.1x 19% 10% 1.8x 9.7x 19.5x Commercial ITES - US listed M edian 18% 10% 1.9x 9.4x 19.1x Commercial ITES - US listed M ean 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 400 26 39 18 1,996 (302) -15% (250) -13% 372 0.2x NA NA Datamatics Global Services Ltd 3,348 57 64 19 7,338 865 12% 487 7% 3,474 0.5x 4.0x 6.9x eClerx Services Limited 39,340 1,299 1,370 710 8,685 3,529 41% 2,474 28% 35,779 4.1x 10.1x 15.9x Firstsource Solutions Limited 25,478 39 42 11 31,444 3,708 12% 2,052 7% 35,846 1.1x 9.7x 12.4x Hinduja Global Solutions Ltd 12,943 628 737 221 25,049 3,067 12% 1,696 7% 14,734 0.6x 4.8x 7.6x HOV Services Limited 1,268 101 122 22 139 (22) -16% (391) -282% 1,290 9.3x NA NA Commercial ITES - India listed M ean 8% -41% 2.6x 7.2x 10.7x Commercial ITES - India listed M edian 12% 7% 0.9x 7.2x 10.0x 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 July 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