IT AND IT ENABLED SERVICES
MONTHLY UPDATE
11 February 2014

KPMG Corporate Finance practise
in India is pleased to release...
M&A update for the IT
and ITES industry
Key deals in January 2014
Four soft acquires deals15.com
Four Soft Ltd, a software...
Valuations update for the Information
Technology industry
(January 31, 2014)
INR million, except share price
Com pany

Mar...
Valuations update for the ITES industry
(January 31, 2014)
INR Million, except share price
Com pany

Market Cap(1)

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IT and ITES Monthly Update, Issue 52, February 2014

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

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IT and ITES Monthly Update, Issue 52, February 2014

  1. 1. IT AND IT ENABLED SERVICES MONTHLY UPDATE 11 February 2014 KPMG Corporate Finance practise in India is pleased to release the fifty second issue of the 'IT and ITES Monthly Update'. This monthly update will highlight select M&A transactions announced in January 2014 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: Nitin Atroley Partner Markets nitinatroley@kpmg.com Tel: +91 124 307 4887 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 / 11 February 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. 2. M&A update for the IT and ITES industry Key deals in January 2014 Four soft acquires deals15.com Four Soft Ltd, a software solutions provider for transportation and logistics industry, has acquired Deals15.com, a computer peripherals and mobile accessories e-tailer, from Hyderabad-based Premium Web Services. Deals15.com provides laptop peripherals, HDMI cables, Apple and Samsung accessories, TV and set-top box remote control devices, with an in-house warranty, as well as a return and refund policy. Four Soft recently sold its core IT business to UK-based Kewill Group for USD 43.4 million including some overseas arms. Source: Business Standard Link: http://www.business-standard.com/article/news-cm/four-soft-surges-as-board-mulls-acquisition-of-deals15-com-114010600615_1.htm Facebook acquires Little Eye Labs Social media firm Facebook Inc. bought its first company in India, Bangalore-based Little Eye Labs that uses analysis and monitoring tools to help improve mobile apps. Facebook did not disclose the deal size but technology news website Techcrunch pegs the sale at USD 10-15 million. After the deal is completed, the Little Eye Labs team of seven people, including the four founders, will move to the Facebook headquarters in Menlo Park, California. Little Eye will continue to build tools that help identify and fix performance problems in mobile apps. Source: LiveMint Link:http://www.livemint.com/Companies/9PVIKQauvHSBA5Wo6jU6TK/Facebook-buys-Little-Eye-Labs-in-first-India-acquisition.html Aditya Birla Nuvo to sell BPO unit Minacs Aditya Birla Nuvo Ltd sold its Canada-based business and technology outsourcing firm Aditya Birla Minacs Worldwide Ltd to a group of financial investors led by Capital Square Partners and CX Partners. The transaction marks Aditya Birla group’s exit from the information technology business. Source: LiveMint Link: http://www.livemint.com/Companies/BV3oCuOfABn2dzhe1XmzqN/Aditya-Birla-Nuvo-to-sell-BPO-Minacs.html Key IT and ITES transactions (January 2014) Announced Date Target Country Target Deal Type Acquirer/Investor Acquirer Country Deal Size (USD m n) 1/6/2014 Deals15.com India Acquisition FourSoft India NA 1/8/2014 Little Eye Labs India Acquisition Facebook India NA 1/30/2014 Aditya Birla Minacs Worldw ide Ltd India Acquisition CX Partners, Capital Square Partners India 260 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. 3. Valuations update for the Information Technology industry (January 31, 2014) 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. 1,023,938 1,465 1,470 653 277,602 67,603 24% 49,093 18% 970,692 3.5x 14.4x 20.9x Infosys Ltd. 2,113,875 3,699 3,799 2,190 503,711 133,162 26% 106,280 21% 1,851,985 3.7x 13.9x 19.9x Tata Consultancy Services Ltd 4,380,108 2,236 2,384 1,341 766,884 232,269 30% 174,219 23% 4,268,630 5.6x 18.4x 25.1x Wipro Ltd. 1,408,068 575 587 315 374,256 80,349 21% 61,684 16% 1,280,705 3.4x 15.9x 22.8x Commercial IT Services - Large Cap M ean 26% 19% 4.0x 15.6x 22.2x Commercial IT Services - Large Cap M edian 25% 19% 3.6x 15.1x 21.8x Com m ercial IT Services - Mid Cap 3i Infotech Limited CMC Limited Geometric Limited 4,215 7 9 4 13,109 334 3% (3,295) -25% 25,252 1.9x NM NM 42,556 1,405 1,780 1,107 21,324 3,347 16% 2,523 12% 40,275 1.9x 12.0x 16.9x 6,293 99 117 61 10,692 1,597 15% 506 5% 5,524 NM 3.5x 12.4x Hexaw are Technologies Limited 40,423 135 146 72 22,854 5,020 22% 3,791 17% 34,877 1.5x 6.9x 10.7x Infotech Enterprises Limited 39,957 357 387 157 20,760 3,577 17% 2,504 12% 33,829 1.6x 9.5x 16.0x KPIT Cummins Infosystems Ltd. 31,132 161 189 92 25,638 3,938 15% 2,388 9% 31,153 1.2x 7.9x 13.0x 4,277 174 214 103 9,356 874 9% 608 6% 1,783 NM 2.0x 7.0x MindTree Limited 59,306 1,425 1,685 770 28,094 5,382 19% 4,261 15% 52,994 1.9x 9.8x 13.9x NIIT Technologies Limited 24,330 401 422 234 20,214 3,137 16% 2,132 11% 22,321 1.1x 7.1x 11.4x 5,926 183 201 65 3,320 551 17% 560 17% NM NM NM NM 269,149 3,200 3,415 2,350 35,986 13,205 37% 12,753 35% 214,429 6.0x 16.2x 21.1x Persistent Systems Limited 38,584 965 1,058 477 15,564 3,868 25% 2,340 15% 33,713 2.2x 8.7x 16.5x Polaris Financial Technology Limited 13,538 136 155 96 23,586 2,814 12% 1,763 7% 9,504 NM 3.4x 7.7x 14.3x Mastek Limited Nucleus Softw are Exports Ltd. Oracle Financial Services Softw are Ltd. R Systems International Ltd. 4,842 229 390 200 5,521 479 9% 10,357 64 79 50 23,364 9,617 41% Sasken Communication Technologies Ltd. 3,555 165 216 101 4,550 542 12% Sonata Softw are Limited 4,112 39 48 22 14,925 791 Take Solutions Ltd. 4,422 37 42 20 8,142 1,168 Rolta India Ltd. Tech Mahindra Limited 338 6% 4,115 0.7x 8.6x -36% 45,193 1.9x 4.7x NM 494 11% 1,678 NM NM 7.2x 5% 482 3% 2,770 NM NM NM 14% 605 7% 5,516 0.7x 4.7x 7.3x (8,322) 417,709 1,791 1,906 895 143,320 30,633 21% 21,458 15% 386,611 2.7x 12.6x 19.5x Xchanging Solutions Limited 1,614 14 19 7 2,088 175 8% 123 6% 1,207 NM 6.9x 13.2x Zensar Technologies Limited 16,678 382 430 181 22,212 3,189 14% 2,214 10% 15,603 0.7x 4.9x 7.5x Commercial IT Services - M id Cap M ean 17% 8% 1.9x 7.6x 12.7x Commercial IT Services - M id Cap M edian 15% 10% 1.8x 7.1x 13.0x Source: CapitalIQ, website: www.capitaliq.com Note: (1) Market Capitalisation amounts are based on closing share prices as of January 31, 2014 (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. 4. Valuations update for the ITES industry (January 31, 2014) 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 511 Datamatics Global Services Ltd 34 79 18 2,637 (109) -4% (129) -5% 364 NM NA NA 2,933 50 54 19 6,693 797 12% 425 6% 3,445 NM 4.3x 6.9x eClerx Services Limited 36,715 1,220 1,248 599 7,984 3,281 41% 2,394 30% 34,141 4.3x 10.4x 15.3x Firstsource Solutions Limited 15,974 24 28 9 30,089 3,515 12% 1,743 6% 24,987 NM 7.1x 9.2x Hinduja Global Solutions Ltd 11,260 546 609 218 22,539 2,800 12% 1,407 6% 11,277 NM 4.0x 8.0x 1,100 88 122 20 140 -11% 49 35% 1,051 7.5x NA 22.5x HOV Services Limited (15) Commercial ITES - India listed M ean 10% 13% 5.9x 6.5x 12.4x Commercial ITES - India listed M edian 12% 6% 5.9x 5.7x 9.2x 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 828 25 33 23 472 86 18% 44 9% 692 1.5x 8.0x 18.7x Genpact Ltd. Exlservice Holdings, Inc. 3,906 17 21 16 2,132 386 18% 230 11% 4,072 1.9x 10.6x 17.0x WNS (Holdings) Ltd. 1,102 22 23 12 492 89 18% 36 7% 1,067 2.2x 12.0x 30.3x Commercial ITES - US listed M ean 18% 9% 1.8x 10.2x 22.0x Commercial ITES - US listed M edian 18% 9% 1.9x 10.6x 18.7x 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 January 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 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.

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