IT and ITES Monthly Update - Issue 55, May 2014

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

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

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IT and ITES Monthly Update - Issue 55, May 2014

  1. 1. IT AND IT ENABLED SERVICES MONTHLY UPDATE / Advisory / 9 May 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 fifth issue of the 'IT and ITES monthly update'. This monthly update will highlight select M&A transactions announced in April 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 9 May 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 April 2014 Kellton Tech acquires eVantage Enterprises Kellton Tech Solutions has purchased US-based IT outsourcing firm eVantage Enterprises. The deal will help it to expand ERP services worldwide. Kellton’s offerings include comprehensive IT solutions, strategic technology consulting, offshore product development services, enterprise application integration and business intelligence. Tech Mahindra acquires big data start-up Fixstream Networks Tech Mahindra, India's fifth-largest IT services company, has acquired 75% stake in US- based big data analytics startup FixStream Networks for USD 10 million. FixStream has developed a technology platform that mines hidden insights, patterns and unknown correlations from huge amount of data in datacentres and has large technology companies like Cisco Systems, CenturyLink, and DirecTV among its early stage customers. Key IT and ITES transactions (April 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: Economic Times Link: http://economictimes.indiatimes.com/tech/ites/tech-mahindra-acquires-big-data-start-up-fixstream-networks/articleshow/34050553.cms Source: Nearshore Americas Link: /http://www.nearshoreamericas.com/kellton-tech-acquires-evantage-technologies-bolser-erp-services/ Announced Date Target Target Country Deal Type Acquirer/Investor Acquirer Country Deal Size (USD mn) 4/22/2014 eVantage Enterprises United States Acquisition Kellton Tech India NA 4/21/2014 Fixstream Netw orks United States Acquisition Tech Mahindra India 10
  3. 3. Valuations update for the Information Technology industry (April 30, 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. 981,998 1,404 1,589 674 286,269 73,520 26% 53,191 19% 918,044 3.2x 12.5x 18.5x Infosys Ltd. 1,815,460 3,177 3,847 2,190 495,765 134,384 27% 105,235 21% 1,525,388 3.1x 11.4x 17.3x Tata Consultancy Services Ltd 4,288,439 2,189 2,384 1,364 818,094 250,997 31% 191,639 23% 4,142,059 5.1x 16.5x 22.4x Wipro Ltd. 1,278,920 522 611 315 374,256 80,349 21% 61,684 16% 1,140,533 3.0x 14.2x 20.7x Commercial IT Services - Large Cap M ean 26% 20% 3.6x 13.6x 19.7x Commercial IT Services - Large Cap M edian 26% 20% 3.1x 13.3x 19.6x Commercial IT Services - Mid Cap 3i Infotech Limited 4,089 7 9 4 13,079 912 7% (3,576) -27% 25,126 1.9x NM NM CMC Limited 43,524 1,436 1,780 1,107 22,309 3,854 17% 2,804 13% 40,239 1.8x 10.4x 15.5x Geometric Limited 6,658 105 130 61 10,955 1,146 10% 462 4% 5,889 NM 5.1x 14.4x Hexaw are Technologies Limited 45,430 151 180 72 23,665 5,237 22% 3,702 16% 39,042 1.6x 7.5x 12.3x Infotech Enterprises Limited 35,213 315 389 157 22,064 3,822 17% 2,660 12% 27,958 1.3x 7.3x 13.2x KPIT Cummins Infosystems Ltd. 33,594 173 189 93 26,940 4,183 16% 2,490 9% 34,335 1.3x 8.2x 13.5x Mastek Limited 3,809 172 228 103 9,096 772 8% 518 6% 2,112 NM 2.7x 7.4x MindTree Limited 59,154 1,419 1,725 783 30,194 5,946 20% 4,519 15% 52,837 1.7x 8.9x 13.1x NIIT Technologies Limited 24,393 402 477 234 20,214 3,137 16% 2,132 11% 22,384 1.1x 7.1x 11.4x Nucleus Softw are Exports Ltd. 7,285 225 251 65 3,462 636 18% 643 19% NM NM NM NM Oracle Financial Services Softw are Ltd. 252,689 3,003 3,415 2,350 37,276 14,041 38% 13,299 36% 197,969 5.3x 14.1x 19.0x Persistent Systems Limited 40,366 1,009 1,220 477 16,692 3,927 24% 2,493 15% 35,365 2.1x 9.0x 16.2x Polaris Financial Technology Limited 17,740 178 219 96 25,281 3,374 13% 1,992 8% 11,757 NM 3.5x 8.9x R Systems International Ltd. 5,012 229 68 20 6,275 914 15% 619 10% 3,872 0.6x 4.2x 8.1x Rolta India Ltd. 12,035 75 83 50 25,793 9,217 36% (8,279) -32% 49,283 1.9x 5.3x NM Sasken Communication Technologies Ltd. 4,168 194 235 101 4,580 530 12% 515 11% 2,792 NM NM 8.1x Sonata Softw are Limited 5,116 49 54 22 14,842 957 6% 612 4% 3,775 NM NM NM Take Solutions Ltd. 3,756 31 42 20 8,142 1,168 14% 605 7% 4,850 0.6x 4.2x 6.2x Tech Mahindra Limited 427,926 1,832 1,936 895 143,320 30,633 21% 21,458 15% 396,828 2.8x 13.0x 19.9x Xchanging Solutions Limited 1,905 17 22 7 2,431 165 7% 303 12% 1,166 NM 7.1x 6.3x Zensar Technologies Limited 15,759 360 430 181 23,156 3,441 15% 2,375 10% 13,803 0.6x 4.0x 6.6x Commercial IT Services - M id Cap M ean 17% 8% 1.8x 7.2x 11.8x Commercial IT Services - M id Cap M edian 16% 11% 1.7x 7.1x 12.3x 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 April 30, 2014
  4. 4. Valuations update for the ITES industry (April 30, 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 411 27 44 18 2,297 (204) -9% (174) -8% 264 NM NA NA Datamatics Global Services Ltd 2,974 50 60 19 6,693 797 12% 425 6% 3,487 NM 4.4x 7.0x eClerx Services Limited 36,668 1,215 1,370 600 7,984 3,281 41% 2,394 30% 34,094 4.3x 10.4x 15.3x Firstsource Solutions Limited 21,112 32 34 9 31,270 3,652 12% 1,930 6% 30,124 NM 8.2x 10.9x Hinduja Global Solutions Ltd 10,842 526 632 221 23,896 3,202 13% 1,748 7% 10,859 NM 3.4x 6.2x HOV Services Limited 1,055 84 122 22 140 (15) -11% 49 35% 1,006 7.2x NA 21.6x Commercial ITES - India listed M ean 10% 13% 5.7x 6.6x 12.2x Commercial ITES - India listed M edian 12% 7% 5.7x 6.3x 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. 950 28 33 23 484 96 20% 50 10% 798 1.6x 8.3x 19.2x Genpact Ltd. 3,908 17 21 14 2,156 387 18% 234 11% 3,996 1.9x 10.3x 16.7x WNS (Holdings) Ltd. 953 19 23 13 503 97 19% 42 8% 920 1.8x 9.5x 22.9x 19% 10% 1.8x 9.4x 19.6x Commercial ITES - US listed M edian 19% 10% 1.8x 9.5x 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 April 30, 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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