Expect Welsco to contribute $10-12m this yr: Infotech Ent

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Expect Welsco to contribute $10-12m this yr: Infotech Ent

Infotech Enterprises announced that their US arm bought Welsco. According to the company's Chairman and Managing Director, BVR Mohan Reddy, Welsco will contribute revenue between USD 10-12 million in FY11.

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Infotech Enterprises has announced that their US arm Infotech Enterprises America Incorporated has bought welding technologies specialist Welsco. According to the Infotech Enterprises Chairman and Managing Director, BVR Mohan Reddy, Welsco is expected to contribute revenue between USD 10-12 million in financial year 2010-11.

"Welsco has an annual run rate of a million dollars per month. This company will start giving us revenue for the next eight months," he said.

The buyout was an all cash deal. Welsco has USD 12 million as its annual run rate and is profitable at the operating level, he said.

Below is a verbatim transcript. Also watch the accompanying video.

Q: If you can take us through what Welsco cost you and what synergies you see first up?

A: We are delighted to announce this acquisition of Welsco by our fully owned subsidiary called Infotech Enterprises America Incorporated (IEAI). It is an all cash transaction that has been done. There is no dilution in terms of our equity.

Welsco currently has a run rate of USD 12 million. That is their current annual run rate in terms of revenue. They are a profitable company. There is going to be positive earnings per share (EPS) accretion on account of this transaction on a consolidated basis. We are under some non-disclosures from the current seller not to announce the acquisition price and as such I am unable to tell you what we paid for this particular transaction.

Q: Your FY10 consolidated turnover stood at about Rs 953 crore. How much will this deal add to your turnover in FY11 and then in FY12? Would you need to raise money to buy this company?

A: Welsco has an annual run rate of a million dollars per month. This company will start giving us revenue for the next eight months. August 9 onwards we should be in a position to start adding revenues, which effectively means that by the end of the year eight months of revenue will come in. That at least should be USD 8 million, but there is more upside to it. Our expectation is that it will contribute between USD 10 million to USD 12 million of revenue for the current financial year.

We think it is a fairly large opportunity for us in the Telco engineering space. That is the space in which this company operates. Welsco engineering is more to do with design and engineering for telecom service providers.

This particular market play is about USD 20 billion which is the addressable market in the US. Companies like Infotech can certainly do design and engineering for about USD 2.5 billion in the next five to 10 years. That is the type of market opportunity that we have. As a result we think that there is going to be a fairly steep growth in the coming years.

In terms of the raising money, we have about Rs 400 crore of cash in the bank at this point of time and it did not require all that money, it required a very small portion of that money to make this acquisition.