Omnitech to buyout Dutch IT firm for $15-20 mn by yr-end

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Technology services and solutions provider company Omnitech Info Solutions , in an exclusive interview on CNBC-TV18, has confirmed that they are in the final stages of purchasing a Dutch IT firm by December end, at a cost of USD15-20 million.

"We are looking at acquiring them by paying them upfront," said Atul Hemani, MD & CEO of Omnitech Info Solutions.

Below is a verbatim transcript of his interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar. Also watch the accompanying video for more.

Q: The big buzz is in terms of acquisition with respect to your company what have you lined up and what are you looking at before the year is out?

A: We are in the final stage and the last couple of processes require to be completed. We are doing it for an acquisition and it is a cross border acquisition. We are going to acquire a company which is based in Netherlands. They are in the managed IT services space.

We run a very systematic process and we short listed this company. It has been completed due to a diligence process and we are now working on the last leg of integration. This is our first acquisition. We do not want to leave anything to chance.

Q: Could you tell us what the size of this acquisition is likely to be and also the revenue profile of this Dutch company you are looking to acquire?

A: This is a 10-year plus company. It has got a very good brand name in that particular market. They are roughly a USD 15 million size company and are growing at around 15% year on year basis.

We are looking at acquiring them by paying them upfront. We are going to have the current management and a key profile of the team to work with us for the next three years and there would be some paid components there. The overall deal size will be anywhere between 6 to 8 multiple of EBITDA.

Q: The company which is based out of Europe does not sound like a very exciting prospect, considering that it is in a continent where growth is not looking very good. What makes you confident that this one is going to be a growth spinner?

A: Where second tier or mid-tier market kind of Indian companies are concerned - when India is doing well as an economy and where an international market especially continents like Europe which are not doing too good at an economic level it is a great opportunity for us.

What we can do is go to the mid-sized companies in that part of the world and help them to really optimize their IT operations by using a hybrid model where some part of the component can be locally delivered and rest of the parts can be delivered in India. So we bring value addition along with the course advantage and that is more exciting for us.

The next great advantage for us is that we see very less competition when it comes to a peer group of companies and that is what we would like to take advantage of early and move in that space.

Q: You are also eyeing a company in the United States?

A: Certainly. The US is a big market as far as IT services are concerned and we are definitely looking at it. We had decided in 2008 to acquire a company but we did not pursue it at that point in time because of the global economic slowdown. We will definitely be looking at an acquisition which should be over in a quarter or two post acquisition of this company that we currently have.

Q: Sometime back you had given a fairly bullish guidance that you will have a 5 fold growth in your topline and you will reach Rs 1,000 crore by 2013. Can you give us a closer home target? How does your EPS or your revenue growth look in FY11-12?

A: As a company we are looking at 35% growth on an organic year on year basis. We are also looking at an acquisition which will fuel growth. We are looking at something like 55-60% compounded growth for the next three years.

Currently, if you look at the last two quarters, we have already posted a robust growth. We have a fairly strong order book and our third quarter is very well on track. With the acquisition coming in, we are sure that we will be able to achieve this year's target.

For the next year as well we are in a business where we get long-term contractual obligations coming in and where we have businesses coming in. We have fairly decent visibility in terms of managed services where we are uniquely positioned in the areas of BFSI and cloud computing services. We are confident that we will be able to sail through very well.

Coming to our EPS, last year we had put around Rs 26 and have been looking at growth coming in. We are confident to maintain our PAT ratio at around 16-17% and we do not have very aggressive plans of diluting our equity so we definitely would be able to give a decent return on EPS basis.