Chemistry between Capgemini-iGate instantaneous: A Vemuri

Ashok Vemuri, President and CEO of iGate in an exlusive interview to CNBC-TV18’s Shereen Bhan said the Capegemini-iGate deal is the largest in India’s IT history and that the chemistry with Capgemini was instantaneous.He said the deal would be an opportunity to create new IT services model.However, since the merger would needs several regulatory approvals, the companies would continue to exist as independent businesses until approvals come through, he added.In a bid to expand its footprint in North America, French IT services giant Capgemini Monday said it was set to acquire US based iGate for USD 4 billion. The combined entity will now have 12.5 billion euros in revenue and nearly 2 lakh employees. Moreover, Capgemini will be paying USD 48 dollars for every iGate share, which is a 5% premium to Friday's closing price.

Vemuri said both companies would stand to gain from the merger and that there would be significant synergies between the two. The deal would be beneficial in the financial vertical.Below is the transcript of Ashok Vemuri’s interview with Shereen Bhan on CNBC-TV18.Q: Were there other suitors in fray apart from Capgemini who had expressed interest? A: It is indeed the largest deal in the history of Indian IT services. It is a clear reflection of the value my management team has been able to create over the last year, year and a half. It is a very proud moment for me personally. We have always believed in adding value whether it was to client, for employees and being able to add value to shareholders is an added feature for that. When we met them, and they met us the chemistry was instantaneous in terms of shared values, in terms shared vision, the kind of IT service new model that we want to create. So it was smooth and fairly one on one.

Q: We understand this strategic rationale for Capgemini to do this merger. What was this strategic rationale for you to accept the offer from Capgemini? Was it getting increasingly difficult for you to exist as a stand alone player? Was this really to in that sense secure the future if iGate? A: We in the last one year have shown double digit growth. We have created multiple productised applications and platforms. In fact the largest deal in the history of the company of USD 250 million deal was won on the back of these productised applications and platforms. Coming into 2015 as I said during my January results, our outlook was lot more positive then some of the resource that we have seen actually in the recent past. However, there was clearly a need to add on to some of those competences whether it is in the area of digital, Social, Mobility, Analytics and Cloud (SMAC) etc is complementary in the sense that Capgemini has a much larger reach. It has a larger client base. It has capabilities which we would have to invest for a period of time before we see the returns of them. As I said, the chemistry between the management team is driven by the management team and the chemistry was outstanding. So this is a great opportunity to create a new IT services model.Q: In your press release you said that this is a straight forward integration; I understand that the new organisation will be in place in about three months and you expect the integration exercise to be complete in the next nine months. Can you take us through what the integration will entail and also what happens to the current iGate management including our self?A: We are at this point in time in a definitive agreement to merge, so we will continue to exist as independent businesses and till closing - there are lot of regulatory things that have to be completed because we both, we are US listed company and they are French listed company so there are many regulatory things that we have to follow and the process has to be completed. Post that we will sit down and figure out in terms of what the integration will look like. My management team and I are completely committed to making that integration as smooth as possible. Thank you for your concern, but I have work cut-out over the next foreseeable future. Q: In terms of the annual efficiency gains you talked about USD 75-105 million in three years. You also said that the combinations will provide cross-selling revenue synergies of between a USD 100-150 million. Take us through the details of the cross selling synergies that you anticipate and expect? A: At this point in time again we are two independent companies; we have to follow our own business exigencies. These will get sorted out in a much more detailed fashion as we progress with the integration. Nevertheless, it is important to point out that there are significant complementarities; we have an opportunity to beef up financial services capability as well as North American business which is about 79 percent of iGate revenue.Q: But if you can stretch that a little further. I understand that the nitty-grittys are yet to be worked out but you talked about beefing up financial services capabilities. I also understand that this is going to mean more capability enhancement as far as the retail sector is concerned, perhaps BPO infrastructure management. If you can just detail for us what we can expect in terms of complementarities?A: As I said the obvious complementarities are in terms of the product size applications and platforms that we have built. They have a very robust digital and Social, Mobile, Analytics, Cloud (SMAC) capabilities stack and today we are just starting the definitive agreements to merge and as the details get worked out of the next three months or six months, we will definitely be able to talk about that in greater details.Q: As far as Capgemini his concerned this is really a US play for them and specifically a North America play, wouldn’t you say?A: Well that has been their stated objective. Paul Hermelin has actually said that publically and this very much compliments that strategy.Q: I understand that this deal is going to be EPS accretive for Capgemini starting pretty much this year itself but in terms of the challenges that you foresee particularly as far as integration is concerned because there have been issues in the past as well issues relating to Capgemini’s deals are concerned, just specifically won in the recent past. Can you share with us what you foresee as some of the challenges and I would imagine that there may be concern in the minds of your over 30,000 employees about what happens to them post this transaction given the fact that there are some specific synergies and complementarities?A: Capgemini has done close to 40 acquisitions. I would say they have little more than just experience in terms of being able to do that. Some of these acquisitions sometimes are smooth and sometimes they get rough. On our part, I have a management team that just concluded three years ago the integration of Patni. That team is with me and my management team secondly is committed to this deal. They have been part of this journey with me for the last period of time. So, there is a desire to do this, there is expertise and experience to do this. So it is difficult to say how difficult or easy it will be in terms of integration but we feel comfortable that we have been there, done that and we probably think we know how to make this as smooth as we can.Q: Just in terms of the kinds of opportunities because this now takes Capgemini higher up the pecking order as far as the global IT ranking is concerned and also opens up new areas of opportunities. What would you say will this combination really give Capgemini in terms of enhanced opportunities and capabilities?A: The stated objective is in terms of financial services strengthening. They are acquiring a presence in North America, industralisation and efficiency machine. Combined together the two management teams are extremely strong with a lot of experience and expertise. We have to see what the benefits and how quickly they translate. Clearly, at this point in time the value arrowheads that we have created whether it is in monetising some of our integrated technology and operation capabilities and the product side applications and platforms, will create that much needed differentiation in the market place.