Tech Mahindra, the information technology arm of the Mahindra Group on Thursday entered into a definitive agreement to acquire 100 percent of US-based network solutions company Lightbridge Communications Corporation (LCC) for USD 240 million.
Ravi Menon, VP - IT, Centrum Broking Limited believes the pact is fairly valued and expects the stock to react positively to this news. The company has earlier integrated a company as large as Satyam, hence addition of 5700 employees is not a significant number.
“I don’t see a problem for them going up to another acquisition even with a valuation of a USD 1 billion”, he says in an interview to CNBC-TV18. However, he does cite concerns of overlapping clients as LCC has its presence across the globe.
Meanwhile, Ankit Pande, Equity Research, Quant Broking feels that prima facie, the deal will have an impact of 100 basis points on Tech Mahindra’s margins.
“As far as margin aspirations are concerned they clearly are aiming a lot higher and with synergies and with growth probably what I could understand is there is underutilisation of resources in LCC,” he says adding, “At this point in time and maybe with the growth and with synergies and there are lot of opportunities to combine offerings.”
Furthermore, experts feel investors should be comforted as far as margin pressure is concerned over the medium term, especially with the cash outflow of USD 240 million that they are looking at.
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