Mastek pegs TAISTech revenue at $30 mn by March 2017: Chief

Mastek gained ground in today's trading session after the company board approved to acquire Trans American Infosystems (TAISTech) in US. The focus of the company is in e-commerce space which is in line with Mastek's thrust of digital transformation, said Sudharkar Ram, VC & MD of Mastek.Speaking to CNBC-TV18, Ram said the total consideration for TAISTech is at USD 25 million. He said a part of the upfront payment is funded through debt which is in the USD 10 million range.TAISTech is margin accretive and will have revenues of USD 30 million by March end, said Ram.With this acquisition, Mastek will be a Rs 750-Rs 800 crore company in the next couple of years. The company may look at an EBITDA number of Rs 100 crores. Below is the verbatim transcript of Sudhakar Ram's interview to Sumaira Abidi & Nigel D'Souza.Nigel: You have made a couple of acquisitions. Could you tell us what is the total acquisition cost of these subsidiaries?A: This is a company called TAISTech that we have acquired in the US and that company had an Indian subsidiary which was doing offshore work. The focus of this company is in the e-commerce space which is in line with Mastek\\'s own thrust in the area of digital transformation.However, when we had to buy the entity, there are many individual legal entities but all of them operate as a single group. So Mastek\\'s US subsidiary called Digility and that has acquired the principal that is TAISTech in the US and Mastek Limited which is the offshore arm has acquired the offshore arm of TAISTech. So that is how this whole deal is structured. The total consideration is about USD 25 million.Sumaira: So that would be roughly about Rs 170 crore odd, right?A: That is correct.Sumaira: So you have about a little shy of Rs 140 crore on your books already. How will the balance be funded?A: We have gone in for bank funding to fund the balance and while the consideration was 25 million and it is not all paid upfront; it's a combination of an upfront payment and earn outs. So a part of the upfront payment is funded through debt and that is something that Mastek as the principal has also facilitated and guaranteed.Nigel: How much is the upfront payment. You said a part of it will be funded by debt and also it is going to be a roughly around Rs 50 crore debt is what you are looking at?A: No, more than that. We are looking at debt around 10 million range. Nigel: So after this you are not utilising all the cash that you have because the last number that we have is around Rs 135-140 crore. So you are keeping some cash?A: Yes.Nigel: So it is going to be a mix of debt as well as your internal accruals. This acquisition is around Rs 170 crore. What kind of revenue potential do we expect coming in from here?A: This Company did more than 27 million last year and it is expected to grow. Obviously, financial year will end in March. So we would be around 30 million marks in March.Sumaira: You also said that these deals are margin accretive, is it?A: That's right.Sumaira: How much are you expecting for them to add-on?A: We cannot exactly share those figures but overall the deal will make us better in terms of EBITDA.Nigel: If I do rough working then 25-30 million, we are talking about more than 200-220 crore or more than that. Last year your revenue was around Rs 530 crore. So you are saying that your revenue, maybe in the next couple of years, will go up by 40 percent or so?A: Yes, it should, combine the organic growth of the company and we expect this company to synergise well with the rest of our operations, for example it has a high retail focus and we do a lot of retail in the UK. So the expertise that these guys bring in our e-commerce suite is something we can leverage in the UK and our data warehousing expertise and retail which we have exemplified for people like Morrisons can be leveraged in their customer base in the US. However, I have always been saying that in US need to start with acquisition because organically to start from scratch is difficult. So this is a nice addition to kick-start our US business.Nigel: You will be around Rs 750 to 800 crore company in the next couple of years; you will have a debt of around USD 10 million approximately. What kind of margins can we look at, some kind of range because we want to do a back of an envelope calculation.A: We have been targeting mid-teens in terms of our own margins and this should facilitate all.Nigel: So we can look at an EBITDA number of roughly around Rs 100 crore or thereabouts?A: Yes, somewhere in that range.