Bangalore: Infosys on Monday said it will acquire Swiss SAP implementation firm Lodestone for 330 million Swiss Francs (about Rs 1,932 crore), a move aimed at strengthening its consulting practice and increasing revenues from its European operations.
     
The acquisition, the biggest by Infosys so far, is expected to strengthen the consulting and systems integration (C&SI) capabilities of Infosys. The combined consulting practice focusing on enterprise solution SAP is likely to deliver revenues of more than USD 1 billion.
     
The buyout will "firmly establish Infosys among the global leaders in SAP consulting," Infosys CEO and Managing Director S D Shibulal said.
     
The all-cash deal is expected to be completed by October.
     
Speaking to reporters he said, "A key plank of our Infosys 3.0 strategy is to expand our C&SI. This acquisition fits perfectly into that strategy. Lodestone and Infosys share a culture of unwavering focus on nurturing and maintaining client trust."
      
Infosys C&SI business has more than 30,000 consultants across 10 industry verticals and accounts for 31 percent of the company's revenue.
      
"This will enhance consulting and system integration practise of Infosys. Infosys has been looking for acquisition from a long time to strengthen its presence in Consulting and Package Implementation domain," broking firm Prabhudas Lilladher's Senior Research Analyst Shashi Bhusan said.
    
After it was outbid by smaller local rival HCL Tech to buy UK-based enterprise software consulting firm Axon Group in 2008, Infosys has been steadily building its consulting
business on its own. It has since then organically grew its C&SI revenue to USD 525 million, Bhusan added.
     
Shibulal said the deal will significantly enhance global presence of Infosys, particularly in continental Europe and emerging markets like Latin America and Asia Pacific.
     
Infosys was at the receiving end of criticism after missing its own revenue guidance for April-June quarter and lost its position as country's second largest software to Cognizant even as rivals like TCS boosted their businesses with multiple buyouts.
     
Analysts have blamed unwillingness of Infosys-- which had USD 3.7 billion in cash at the end of June quarter-- to go in for buyouts as one of the main reasons for the slower growth.
     
"The acquisition of (Lodestone) will address some of the concerns relating to utilisation of excess cash. It is not likely to make any significant difference to the overall financials as the revenues of Lodestone are less than five percent of Infosys' projected FY13 revenues," Kotak Securities Head of Fundamental Research Dipen Shah said.
    
The acquisition may take Infosys closer to its goal of offering clients higher value services and consulting.
     
Infosys share rose over one percent in intra-day trade, amid a flat broader market. It closed at Rs 2,511 a piece, 0.6 percent higher than its previous close on the BSE.

The acquisition will also add more than 200 clients across industries, including manufacturing, automotive and life sciences, to the Infosys pool of over 700 clients.
     
It will add the head-count of Infosys by 850 employees, including 750 experienced SAP consultants.
    
Acquisition of Lodestone is a small step for Infosys and a great leap for the Indian IT industry as it integrates consulting and IT services, Infosys Chief Financial Officer V Balakrishnan said.
    
"We expect that this acquisition will help strengthen our system integration space and bring more profits because every one dollar earned through consulting, we expect to earn two to three dollars in overall business," he added.
     
Headquartered in Zurich, Lodestone advises international companies on strategy and process optimisation, and provides business transformation solutions enabled by SAP's enterprise solutions.
     
"We are eager to leverage the widely acknowledged global reach of Infosys and its leadership in the consulting and technology arena to deliver greater value to our clients. This will enhance the momentum that Lodestone is already witnessing in the marketplace," Lodestone Chairman and CEO Ronald Hafnerv said.
     
Linklaters LLP is acting as the legal advisor to Infosys, while UBS AG is acting as financial advisor and Baker & McKenzie acted as legal advisor to Lodestone.
    
The major acquisitions by Infosys include USD 38 mill deal to buy out BPO McCamish Systems (2009), Royal Philips Electronics NV's global finance and accounts BPO and Gen-I (ICT arm of Telecom New Zealand).

(Agencies)

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