Indian IT firms aggressive expansion around the globe
Few days ago, I wrote about Infosys, India’s second largest IT firm, buying up UK based Axon Group PLC, a SAP consultancy firm. However, this is not the first acquisition by any Indian IT firm. In recent years, top Indian IT firms have become more aggressive in spreading their business abroad and building a strong foothold in the global IT market.
Infosys Technologies Limited (BOM:500209), the second largest IT firm offered Axon Group PLC (LON:AXO) a cash offer of £407m. The money is given from Infosys’ own fund. Infosys, which currently employs 90,000 people planned to buy up the UK based firm to increase its presence in the European market. After the news came out, Axon Group’s employees became afraid of losing jobs and mass outsourcing, but Infosys CEO, Kris Gopalakrishnan assured them that they are not going to outsource any job.
Last year, another Indian IT giant WIPRO expanded its business in USA by acquiring Infocrossing, an infrastructure management service provider. The deal cost WIPRO $600 million. Established in 1985, New Jersey based Infocrossing posted $229 million revenue in 2006. It has five branch offices around USA. The company also has subsidiaries to outsource IT related jobs. Two months after acquiring the company, WIPRO received a $275 million outsourcing deal.
Last year was a big year for the Indian IT companies because that year, Firstsource Solutions, promoted by ICIC Bank, bought US company, MedAssist Holdings with $330 million.
In April 2006, Subsex Systems, a Bangalore based Indian IT firm that specializes in telecom software acquired UK-based Azure solutions. The deal was worth $140 million, making it the biggest Indian IT industry acquisition. After the acquisition, Subsex-Azure became one of the top Telecom Revenue Assurance Systems in the world. Another acquisition of Toronto based Syndesis Limited by Subsex-Azure followed after seven months. It was an all cash deal worth $164.5 million.
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Infosys Technologies Ltd. plans to buy up Axon Group PLC
After Tata Motors Limited (BOM: 500570), it’s Infosys’ turn. The second largest Indian IT firm offered to buy up Axon Group PLC (LON:AXO), a UK based SAP consultancy firm with a cash offer of £407m. Infosys Technologies Limited (BOM:500209) is buying up the company to increase its presence in the European market. Under this deal, the three founders of Axon Group will walk away with about £70m.
The news sparked fears of job losses and mass-outsourcing among the workers but Infosys CEO, Kris Gopalakrishnan assured that there will be no job losses. He said that there would be little overlap between the clients of the two companies.
At present, Infosys Technologies Ltd. employs 90,000 people majority of which are in India. Axon Group PLC has 2,000 employees. The company mainly works with firms that use business software developed by German SAP. Mr, Gopalakrishnan said:
“It is very important to us that people stay and make the whole thing work. . . .We are doing this acquisition so we can leverage all the employees.”
Under the current deal, Axon will be paid 600p per share. Infosys is giving the money from its own fund. The deal is backed by the management of Axon Group PLC and its three founders who currently holds just under 17.9% share of the company. The transfer process is expected to finish in November 2008.
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