|DEALS INDIA - SMALL TARGETS Accel Frontline seeks acquisitions|
B Y V IDYA P ADMANABHAN firstname.lastname@example.org······················· CHENNAI
Powered by Mint, Dow Jones Newswires and The Wall Street Journal Information technology services company Accel Frontline Ltd plans to spend as much as $25 million to buy several small companies as it seeks to boost revenue sixfold by 2017.
It aims to raise $10-15 mil- lion by selling shares to pri- vate equity (PE) funds to par- tially fund the acquisitions, chief executive N.R. Panicker said in an interview. The company aims to increase revenue to `2,500 crore in the next five-six years from `396 crore in the year ended 31 March, he said.
“The next five years will be the growth phase,“ said Pan- icker, who founded the flag- ship company in 1991. “We will be looking at inorganic growth. We want to get geo- graphical reach.“
The company is in prelimi- nary talks with PE investors, though the need for funding and its size will depend on the companies identified for pur- chase, Panicker said, adding that he hopes to invest $20-25 million in acquisitions over the next 18 months. The com- pany could fund acquisitions of up to $10 million through internal accruals, he said.
Accel Frontline plans to ex- pand its core business of do- mestic technology infrastruc- ture management; add busi- ness through an embedded software company, Ushus Technologies, which it ac- quired last month from a group firm; and expand over- seas through acquisitions of companies in the US or West Asia with sales of $10-50 mil- lion, or Indian companies with a sizeable export busi- ness, Panicker said.
The long-term plan is to use the combined strength of these small acquisitions to undertake a leveraged buy- out of a larger company down the line, he said.
“The IT (information tech- nology) services industry re- defines itself every two-three years,“ said Ankit Pande, a technology analyst with SBI Capital Securities. “Any wave of industrial revolution takes 70-80 years, and tech is really only about 20 years old. IT will continue to see sustained growth.“
The company's core area of operation, the IT infrastruc- ture management industry, has grown 40% year-on-year for the last three years, said Milan Sheth, partner, IT advi- sory, Ernst and Young.
Group company Accel Me- dia Ventures Ltd is also look- ing for PE funding of about $15-20 million to strengthen its media production, distri- bution, licensing, merchan- dising and education opera- tions. It has bid to set up an international animation and gaming school planned as a public-private partnership venture in Thiruvanan- thapuram.
Accel Frontline bought out the 51% stake of its joint ven- ture partner, BT Frontline--a unit of British Telecommuni- cations (BT)--in August be- cause BT had seemed to shift its focus away from IT, Pan- icker said. This fiscal, with Ushus Technologies contri- buting about half the year's revenue, the company ex- pects to report revenue of `570 crore through organic growth of about 44%.
I have taken this post from Livemint epaper edition.
Well,the current sale is for Mar 2011 is Rs 330 cr and Mcap is 84 cr which gives us an edge on valuation.The eps is 2.81 for last year which discount the stock at around 12 P/E.
Here in the above post the chief executive N.R. Panicker is talking about increasing the sales 6 fold in 5-6 yrs through acquisition. The embedded software company, Ushus Technologies, which it ac- quired last month from a group firm , Mr. Panicker is hoping of adding half year revenue that is around 170 cr and thus the sales will go up by 44%.
Well, these are all projections and how much it will come good needs to be seen.
Apart from the Mcap/ sales ratio which looks to be in favour of investor, I also like the promoters holding of 71.60% which gives us more comfort as usually I have seen that IT companies has very low promoters holding.
Another thing I like about this Co is the AR has already been posted for year 2011 at bse website .This shows the transperancy of the management.While putting AR of 2011 well in time, shows that management is open in telling the future plans to the investors.
Market can still go lower as I wrote recently and hence Accel Frontline can also go lower and if that happens and stock comes around 25 then it will be an excellent oppertunity to buy it.
I don't want to go in for discussion for what service they are rendering as that can be read while going to the website.......