Fairfax-controlled business services provider Quess Corp Ltd has announced the acquisition of a significant minority stake in Coimbatore-based Heptagon Technologies Pvt Ltd, a software development company, as it looks to cut costs and ramp up digitisation of business processes.
Quess will acquire 26% in the tech company for Rs 5.55 crore through an all-cash deal that is expected to be completed in a month.
The investment is expected to generate several synergies, including cost-reduction at Quess' IT staffing solutions and digital transformation projects. The deal is also likely to enhance sales for the industrial Internet of Things (IoT) business of Quess.
Heptagon, which was founded by a team of IT and computer science engineers in 2015, is engaged in niche software development, machine learning and automation technologies.
Focus on acquisitions
Quess has an active acquisition strategy, and it has acquired stakes in close to two dozen companies since 2008. It has also closed five deals since the company went public in July last year.
In an August 2016 interaction with VCCircle, Quess founder and CEO Ajit Isaac said the company was open to both 'string of pearls M&A strategy' and larger transformative deals. The company has an inclination towards value-based investing, where it sees a clear payback within three-five years of investment.
Isaac had also said that segments such as payroll, compliance, finance and accounting, and security services were areas of interest for the company as far as acquisitions go.
In November last year, Quess acquired the facility management and catering business of Manipal Integrated Services Pvt. Ltd (MIS) for Rs 220 crore and an additional stock component.
The staffing industry—where Quess broadly belongs to—is largely a fragmented market in India with a few global players. Quess got a shot in the arm when it was acquired by travel and tour company Thomas Cook in early 2013 for Rs 256 crore. The deal marked an exit for India Equity Partners, which had invested in the firm in 2008.
Established in 2007 in Bangalore, Fairfax-controlled Quess Corp (earlier IKYA Group), had recorded the highest investor interest among Indian IPOs in eight years. Its IPO received bids for a whopping 144 times the number of shares on sale.
In another deal in this space, CX Partners-backed Security and Intelligence Services (India) Ltd (SIS), a New Delhi-based security solutions and business support services provider, acquired facility management company Dusters Total Solutions Services Ltd.
SIS is also looking to list.
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