Shiv Nadar-founded HCL Technologies has agreed to buy the IT services business of Mumbai-based Geometric, except a joint venture the latter has with Dassault Systèmes SA, in an all-stock deal valued around Rs 1,300 crore (around $200 million). The deal will help HCL broaden its engineering and automotive services portfolio.
Geometric, promoted by Godrej group, has been on the block for about a year. Apart from HCL, other IT services companies such as Tech Mahindra and L&T Infotech were also seen as suitors for the Mumbai-based engineering services company that focuses on product lifecycle management, embedded system and digital technology solutions.
In the share-swap deal, the BSE-listed Geometric’s shareholders will get 10 shares of HCL for 43 shares of Geometric. The promoters Godrej group, through Godrej & Boyce Manufacturing Company and Godrej Investments, and Geometric MD and CEO Manu Parpia and his family together hold close to 38 per cent in the firm while the rest is held by the public. Ace stock market investor and trader Rakesh Jhunjhunwala and wife Rekha hold 19 per cent in Geometric.
Founded as part of the electronic business of Godrej & Boyce in 1984, Geometric got listed on the bourses in 2000. It currently has 2,606 employees across 13 global delivery locations and reported Rs 673 crore revenues for the first nine months of the last fiscal; full financial year results are yet to be announced.
HCL’s acquisition of Geometric is one of the largest in the engineering services space. HCL, as a technology services outsourcing company, has a strong focus on the engineering services business which clocked revenues of around $1.2 billion in 2015. “The acquisition strengthens HCL’s presence in the product lifecycle management (PLM) consulting as well as mechanical and manufacturing engineering space. It also enhances HCL’s automotive and industrial practices,” the company said in a statement.
“With broad capabilities and rich experience across PLM consulting, mechanical and manufacturing engineering that Geometric brings in, the synergies allow us to take advantage of the rapidly growing manufacturing engineering and PLM services market,” said GH Rao, president, engineering and R&D services, at HCL Technologies.
“I welcome this as a synergistic transaction, as both our employees and customers will benefit. Our customers will have access to a range of engineering services which complements Geometric’s offerings. Geometric’s employees will have the opportunity for growth as they can serve HCL’s large customer base,” said Manu Parpia, MD and CEO, Geometric.
For HCL, which has a cash reserve of $2 billion, this deal comes immediately after its $133 million acquisition of the IT business of Volvo Group. Geometric is its second-largest acquisition after it bought SAP consulting firm Axon Group Plc for $658 million in 2008.
While the IT industry has seen many cross-border M&A deals, there have not been many large domestic transactions. HCL’s acquisition of Geometric is the second-largest buyout deal in the domestic IT space after Tech Mahindra acquired a controlling stake in Satyam for Rs 2,900 crore in 2009.