Pune-based KPIT Cummins Infosystems Limited is acquiring US-based CPG Solutions, LLC for a consideration up to $13.2 million (Rs 60 crore). The software and engineering services firm said, the deal involves guaranteed payments of Rs 27 crore and Rs 33 crore as milestone-based payment over three years. CPG provides Oracle consulting services to manufacturing and supply chain companies.
KPIT is focused on the manufacturing, energy and utilities industry which accounts for 85% of its revenues. The deal would help the firm to provide its clients a complete spectrum of services. The acquisition of CPG will further strengthen KPIT’s position as a preferred Oracle partner for manufacturing companies and is designed to complement KPIT’s strengths in global ERP roll-outs, implementation and support and maintainance services, the company said in a statement.
CPG has revenues of $11 million (Rs 50 crore) and margins of 13%. “Thus, KPIT is paying 1.2x revenues for CPG spread out over 3 years, which we believe is quite reasonable. The CPG acquisition will boost FY11 and FY12 revenues by 3% and 4%, respectively, while EBITDA margins could see a fall of 15 bps and 21 bps, respectively,” said Harit Shah of Karvy Stock Broking in a note.
KPIT plans to make Oracle consulting practice a more than Rs 400 crore business in the next three years focused on manufacturing, energy and utilities verticals, said Kishore Patil, MD & CEO of the firm in a statement. KPIT reported revenues of Rs 732 crore with a net profit of Rs 86 crore in FY10.
The share price of KPIT closed at Rs 172 per share, down marginally by 0.69%.
KPIT last year acquired US-based Sparta Consulting, which specializes in implementing SAP AG’s business software, for up to $38 million.