Sudin Apte, CEO and research analyst, Offshore Insights says Infosys acquiring Panaya is a strategic fit and will help Infy to up its automation and delivery engine. It is a mid-sized acquisition, he adds.
IT major Infosys is planning to acquire Panaya – a leading provider of automation technology - for an enterprise value of USD 200 million. It will be an all-cash acquisition.
Sudin Apte, CEO and research analyst, Offshore Insights says it is a strategic fit and will help Infosys to up its automation and delivery engine. It is a mid-sized acquisition, he adds.
The Panaya deal is expected to be closed by March-end.
Below is the verbatim transcript of Sudin Apte's interview with Sonia Shenoy & Ekta Batra on CNBC-TV18.
Ekta: Your sense on USD 200 million acquisitions for Infosys. What does it mean?
A: In a way this was expected. Infosys has been talking about extending its capabilities in the area of artificial intelligence and automation, so this in a way was expected. Some of its peers especially Tata Consultnacy Services (TCS) over the last three-four years have taken a substantial lead in creating automation in the reuse and building somewhat non linearity. So this acquisition will help Infosys to catch up the game to some extent. Once it's completely integrated, I believe that its delivery engine will become little bit more effective.
Sonia: How large do you think this acquisition is?
A: I would call it midsize acquisition from overall company perspective but considering this is a specialty acquisition; this is not something like infrastructure Services Company or SAP Implication Company that they are acquiring. So considering the specialty and the niche nature, this is a good size deal.
Ekta: Can you tell us more about this company Panaya and maybe the financials of it?
A: I am not privy to its financials for sure. This is one of the automation companies focusing on more of per person through put increasing and leveraging artificial intelligence for services delivery. So, I do believe that they will have to integrate this organisation to its delivery engine so that effectiveness of its existing staff can be enhanced or better utilised.
Sonia: What is the exact cash on books that Infosys has currently?
A: Its better you ask some financial analysts but from my perspective if its clients are concerned, they may look at this as an interesting acquisition once it's completely integrated with delivery engine so they can look for some higher value coming from Infosys in terms of productivity and effectiveness of service.
Ekta: With this acquisition for Infosys, where does it live it with its peers compared to its peers? Who would be more comparable and in terms of strategy can we see more inorganic moves from Infosys according to you going forward maybe in the similar space?
A: The second part of your question is very speculative. Just going by executive commentary they have said that they would like to do this. I am hoping that they will leverage the balance sheet strength to do some acquisition. As far as competitive space is concerned, some of the firms especially TCS who has been that size of organisation have higher level of automation, not only on delivery but entire from sale cycle to entire delivery lifecycle. They have achieved fairly good amount of automation and that's why you see at higher growth, TCS' profitability has been good. This deal in a sense and one has to see how it gets integrated and how much IP they are able to transform into entire delivery of Infosys but this particular engagement will help them to catch up with firms like TCS or Accenture on automation and artificial.
Infosys stock price
On February 16, 2015, at 14:10 hrs Infosys was quoting at Rs 2282.00, down Rs 14.4, or 0.63 percent. The 52-week high of the share was Rs 4401.00 and the 52-week low was Rs 1447.00.
The company's trailing 12-month (TTM) EPS was at Rs 104.69 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 21.8. The latest book value of the company is Rs 366.51 per share. At current value, the price-to-book value of the company is 6.23.
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