Under the deal, HCL Technologies will provide Volvo IT services in the area of infrastructure and application operations. It will also create an automotive centre of excellence in Gothenburg, Sweden based on the domain expertise of the Volvo team, to serve its global automotive and manufacturing customers.
India’s fourth-largest IT services exporter, HCL Technologies, has announced the acquisition of the external IT business of Volvo Group, the Swedish global commercial vehicle maker, for a cash consideration of 1,130 million Swedish krona (approximately Rs 904 crore), even as it has signed an outsourcing deal.
The acquisition of Volvo IT adds 40 new customers for HCL Technologies from the Nordics and France while bringing in around 2500 people, spread across 11 countries. HCL Technologies has also announced the signing of an IT outsourcing deal with Volvo for an undisclosed value. Under the deal, HCL Technologies will provide Volvo IT services in the area of infrastructure and application operations. It will also create an automotive centre of excellence in Gothenburg, Sweden based on the domain expertise of the Volvo team, to serve its global automotive and manufacturing customers.
On the deal, HCL Technologies said, “The deal is one of the largest IT deals signed by any Indian IT company, and a first in the industry to use principles of vested sourcing as the basis of the relationship for an IT outsourcing engagement of this size and magnitude.”
Volvo IT is part of Volvo Group, responsible for delivering IT services to the Volvo Group as well as non-Volvo Group customers in Europe. It has been engaged since 1970 as an internal provider to Volvo cars and Volvo trucks and since 1999, to external customers in the business that is being acquired.
The revenue of Volvo’s external IT business has been 1,537 million Swedish krona or SEK (R1230 crore) in FY13, 1,558 million SEK (R1,246 crore) in FY14 and 1,687 million SEK (R1,350 crore) in FY15 (FY ending December).
Volvo IT provides IT infrastructure and application services largely in the mainframe segment and also provides HCL Technologies certain domain capabilities to automotive and manufacturing segment.
Anant Gupta, president & CEO, HCL Technologies, said, “The deal perfectly embodies HCL’s ongoing mission to develop its business with an innovation-led mindset.” According to HCL Technologies, the deal with Volvo makes them the largest IT services provider of Indian origin in the Nordics.
The Indian IT industry has been very active on the inorganic front, either through acquisitions of businesses or picking up minority stakes in technology start-ups. HCL Technologies in January had announced the acquisition of a UK firm, Point to Point, for a cash consideration of R78 crore. A week ago, Wipro announced its second-largest acquisition through the buyout of healthcare technology company in US — HealthPlan Services — for $460 million.
In line with this acquisition strategy, IT majors like Wipro and Infosys have created a separate venture capital fund to invest in technology start-ups. Though the majority of the acquisition are being done in the US, they also picked up stakes in Indian startups. The HCL scrip ended on the BSE on Tuesday at R821.75 which was a marginal decline of 0.45%.