Infosys, India’s second largest IT services exporter, is aggressively scouting for acquisitions of smaller companies in high- value technology areas such as artificial intelligence, big data and analytics betting on these trends to generate future revenues.
Shedding its conservative stance of the past towards acquisitions, Infosys, under leadership of its first non-founder CEO Vishal Sikka, is actively looking at such companies globally. UB Pravin Rao, chief operating officer, Infosys, said, “We have been aggressive unlike in the past when we were more conservative. We are looking at these technology areas much more closely.”
This new found aggression is also linked to Sikka’s background and profile. His previous long association with SAP, which is quite active on the inorganic front, and the strong connection with the Silicon Valley in the US are spurring this drive.
Without divulging on the size of these acquisitions, Rao said that these prospective buyouts will look small in size but their valuation could be really high. Besides, Infosys will also look at the inorganic option to expand its reach into newer geographies.
“We are not going to acquire for growth or people but for capability,” the Infosys COO said, adding that completion of any buyout will depend on multiple factors.
Funding these acquisitions would not be an issue for Infosys given its liquidity position. At the end of December, 2014, the IT major’s liquid assets including cash & cash equivalents and other financial instruments stood at $5.53 billion.
Rao said Infosys would also be looking at acquisitions which are complementary to its array of IT services and could bring in additional value.
Infosys has been sparing in terms of acquisitions when compared to its peers like Tata Consultancy Services (TCS) and Wipro. The IT major’s last major acquisition was of Switzerland-headquartered technology consultancy firm Lodestone in September, 2012 for around $350 million.
Today for Infosys, the acquisition strategy will run in parallel with its expanded $500 million innovation fund. This fund will primarily invest in technology start-ups across the world with a particular focus on India.
The Infosys COO said there were many interesting product companies with great ideas and it is looking combining their offerings with its services. “We could look at bundling these solutions with our banking product Finacle,” he remarked.
Infosys already is in advanced talks with a couple of start-ups though it is yet to firm up whether the new innovation fund will part of the corporate set up or create a separate venture fund.
As part of these tie-ups with start-ups, Infosys has partnerships in the US with video technology firm Ooyala and Clique Intelligence which
develops collaboration and communication tools.
