Ranjit Shinde and Ramakrishna Kashelkar
CORE Projects has set eyes on the business of IT products and solutions in the global education space through the inorganic route. The company has acquired three foreign players in this segment, including two in the UK and one in the US. The acquisitions, which are expected to be completed by the month-end, will add $45 million (Rs 180 crore) annually to Core’s topline, which was Rs 200 crore in FY07 on consolidated basis.
Following the announcement, the stock of Core Projects rose 1% in a volatile market while the Sensex remained flat. The Mumbai-based company provides IT services in verticals including educational solutions, logistics, banking financial services and insurance (BFSI) and pharmaceuticals. In FY07, educational solutions accounted for 24% of the total revenue of the company while logistics constituted 22%. Post-acquisitions, more than half of the revenue is expected to be generated by this vertical.
Core has spent around $45 million in all its acquisitions. This is much cheaper than some recent deals in the IT space that attracted valuations of 2-3 times sales. Moreover, operations of target companies are profitable. The companies have profit before depreciation and taxes (PBDT) in the range of 12-15% of the revenue. However, this is much lower than Core’s PBDT margin of 24% in the June quarter of FY08. Though the deal is likely to pull down the margins of the acquiring company in near term, migration of product development to Core’s Mahape unit in Navi Mumbai will provide some relief.
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