Bangalore based-Mphasis BFL has entered into an agreement to acquire software solutions provider Kshema Technologies for approximately $21 million. The stock and cash deal, with a cash amount of close to $6.8 million, is expected to close by June 2004, regulatory approval pending. As per the deal, the embedded teams from Mphasis and Kshema will be put together and the combined technology group will be headed by Anant Koppar, former chairman and CEO of Kshema Technologies. According to Mphasis, it was not decided on whether the group will function as a division within the company or as a separate 100% subsidiary.

Mphasis was looking to scale operations in the embedded technology area where it’s slightly weak. So we worked out this deal where both of us will stand to benefit Jerry Rao chairman and CEO of Mphasis

"The move is part of our bid to become a broad spectrum-based IT service provider. We are traditionally strong in the application integration and management area. We acquired the SAP division of MIRC electronics in January to strengthen our ERP offerings. This acquisition will add muscle to our technology offerings in the embedded space," said Rao. He added that Mphasis still had a few ‘weak’ spots and that they would look to fill it in the future through organic growth or acquisitions.

Embedded solutions comprised 15% of the Rs 207 crores revenue that Mphasis clocked last fiscal. Kshema, also based in Bangalore, was owned by seed capital investor Global Technology Ventures and Singapore Computer Systems with 46% and 30% respectively, the rest being divided among employees and promoters. It recorded revenues of around Rs 57 crores in FY 2002-03 with a PAT of Rs 8 crores. The company had the bulk of its 400-plus employees, except for a tiny SAP team, working on embedded solutions for the industrial automation, healthcare and communication verticals.

Sathya Mithra Ashok in Bangalore

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