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Infinite Computer Solutions, a leading provider of IT services in the small and medium enterprise segment, is set to expand its presence in the US, where it was founded by NRI angel investors during the boom times.
Set up originally at Maryland in Washington DC, the five-year-old company has moved its corporate office to Bangalore in 1999 to capitalise on the local software skills and target the Asia-Pacific market.
With around 97 per cent of its business being generated from the US market, the company is mulling to acquire an IT service firm with an expertise in the banking and financial services industry, and a business process outsourcing company either in the US or India to cater to its existing customer base and prospective clients.
In the run-up, the Rs 254-crore (Rs 2.54 billion or $53 million) company will be setting up an onsite development centre in Boston, which will be an addition to the existing such centres at Dallas in Texas and Tampa in Florida. It's further expansion in the mid-west and the east coast will depend on its business prospects.
"The acquisition plans are to meet the growing demand for IT services from our US customers, including Fortune 10 clients such as GE, IBM, Huges, Kodak, Motorola and Pitney Bowes.
While the current organic growth will be maintained, we are looking at inorganic growth too through strategic acquisition of an IT services firm and a BPO company for providing end-to-end solutions to our client base," Infinite chief operating officer Upinder Zutshi told rediff.com in Bangalore on Wednesday.
The privately-held company, however, did not name two firms it was short listing for acquisition or their price. But it plans to go for a first round of funding by diluting a portion of the promoters' stake to a venture fund in Singapore, where it has recently set up a sales and marketing office for the Asia-Pacific region.
Sanjay Govil, a tech-savvy NRI angel investor, is the co-founder of Infinite, and a couple of other Indian expatriates also hold substantial stake in the company. Incidentally, Govil was awarded the Ernst & Young entrepreneur award for 2002.
"As part of our growth strategy, we are looking at small and mid-sized IT services firm and a BPO outfit in the telecom sector. We hope to strike the deals, including the first round of funding by the end of the current fiscal year (2003-04)," Zutshi stated.
Unlike the trend in the Indian IT industry, the company generates 88 per cent of its total revenue from onsite work and the balance 12 per cent from offshore delivery.
"The disproportionate share of onsite work is due to our long presence in the US since inception in 1997-98, where we have a large contingent of local (American) and Indian software engineers employed on L1 and H1B visas. Many of our people are US nationals and Indians with green-cards," Zutshi claimed.
As a result, of the 970 employees, about 650 are located in the US, with the remaining in India and a few in Singapore. During the current fiscal year, the company is ramping up its staff strength by about 300 to take the total to 1,250 by March 2004.
"The hiring will be more in India to increase the share of offshore activity to 22 per cent and bring down onsite delivery to 78 per cent. Gradually, we propose to reach the current industry average of 55:45 offshore-onsite work by 2006," Zutshi hinted.
Infinite provides a range of solutions and consulting services to diverse verticals such as telecom, healthcare, and insurance, besides expertise in data-warehousing, e-business product development, and web-enabling of legacy applications.
The company is targeting a gross revenue of Rs 335 crore (Rs 3.35 billion) by the end of FY 03-04, projecting a growth of 35 per cent over the preceding year's (2002-03) revenue of Rs 254 crore (Rs 2.54 billion).
Though not listed, Zutshi disclosed that its EBITDA (earnings before interest, tax, and depreciation allowance) for FY 03 was Rs 25 crore (Rs 250 million or $5.2 million), a whopping growth of 105 per cent over FY 02. The company is projecting an EBITDA of Rs 43 crore (Rs 430 million or $9 million) for FY 04, an estimated growth of 71 per cent over FY03.
"As an SME company, we have grown during FY03 at 38 per cent, outperforming the Indian IT industry's average growth rate of 26 per cent," Zutshi asserted.
Interestingly, Forbes.com ranked Infinite as the seventh fastest growing firm in the US under the SME category. Even the Washington Business Journal ranked the company as the number one fastest growing firm in Washington DC metro area.