3i Infotech, a company of information technology, sales were sold in the U.S. and the unity of the payments of its subsidiary, 3i Infotech financial software, 9.1% more than they actually paid for business.
3i Infotech receives 137 million U.S. dollars, and use the sale to reduce debt, will also sell some non-performing business.
Between 2007 and 2008, ICICI Bank-promoted 3i Infotech acquired Regulus Group and J & B Software offers a separate $ 100 million and $ 25,500,000, respectively. Subsequently, both companies were part of 3i Infotech, Financial Software.
V. Srinivasan, director general and CEO of 3i Infotech Global, said the company had actually ended up paying 90 million U.S. dollars, not U.S. $ 100 million, as announced by the then Regulus Group.
The company said the agreement marked the successful strategy of mergers and acquisitions, but analysts are not convinced.
“There has not been able to turn around the two companies and sold them for almost no premium,” said a brokerage analyst Nacional, who spoke on condition of anonymity. “If funds are held in trust business, the company would have made more money, not to mention the efforts being invested in companies.”
Shristi Anand, an analyst at Mumbai-based Angel Broking, said the payments and billing transactions did not do well, because almost 20% decrease in volume of banking transactions in the United States, when the 2008-2009 economic slowdown .
“The company has also been for about 11% of its top line by 2011 and therefore attracted assessments were not very good,” he said.
3i Infotech broke both companies at 0.7 times earnings in 2007 and sold at 0.8 times sales, without premium built, “said Anand.
The companies that were sold between $ 170,000,000 and $ 175 million as income on 31 March, a company spokesman.
“The sale reduces leverage and strengthen its balance sheet,” said Srinivasan. “This allows the company to return to its roots as a major IT products and services play.”
Although the proceeds from the sale will be used to reduce debt, analysts are concerned about the level of indebtedness of the company.
After considering the sale, the company has an outstanding debt of its 17610000000 rupees (391 million dollars), plus about $ 90,000,000 for reimbursement due to repayment of foreign currency convertible bonds in July 2012.
“For three or four quarters, the transaction services revenues fell and the high level of debt on the books, we have not been able to consolidate the activities of the way we wanted, and therefore sold,” said Srinivasan. ” If we had stuck to the company, given our inability to consolidate, have continued to deteriorate. “
“We want to wait a while and see how much house you can build in the coming year and there is no immediate need to dilute equity,” he added, in response to a question about a stock sale.
Analysts say they remain concerned about its ability to generate enough money to repay its debts, including convertible bonds and preference shares. Ratio of net debt to net cash flow available to repay debt is about 14 times fiscal 2012 estimates, said Shah Hardik Jhaveri niyati of equities and KR Choksey in their report last month .
The report was based on the analyst meeting with Amar Chintopanth, chief financial officer and deputy managing director of the company.
the company’s net debt to earnings before interest, taxes, depreciation and amortization was 3.5 for 2011, which is high compared to its peers. For the year ended March 31, the company had 2.45 billion rupees in cash and debt of 25.34 billion rupees.
ICICI Bank owns 20.33% of the game of 3i Infotech. Analysts say the bank may consider sale of its stake in either investment capital or a strategic investor.
Raymond James and lecturer acted as financial advisor to 3i Infotech and Alvarez and Marsal Transaction Advisory accounting as a political advisor in the transaction.