Polaris is a competitor against Indian offshore players providing financial services-focused software services and whose primary role is to help the likes of Citi, Bank of Tokyo Mitsubishi and multinational insurance corporations develop and maintain their technology backbone.
Virtusa Corp, the US-based technology outsourcing company is all set to buy 53% of shares in Polaris Consulting & Services which is middle tiered Indian IT firm for a whopping Rs 1,173 crore. Virtusa is expected to expand its presence in the banking and financial services space with the acquisition of these shares.
According to a statement made by officials at Virtusa, they will make what they call an “unconditional mandatory” offer to all public shareholders of Polaris enabling them to obtain up to an additional 26% of the outstanding shares, and expects to realize over $100 million of cumulative revenue from the deal over the next three fiscal years.
The deal confirms that there is indeed a rise in interest amongst investors towards mid-tier Indian IT firms. As such, the acquisition is expected to be finalized during Virtusa’s fourth fiscal quarter which ends on March 31, 2016.
Therefore, Virtusa in essence acquires all outstanding shares currently in possessed by Polaris founder and Chairman Arun Jain, and shareholders such as Orbitech Pvt Ltd. Virtusa will provide financial support for the transaction via a cash/debt combination, and expects Polaris to add to earnings per share in fiscal year 2018 and beyond.
Originally, Polaris’ PE stake belonged to Citi Venture Capital International. That all changed in 2013 when Citigroup sold its $4.3 billion emerging markets private equity fund along with its portfolio to Rohatyn Group in accordance to US rules. Nonetheless, Citi remains their single largest client, with almost 30% of revenue coming from them. In addition, Citi is also one of Virtusa’s important clients and is also rumored to have had a hand in establishing the transaction.
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