Mastek looks to exit Majesco, to use proceeds for acquisitions

Mid-tier IT firm Mastek is aiming to sell its 12 percent holding in its former subsidiary Majesco by the end of 2019 and deploy the cash for acquisitions, as it aims a fourfold growth in business in the medium-term. The 12 percent stake in the homegrown company, which focuses on the British market, was valued at Rs 130 crore as per the closing price of its stocks last Friday.
Majesco and Mastek demerged in 2014 but the latter continues to hold 12 percent stake in the former.

"We have set ambitious targets for growth and acquisitions will be a strong focus of the targeted strategy," Mastek chief executive John Owen told PTI in a recent interaction.

The company is likely to close FY19 with a revenue of Rs 1,000 crore and is aiming to take the same to USD 500 million or Rs 3,500 crore, he said, adding it will reach the target both organically by building the business internally and also inorganically, by acquisitions.

Any potential acquisition target has to be a company with an Indian engineering heritage serving the world and a cultural fit, he underlined.

Apart from internal accruals, the Majesco stake sale this year will be of help for possible acquisitions, he said.

From the head count perspective, the company that employs 2,100 people, including 1,500 people in India, is aiming toadd up to 1,000 more in the next three years, he said, adding 60 percent of the new additions will be here.

At present, England constitutes 75 percent of the business, with the rest coming from the US, Owen said, adding it is working to reduce reliance on the British market.

In three years, it is aiming for a 45 percent each contribution to the revenue pie from the US and England and the rest from India.

Owen said it wants to look India both as a market for its products as well as source market for talent.

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In a departure from IT services companies' strategy of using the Indian market for cheap labour, Owen said his company wants to do high-value work from here and exuded confidence on delivering on margins despite this.

The company is targeting to increase its operating margins to 15 percent from the present 11 percent.