Tuesday, June 16, 2009

Softpro buys SA software company for $19 million

The Hyderabad-based SoftPro Systems, a IT Solution provider has acquired 100% equity stake in South Africa-based Cura Risk Management software for $19 million in an all cash deal. The move is likely to help the Indian company grow six fold to over Rs 60 crore by the end of this fiscal.

“The acquisition is the first step towards the turnaround of our fledgling company. The deal draws strategic benefits as we can utilise the established client base of the acquired firm. Also, we hope to become a $200 million company in the next five years,” said G. Bala Reddy, chairman & managing director, SoftPro.

SoftPro has tied up about $14.5 million of funds with Bank of India and Andhra Bank. Andhra Bank will part guarantee the funds. The company is also looking at infusing fresh equity in the business through a preferential allotment of shares. This will help the firm raise about Rs 53 crore over the next one and a half year. It will also use a part of the money to fund the acquisition.

The promoter group currently holds 46.5% stake in the company. However, the stake will come down to 41% after the preferential allotment. The equity base of the company will increase from Rs 6 crore to Rs 9.5 crore. “While a part of the money raised through preferential allotment will be used to fund the deal, the balance will be used to meet working capital needs,” said Reddy.

SoftPro will pay $16 million upfront and the balance in the next three years based on performance of the acquired company, Cura.

“We see the acquisition as the next stage of growth,” said Alon Apteker, director, Cura. The $8-million company provides integrated software solutions addressing the Governance Risk & Compliance (GRC) requirements. It has about 200 clients across the globe. According to an IT analyst, small IT firms can leverage on such deals as they get to expand demographically and bring business home. Also a company can utilise the technology and expertise locally.


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