Date:09/05/2006 URL: http://www.thehindubusinessline.com/2006/05/09/stories/2006050900620400.htm

Back NIIT Tech buys UK insurance solutions co

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$25-m all-cash deal, supported by internal accruals and debt

Niche acquisition: Mr Rajendra S. Pawar (left), Chairman, NIIT Technologies, and Mr Arvind Thakur, CEO, at a press conference in the Capital on Monday. - Kamal Narang

New Delhi , May 8

In a bid to strengthen its presence in the insurance vertical and gain access to large clients, NIIT Technologies Ltd (NTL) on Monday announced acquisition of the UK-based insurance solutions provider ROOM Solutions Ltd for about $25 million in an all-cash deal.

The company has bought 51 per cent stake in the UK firm in the first phase, and would acquire the balance over the next 18 months "linked to performance," Mr Rajendra S. Pawar, Chairman, NIIT Technologies, said at a conference here.

"The strategic direction for NIIT Technologies has been to focus and scale its business in a few select industry segments such as insurance. We had earlier identified certain gaps in insurance space, including absence of presence in the UK; focus predominantly on life and pensions, with property and casualty scale limited; and need for an enhanced visibility in insurance segment. This acquisition strengthens NTL's insurance capabilities," he said.

ROOM Solutions is focused on the commercial insurance market. The company has developed `Subscribe', part of a software suite that provides insurers with the functionality of to sustain profitability through the insurance cycle. Over a quarter of Lloyd's business is processed on the core policy administration platform `Subscribe'.

"With this acquisition, NTL gains access to a large client base in property and casualty segment to cross sell its services in spaces such as managed services, maintenance service and business process management. For ROOM Solutions, it provides global markets to extend services with enhanced technology, including offshore capability. The UK-based company needed to scale, and the acquisition will be a medium for their engagement at global level," said Mr Arvind Thakur, Chief Executive Officer, NIIT Technologies.

Mr Thakur said that with the entire transaction valued at about $25 million, NTL would initially make the first tranche of payment for acquiring 51 per cent stake. "It is an all cash deal, which will be supported by a combination of debt and internal accruals. We already have a line of credit of $18 million," he said. With revenues of $25 million, ROOM Solutions' net profit was pegged at 4-5 per cent during the last financial year.

Mr Thakur said three NIIT executives would be represented in the five-member board of ROOM Solutions. The shares of NTL closed at Rs 229.35 per share on the BSE, up 1.78 per cent over the previous close.