Zylog close to buying firms in Dubai, Singapore

Fri, May 16 04:28 PM

By C.J. Kuncheria

NEW DELHI (Reuters) - Software services firm Zylog Systems will buy a Dubai-based peer in one week's time, and is close to acquiring a Singapore-based firm as it seeks to reduce dependence on North American revenue, top officials said.

The Chennai-based firm, which offers financial, manufacturing, healthcare and telecom software services, earned 97 percent of its 6.06 billion rupees revenue in 2007/08 from North America, they told Reuters on Friday.

"(Geographical diversification) is the basis of our spreading out to Europe, Asia Pacific and now Middle East also. Our internal target is to grow this to at least 10 percent this year," Chairman Sudarshan Venkatraman said over the telephone.

Indian software service firms, which earn more than half their revenue from U.S. are reducing their dependence on North America amid talk of a slowdown in the world's biggest economy.

Zylog, which is using acquisitions to expand business, plans to fund these with proceeds of a 2007 initial share sale, Finance Controller S.P. Srihari said. The firm raised 1.26 billion rupees, of which 400 million rupees was marked for acquisitions.

The Dubai firm, valued at 27.5 million dirhams ($7.5 million) provides mobile and wireless services to banks and telecoms firm, while the Singapore firm supplies software to aircraft maintain-repair-overhaul (MRO) facilities, he said.

"Effectively, through this (Dubai) company, we will get into the Middle-East market for outsourcing," Venkatraman said.

"(Its) revenue is about 20 million dirhams," Srihari said. "Right now we will pick up 60 percent stake," and the rest later.

The officials declined to provide financial details for the Singapore firm, as the talks were still on, but Venkatraman said he expected to close the deal in two months.

"These guys have been in the (aviation software) space for the last six years," he said, adding the firm counted Singapore Airlines and Korean Airlines as its clients.

Zylog is also pursuing four "small" firms in the United States, three of which provide managed services and the other focuses on pharmaceutical firms, and is scouting for a buy in Europe, Venkatraman said, without providing financial details.

"In the next couple of quarters, we will hopefully complete these acquisitions."

Zylog shares were down 4.6 percent at 282.85 rupees in a firm Mumbai market.

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