UTI Venture, US fund to invest Rs 44 cr in Zylog

MUMBAI: Private equity firms UTI Venture Fund and US-based Argonaut Private Equity are set to invest a total of Rs 43.8 crore (around $10 million) in the Chennai-based Zylog Systems (ZSL). The investment will be done through preferential allotment of shares. ZSL, a 12-year-old IT-services and outsourcing solutions company with around 750 employees in India, the US and Europe, offers services in web application, mobile computing and enterprise infrastructure management. It has a specialised product called DP Online, depository operations and a financial accounting system.

V Sudarshan, founder and chairman of ZSL, said the investments will facilitate the company’s access to clientele in new target markets. ZSL officials refused to give details on the valuation of the company, post fund infusion. In the year ended March 2006, ZSL’s revenues stood at Rs 257.8 crore, a 75% growth over the previous year, and its post-tax profits were at Rs 37.13 crore.

Subsequent to the investment, Ajay Mittal, CFO and director (private equity) of UTI Venture Fund, will join the board of directors of ZSL. Argonaut Private Equity has a corpus of over $2 billion and is present in India since 2003. It has invested over $75 million in Indian companies, predominantly in the IT and other technology sectors. UTI Venture Fund, too, has substantial investments in the technology and IT services sector, including Subex Systems.

This is the second time that the two private equity firms have come together to invest in a single entity. Earlier, the two funds invested a total of $16 million (Rs 72 crore) in Koutons Retail, a Rs. 450-crore menswear retailer. Raja Kumar, CEO of UTI Venture Fund said, “We invest in strong management teams and sound businesses that have the potential to grow from good to great.”