Tech Mahindra acquires US-based LCC; stock hits 52-week high

MUMBAI: Shares of Tech Mahindra hit fresh 52-week high in early trade after the company made its biggest-ever overseas acquisition by buying out US-based IT company LCC for $240 million.

This is the largest acquisition for Tech Mahindra and is expected to close by 4QFY2015. It will be financed through cash.

LCC is estimated to have annual revenues of more than US$400mn (estimated for CY2014), with workforce of over 5,700 network professionals across five continents and more than 50 countries. With this acquisition Tech Mahindra will also be addressing a rapidly growing market opportunity as Telecommunications companies and enterprises accelerate the network upgrade cycle.

“The company is said to have margins of around 8.0 per cent, thus the acquisition will be margin dilutive. Thus while, the sales for FY2016, would see an upgrade of 10.3 per cent to end the period at Rs 27,484 crore (Rs 24,904 crore earlier), the EBDITA margins would fall to 20 per cent from 22.3 crore estimated earlier, subsequently leading to a 0.6 crore dip on net profit, which should come in at Rs 3,666 crore (earlier estimates of Rs 3690 crore),”said Sarabjit Kour Nangra, VP Research - IT, Angel Broking.

“We revise our target on the stock to Rs 2763, from earlier Rs 2833, on back of revised EPS of Rs 157," Nangra added.

At 09:35 a.m.; the stock was at Rs 2713.15, up 0.33 per cent, on the BSE. It gained 1.36 per cent in early trade to touch 52-week high of Rs 2741.