Tech Mahindra eyes next buy in financial sector

BANGALORE: Tech Mahindra, the IT outsourcing business of India's $16.2-billion Mahindra group, is close to making a small acquisition in the financial space. “BFSI is the hot area, definitely it will be in BFSI,” a person with knowledge of the development told ET on condition of anonymity. The deal will bring Tech Mahindra a niche firm in the Asia Pacific region, the person said.

BFSI or banking, financial services and insurance companies are among the largest spenders on technology services, and account for the single largest chunk of revenues for India’s $108 billion outsourcing sector.

A deal could be announced as early as March, the person said. Tech Mahindra has also been in talks with a clutch of aerospace engineering firms, but is yet to announce a deal there. Such an acquisition would help the company boost its revenue from sub-contracts from suppliers to the aerospace giant EADS. Tech Mahindra’s chairman, Anand Mahindra, purchased rival IT firm Satyam Computer Services in 2009.

The combined entity, after a merger that was completed last year, is now India’s fifth-largest IT services provider, with customers such as Nestle and SAAB. CEO CP Gurnani has said he aspires to double the company’s revenues to about $5 billion in 2015.

Acquisitions would have to be an important part of that strategy as competing with established and larger Indian rivals such as Tata Consultancy Services and Infosys for contracts from financial clients would require deep domain expertise.