So it appears that the talks between Tech Mahindra and Bharti Group owned mobile value added services company Comviva are nearing closure: Tech Mahindra is looking to acquire the company for Rs 750 crore, reports The Economic Times.
That they have been in discussions for a while, we have known, but it was not clear whether the deal would go through. Citing a person familiar with the development, the report states that Tech Mahindra has completed due diligence, agreed on the valuation, and has signed an MoU (Memorandum of Understanding) with Comviva. However, both Tech Mahindra and the Bharti spokespersons refused to comment on the development, saying it was a market speculation.
MediaNama sources have indicated that several meetings and an offsite between teams from both companies have taken place, and even client meetings had been initiated.
This follows a similar report earlier this year, which had suggested that Mahindra Satyam was in talks to acquire 20%-30% stake in Comviva and that the deal was expected to be worth Rs 400-Rs 500 crore. Mahindra Satyam is currently in the final stages of its merger with Tech Mahindra after its merger was announced (pdf) in March 2012 and is seeking approval from the Andhra Pradesh and Maharashtra High Court, as indicated by The Hindu report. Last year, there were reports that Bharti was looking to sell its majority stake in Comviva, and had even appointed a merchant bank for the sale, with TCS and HCL rumored as potential bidders. However, no stake sale took place at that time.
Financials: According to the report, Comviva has reported a total revenue of Rs 380 crores for the financial year ending March 31, 2012, up from Rs 313.10 crore in the previous fiscal. It had posted an operating profit of Rs 60 crores, up from Rs 42.4 crore in the previous fiscal.
As of March 2009, Bharti Enterprises owned 75.03% in the company, however the ET report suggests that Sunil Mittal and family currently own 50% stake in the company through various trusts and holding firms while the company’s investors like Sequoia Capital and Cisco own 30% and 5% stake respectively with the rest 15% stake owned by Comviva employees. Comviva claims to have more than 130 customers in 90 countries including Aircel, Idea Cellular, MTN, NTT Docomo, Uninor, Vodafone, Videocon, among others.
Tech Mahindra-Motorola Partnership: Interestingly, Tech Mahindra, and Motorola also jointly run a VAS company, CanvasM, which offers services in the fields of mobile commerce, utilities and digital asset management, although the exact mandate of CanvasM has been unclear over the years.
The acquisition will Tech Mahindra some sort of a play in the Indian market when VAS is undergoing an upheaval of sorts (services have been declining). Comviva is more of a managed services play, with Bharti Airtel as a client, and this fits in well with Tech Mahindra. Much of Comviva’s business has been focused on the African market, especially around mobile payments and commerce, which TechMahindra will also get. The question remains – what will become of CanvasM if Comviva gets acquired?