It’s official! Tech Mahindra has acquired a 51% stake on a fully diluted basis in Comviva
Technologies, a Bharti Group Company, and a provider of mobile Value Added Services (VAS), Mobile Money and Mobile Payment solutions, for a value of Rs 260 crore. The deal will be subject to regulatory approvals, and the company will be rechristened as Mahindra Comviva.
As part of this arrangement, Tech Mahindra will make an upfront payment of Rs 125 crore towards the stake acquired and the balance amount of Rs 135 crore will be paid out over a period of five years based, on Comviva achieving mutually agreed performance targets. The current promoters will continue to hold a 20% stake on a fully diluted basis in Comviva, post the closure of the deal.
As of March 2009, Bharti Enterprises owned 75.03% in the company, however reports suggest 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.
Earlier, there were reports that Tech Mahindra was looking to acquire the company for Rs 750 crore, but both Tech Mahindra and the Bharti spokespersons refused to comment on the development, saying it was a market speculation.
Mutual benefit, what happens to CanvasM?: According to a statement from the company, the acquisition will significantly enhance Tech Mahindra’s capabilities in the mobile VAS domain and will provide access to a large client base, enabling cross-selling opportunities. It is inline with Tech Mahindra’s strategies, namely investing in emerging areas such as Network, Mobility, Analytics, Cloud and Security and further focus on non-linear growth, as per the company.
Comviva has a portfolio of solutions spanning mobile money and payments, mobile data, integrated messaging, mobile lifestyle and customer life cycle management solutions. It claims that its solutions are deployed with over 130 service providers and banks in over 90 countries across Asia, Africa, Middle East, Latin America and Europe, and powers services to more than a billion mobile subscribers.
While Comviva will benefit from Tech Mahindra’s vast geographic reach and access to global telecom players and will enable Comviva to take integrated solutions and products to a larger base, Comviva will bring its Managed VAS capabilities to Tech Mahindra. Note that 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. We’re not sure what will become of CanvasM, now that Tech Mahindra has acquired Comviva.