Indian information technology companies, including Wipro and HCL Technologies, could bid for Computer Science Corp (CSC) if the US-based IT company splits its public sector and commercial operations before putting itself up for sale. Senior executives at both Noida-based HCL Technologies and Bangalore-based Wipro said they could "consider" the commercial business of CSC as it will help them scale up their presence in the United States and Europe.
"Local data centres and existing IT infrastructure business can make for a risky, but good asset to buy we will surely consider if it's split," said an executive at one of the top five Indian software firms. CSC has infrastructure business contributing 35% to its topline, while global business services, including application services and consulting, account for 34% while the North American public sector brings the remaining 31%.
"If the business is split, HCL should be the favourite," said a Mumbai-based analyst at a domestic brokerage, adding hat the company's own application delivery business has not seen much traction and a buyout should help the company.
CSC, which reported nearly $13 billion (Rs 80,000 crore) in revenues last fiscal, has reportedly reached out to private equity group, Blackstone and Bain Capital to gauge this interest in management-led buyout, Bloomberg reported on Tuesday. ET independently could not confirm if the company will split its commercial business operations from those of the government contracts. Both Bain Capital and Blackstone declined to comment while an email sent to CSC remained unanswered.
Last year, CSC stitched a deal with country's fourth-largest IT firm HCL Technologies under which the two firms aim to modernize applications run by their customers. The addressable market for applications services totaled $210 billion in 2014, according to Gartner's 2014 Market Forecast for IT Services.
Some experts, however, remain sceptical if the company's efforts in the two years are enough to entice interest from suitors.
"The company has made efforts to transform its traditional consulting and outsourcing business and is embracing an operating model relying a lot more on software assets and platform-based delivery models," said Frederic Giron, VP and research director, Forrester Research.
"But this is still the beginning of the journey and the transformation will require a lot more freedom of operation. Hence the idea of LBO (leveraged buyout), which would make sense taking the company private similar to what Dell did." Giron said the public sector chunk had about $4 billion in annual revenues.
"I believe India-centric firms are interested in different types of acquisitions: software assets like Trizetto, targeted continental Europe presence like Alti, and potentially some digital capabilities."
To be sure, twice in the past 2006 and last year management at CSC has tried to find buyers for the company but a deal could not be reached. The company, which employs nearly 79,000 employees and counts the US government as one of its 2,500 clients, ended last year with Rs 4,250 crore in cash
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