INDIA BUSINESS WORLD - DECEMBER 2005
THE MONTH THAT WAS

HCL TECH IN $8-M ALLIANCE WITH JAPANESE FIRM EXA

Japan is the flavour of the season at the HCL group campus in Noida. Within a day of formalising its first joint venture with a Japanese IT major, HCL Technologies today announced another alliance with a Japanese company. The software services major today entered into a multi-million-dollar strategic agreement with EXA Corporation, a leading systems integrator in the Japanese market.

The two plan to set up a dedicated development centre in Chennai with a capacity to house over 200 engineers and consultants. As part of its contribution, EXA has already invested $1 million (Rs 4.5 crore) while HCL plans to invest another $7 million (Rs 30 crore).

The alliance is expect to grow into a $100-million (Rs 450 crore) business in the next five years for HCL Technologies. Under the agreement, the company will provide offshore IT solutions and system integration services to EXA. EXA is a 51:49 joint venture between IBM, Japan, and JFE Steel, the second-largest steel manufacturer in Japan. The company claims to have a strong customer base in the manufacturing, engineering, finance and card businesses as well as public sector.

For HCL, the latest alliance is part of its gameplan to make Japanese market one of its growth drivers in the next decade. “We have been present in the Japanese market for over a decade now. But I won't say we have been very successful in penetrating the market on our own, reason being the language and cultural issues faced by us as a non-Japanese company,” HCL Technologies president Vineet Nayar said.

The company has now decided to grow its Japanese business by entering into partnerships with the Japanese IT majors. “Just like NEC, EXA has a long-standing relationships with major Japanese corporations in automobile, manufacturing and banking sectors. We will leverage that to our benefit,” Nayar said.

EXA, on the other hand, plans to leverage HCL's low-cost base to bag new accounts and grow its existing accounts with Japan's leading corporations. “The new venture will play a key role to renovate our processes and provide our customers with cost-effective end-to-end IT solutions,” EXA president Masahiro Ikeda said. EXA clocked a turnover of $400 million in the last financial year.
The company will implement large-scale projects for migration or conversion and reengineering of legacy applications for EXA's customers.

The other areas of engagement will include product development and maintenance for manufacturing IT solutions and enterprise consulting services in Oracle EBS.

Maxis, Apollo scoop up Aircel for $1.08 b

SECOND LARGEST FDI INJECTION INTO TELECOM

Our Mumbai Bureau 30 DECEMBER
MALAYSIA'S largest telecom company Maxis Communications, in partnership with the Chennai-based Reddy family — the promoters of Apollo Hospitals — will buy the C Sivasankaran-promoted Aircel for $1.08 billion. This is the second-largest injection of FDI into the Indian telecom industry after Vodafone paid $1.5 billion for a 10% stake in Bharti Tele-Ventures.
Maxis will take a
direct 65% stake in Aircel by spending $702 million. It will hold the remaining stake indirectly through a joint venture, owned 74% by Apollo and 26% by Maxis. The partners have not yet decided the name of the joint venture, which will be in place latest by April next year.
The existing management of Aircel will continue to be in place. Maxis has said two of its nominees will be on Aircel board of directors — Jamaluddin Ibrahim and Chan Chee Beng. On 16 December ET reported first that Aircel promoter C Sivasankaran was likely to sell out and that Maxis was a strong contender. On December 22 we reported that Maxis was close to completing the transaction. In today's edition we reported that the Reddy family would pick up a 26% stake in the JV. Of the $1.08 billion, $280 million will be injected into the company as cash, which will be used to fund growth and roll out operations in new circles. This implies an enterprise valuation of $800 million for Aircel. With Aircel's mobile subscriber base of over 2.2 million, the payment per subscriber will be around $364.
“We have not made an overpayment. We are looking at future cash flows from operations in newer circles,” Maxis chief executive Jamaludin Ibrahim told ET.