Intel set to acquire majority stake in Eastern Software Systems Ltd
Eastern Software Web site: makess.com
Sharif Rangnekar (ET)
NEW DELHI 13 JULY
THE multi-billion dollar infotech major, Intel, is shopping in India. Its first purchase is a little-known software company — Eastern Software Systems Ltd. The international major is in the process of acquiring a 55 per cent stake in the Indian company.
The transaction is a two-stage deal. In the first stage, 3.5 lakh shares would be acquired from Citicorp Information Technology Industries Limited — a Mumbai-based firm. This equity would be picked up by Intel Pacific Inc.
Following this, fresh equity would be issued to the infotech major. Sources said that 4.47 lakh shares of Rs 10 each would be issued to Intel Pacific. This would result in the US company's stake going above the 51 per cent level, sources added.
Obviously, this will give the US major control over the Indian software company. The deal is said to involve an meagre outgo for Intel as the controlling stake would come to the biggy for just about Rs 3 crore, sources said.
Observers say the Intel plan and that of Eastern is somewhat in contrast with the general trend. Software companies have often gone in for private placements or public issues to raise funds for its projects. This time around, Eastern has not merely brought in funds, but has also obtained an international biggy and its expertise in the infotech sector.
According to its intimation letter and permission request submitted to the Foreign Investment Promotion Board (FIPB), Eastern Software Systems has said that after the two stages of sale of equity and addition of fresh equity, the equity stake of Intel Asia ''will be equal to 55.57 per cent of the total equity share capital of the company of Rs 4.02 crore. Sources said that in both stages, Intel would be offered equity at Rs 10 a share.
It is learnt that the department of electronics did not object to the proposal which led to an approval from the FIPB. What assisted in providing an easy passage, was that the software company's request was supported by a consent letter from Citicorp Information Technology, expressing its willingness to offload its stake in favour of the US major.
Eastern Software Systems is in the business of software production. This includes Bespoke Software Development Application, software package development, training besides out-sourcing service for maintenance and enhancement of infotech set up for its clients.
Observers say that the entry of Intel could make a difference to the general structure of the software company. This could include a change in operations and consequently, production as Intel would like to throw in its own patented products so as to build up a base in India. But as of now, Intel has not indicated any specific plans except its intent to acquire shares in the software company and so one would have to wait and see how its goes about its business. |
