Tech Mahindra acquires 100% stake in European CTC for about Rs.2620 cr

Indian information technology (IT) services company Tech Mahindra said on Monday it will acquire a 100 percent stake in Com Tec Co IT Ltd (CTC), an IT solutions and service provider with development centers in Latvia and Belarus, for €310 million (approx. Rs. 2620 crore).

The homegrown firm said the acquisition, which includes earnouts and synergy linked payouts, will enable it to expand its offerings to high-end digital engineering services for some of the largest insurance, re-insurance and financial services organizations in the world, scaling some of its offshoring efforts near India. 

Additionally, Tech Mahindra is also investing a total of €20 million (approx. Rs. 1.69 crore), for a 25% ownership in SWFT and Surance platforms, which are two InsurTech ventures funded by CTC.

SWFT is a SaaS-based digital customer engagement platform, which is meant for digital brokers, price comparison websites and insurers who want to reach customers directly using digital channels. Surance, on the other hand, is a personal cyber insurance solution that helps in vulnerability assessment, cyber protection, and cyber insurance coverage. Tech Mahindra said the acquisition will help scale its European presence, with over 700 IT professionals in contemporary technologies and processes.

“The Insurance industry is currently undergoing a significant transformation which is driven by new emerging business models that are powered by disruptive digital technologies,” said Vivek Agarwal, President - banking, financial services and insurance, HLS, and Corporate Development at Tech Mahindra, said. “In order to enable this digital transformation, we are investing in strengthening our capabilities to support insurers in accelerating their transition to cloud-based platforms and provide end-to-end engineering with a strong European nearshore presence.”

“Becoming a part of a global entity like Tech Mahindra will give us immediate access to global scale and create a tremendous growth and development opportunity for our people and the business,” said Avraham Shaked, Co-Founder of CTC.

The announcement was made after market hours. The Tech Mahindra stock ended trading at Rs. 1721.65 a piece, 1 percent lower than its previous close, even as BSE ended the day at 61,308.91 points, up 0.14 percent.

To be sure, Indian IT companies continued their strategic buying spree in 2021 in a bid to improve their services offerings and consultancy businesses.

The CTC acquisition, for instance, is a part of recent efforts by Tech Mahindra to scale and bolster its offshore operations. The company has now made about 10 capability-led acquisitions in under 12 months. Early last year, it acquired two companies – US-based Infostar LLC (Lodestone) and London-based We Make Websites Ltd (WMW), for $105 million and 9.4 million pounds (approx. $13 million) respectively.

Last month, the company acquired Allyis India and Green Investments, in an all-cash deal worth $125 million. The two firms are holding companies for Allyis Group, which has 600 employees and is based in the US. The very same month, Tech Mahindra said it had acquired a 100% stake in US-based Activus Connect--a provider of work at home customer experience solutions, for a total consideration of up to $62 million. The acquisition is expected to bolster Tech Mahindra’s capabilities in emerging workplace solutions and strengthen end-to-end customer experience portfolio.

Similarly, HCL Technologies announced the acquisition of a 51 per cent stake in German IT consulting company Gesellschaft fr Banksysteme GmbH (GBS). On 14 January, HCL Technologies announced the signing of a definitive agreement to acquire Hungary-based data engineering services provider Starschema Ltd for $42.5 million. The strategic move is expected to bolster HCL’s capability in data-driven digital engineering and increase its presence in central and eastern Europe.

In March 2021, Wipro closed the company’s largest ever acquisition of technology consultancy to banking and financial services industry Capco for $1.45 billion. In December, it said it would acquire Edgile LLC for $230 million in cash. This move is in line with the company’s strategy to maximize growth via the merger and acquisition route. As such, the Edgile acquisition is a small piece in the overall scheme of things for the company.