We will focus on five key growth areas: Navneet Khandelwal, Zensar Technologies

We have identified five key strategic growth areas and we are enabling a structure that will help us accelerate growth, says Navneet Khandelwal, CFO of Zensar Technologies in an interview with ET Now. 

Talk to us about the acquisition of the US and India-based data engineering firm. What is it going to mean for Zensar going forward?
M3bi is a company that is working in the digital engineering, data engineering analytics space. This is clearly one of the strategic growth opportunities that Zensar has identified. They also come with a very good marquee client base for three fortune 500 companies. We believe it will help us to create more revenues by mining into these customers as well as we will be able to take these skill sets into other Zensar clients. So, all in all, looking at this would create a significant business potential for Zensar as well as a value which will be able to create for our shareholders

What will be the total cost? How are you looking to fund the acquisition?
Sure, this acquisition is priced at a total value of $33 million out of which $24 million will be paid upfront whereas $9 million are going to be paid over a three-year period based on performance-based targets. The deal was closed on 31st March. We will be able to fund the entire acquisition through our internal accruals.

What has been the kind of revenues from M3bi in the last two years?
This deal should get consummated during the current quarter and we should start seeing revenues flowing in from Q1 based on when we actually conclude the closing conditions. In terms of revenue for the calendar year 2020, M3bi reported revenue of $26.75 million. They are in the space which is really growing fast and they are mining very well into the existing client base that they have, so we are confident that with the leverage we can drive from this and given the capabilities, we should be able to get an accelerated growth in this area in the coming year.

Can we expect strong double-digit growth from Zensar going forward?
Sure, the deal pipeline continues to be strong for Zensar. In terms of guidance, we do not give outward guidance, however, as we have called out in our earnings call also which happened a couple of weeks back, we have put in place a strategy that focuses on areas of growth for us. We have identified five key strategic growth areas and we are enabling a structure that will help us accelerate growth. Our focus will be on ensuring that we create sustainable, predictable and profitable growth and as we have called out, it should take us between four and eight quarters to achieve what we have laid down as a part of the strategy.

What kind of M and A can we expect going forward now?
Zensar has been an acquisitive company in the past as well, however, our acquisitions are typically tuck-in acquisitions aligned with the strategy. We have identified five strategic growth areas; they are experience services, advanced engineering services, advanced analytics AI, ML, core application services and foundation services.

So we are doubling down in these areas based on wherever we believe that there are wide spaces where we need to plug capabilities in these areas in line with the vertical focus that we have, we will be looking at opportunities to buy any of the companies that we look for which aligns with this. So that is going to be the integrated part of how we look forward.