CTC 2nd largest acquisition since Satyam; financial services sector a priority: Tech Mahindra

Tech Mahindra, on Monday, announced the acquisition of Com Tec Co IT Ltd (CTC), a European IT firm and 25 percent stake in two insurtech platforms for a total of EUR 330 million (about Rs 2,800 crore). To understand how the acquisitions will aid Tech Mahindra and its strategy going ahead, CNBC-TV18 spoke to Vivek Agarwal, President – BFSI, HLS & Corporate Development of the company.

First, Agarwal highlighted that CTC has an industry-leading EBIT margin. Second, he mentioned that acquisition valuation is in-line with the industry standards. He added that this is the second-largest acquisition done by the company ever since Satyam 12 years ago.

He said, “From a capital commitment perspective, this is one of our larger acquisitions. It’s probably our second largest commitment after the Satyam acquisition which was 12 years back.”

Agarwal pointed out that the recent acquisitions in FY22 are reflective of the opportunities that are currently present in the market. He is confident that investments in growth will generate overall shareholder value.  Additionally, Agarwal mentioned that Tech Mahindra is open to further acquisition opportunities and will stay disciplined in this regard with respect to valuations.

He said, “From valuation matrix perspective, we have always stated that we will stay disciplined on what valuations we pay and what returns we can generate for the shareholders. So, we follow the same matrix and measurement criteria here too.”

On the banking, financial services and insurance (BFSI) segment, Agarwal mentioned that it has grown from 9 percent to 17 percent for the company in the last 5 years. Delving deeper into the segment, he noted that financial services is one of the largest spenders of the tech space. In view of this, going ahead, the company has guided its growth as a strategy. When it comes to the insurance sector, he expects digital transformation being undertaken going ahead. Additionally, he sees spend rates in the insurance sector being higher than the average industry spends.

“As we look at the insurance industry, we do expect significant digital transformation being undertaken in the industry and industry spend rates will grow 2-3 percentage higher than the average industry growth rate,” he mentioned.