Consolidation seems to be name of the game in the Indian IT industry. Over
the last one year, growth through inorganic means has become the most preferred
route. A company that is in the spotlight for a while is Chennai-based SSI Ltd.
Close on the heels of merging its training entity with Aptech, the company has
now joined hands with the US-based Scandent Group. SSI will de-merge its
software services business and merge it with Scandent Group’s IT services arm,
based out of Bangalore. The merged entity will be floated as a new company with
both SSI and Scandent holding equal equities. This development brings to end
months of speculation about the future course of SSI’s software services
business that was going through some tough times as a result of lack of
long-term high-yield new contracts. The merged entity will be a mid-sized
software company with revenues in excess of Rs 300 crore and 1,100 employees.
Journey so far
First education center
Education division merged with Aptech
Software services division merged with
For SSI, this merger could not have come at a better time. Rumor mills were
agog for sometime about the fate of the company’s software services division.
Many stories about SSI’s ‘plans’ to sell off its entire software business
were doing the rounds. However, SSI chairman and ceo Kalpathi Suresh had
executed a series of strategic decisions over the year that is seeing him off
through the tough times. First, he spun off the education division and merged it
with Aptech and had a stake in it. And now comes the de-merger of the company’s
IT services division. While these initiatives will put an end to SSI’s
dwindling revenues, it is still early to ascertain the role that SSI will play
post the merger, since the merged entity will be headed by Scandent founders (Ramesh
Vangal, founder and ceo, and Christopher A Sinclair, the non-executive chairman
of Scandent). Meanwhile, Kalpathi Suresh will become the non-executive director
on the merged entity’s board. The holding pattern of the merged entity will
be: Scandent Group 50%, Kalpathi family 15%, and the public and other share
holders of SSI 35%.
Here comes the rationale of the merger. SSI is strong in certain vertical
areas like government, and financial services and insurance. Despite that SSI
has been able to grab a minuscule share of the North American markets.
Meanwhile, Scandent Group has built a name for itself in the US and has got good
customer relations and delivery models. Scandent will cash in on SSI’s
vertical domain expertise that will help in enlisting new clients. Also, both
the companies feel that by being headed by an American, the merged entity
influence new customers from the region. SSI’s facilities in India, including
its disaster recovery center in Bangalore, will be used effectively by the
On SSI’s future post the merger, a theory envisaged now by industry
watchers is that SSI will be left with a cash in excess of Rs 40 crore and a
holding in Aptech. Kalpathi Suresh however says that it is early days to predict
the road ahead for SSI, a clear picture will emerge down the line.
Shrikanth G in Chennai