In March 2015, the US-based and Nasdaq-listed Virtusa acquired 51.7 per cent of fully diluted outstanding shares of Chennai-based Polaris Consulting & Services for $180 million. It now holds 75 per cent in Polaris with total outgo so far being around $250 million.
“After going public in 2008, we did seven acquisitions with Polaris being the best. After June, we will evaluate de-listing of Polaris’ shares,” Kris Canekeratne, Chairman and CEO, VirtusaPolaris, a subsidiary of Virtusa and listed on the BSE as Polaris Consulting told Business Line in an interview. Excerpts:
We hear integration was over before March 2017 deadline. Your comments?
We were expecting integration to go on till March 2017 but we completed it in the first quarter of this year. We are pleased with quality of client relationships and strengths that we have built in banking and financial services.
Was there any lay off?
During acquisition, Polaris had 7,000 employees and Virtusa 12,000.
The number is almost the same. We increased some percentage of unforced attrition due to headwinds. But in senior leadership, very few moved out.
What kind of synergy was there between Virtusa and Polaris?
Virtusa was dealing with the retail and consumer side of banking, while Polaris was on the corporate and investment side. We acquired them to create a strong go-to-market in banking. Last quarter we announced a $40-million, 24-month engagement wherein Virtusa-Polaris was selected as a partner for mobile banking platform for a large bank in the US. This is one of the biggest deals in the industry.
How has been the sequential revenue growth?
In the second quarter, we grew two per cent sequentially and in the third quarter, we guided to around 3 per cent growth and for the fourth quarter we would grow 4 per cent. We will have a strong sequential growth in second half of the year.
Citigroup was the biggest client for Polaris. How has things changed post acquisition on this account?
Citi represented a disproportionate percentage of Polaris’ revenue with over 40 per cent. This was a risk to Citi group.
During acquisition they dropped to around 15 per cent and they are not close to any of the risk factors. Citi contributed around 14 per cent of overall revenue in second quarter. We will be very comfortable revenue from Citi is 15-20 per cent range. We feel we can create a significant value for Citi group and that it can be terrific strategic partner for us.
What’s revenue from Citi now?
In the first quarter, revenue from Citi was $30 million and increased to $33 million in second quarter. We expect Citi to be a growth account for us. Along with the new CEO Samir, I have put in the right management processes on stepped up execution and built strong relationships at Citi.
Have you got all clearances for the acquisition?
We now own 75 per cent of Polaris. We owned 79 per cent of Polaris but had to scale down to 75 per cent as per SEBI regulation. We did that successfully, and need to remain at 75 per cent for six months that ends in June. Then we have options to continue to run the way we are today or look at options of acquiring 15 per cent, which will force us to do de-listing.
Any plans to de-list Polaris?
We are evaluating it right now. From a go-to-market stand point, we are running as a fully integrated and one go-to-market company. From a long term, it probably does not make sense for us to have a second listing with a minority shareholding. But these are all things that we will look at once we get through the six-month period in June. De-listing is purely accounting purposes.