Indian IT services major HCL Tech said it will buy German automotive engineering services firm ASAP Group late on Wednesday for an enterprise value of about 251 million euros ($279.83 million) as it looks to grow in the automotive space. The acquisition will expand HCL Tech’s engineering services capabilities in e-mobility and autonomous driving in Europe and other key global markets, the company said in a stock exchange filing. Headquartered in Ingolstadt, Germany ASAP employs about 1,600 people across nine locations. It focuses on future-oriented automotive technologies such as autonomous driving and connectivity. Its services portfolio includes electrics/electronics, software, consulting, service testing, validation, and vehicle development.
The acquisition will be made through an all-cash deal involving HCL Tech UK Limited, a wholly owned step-down subsidiary of the IT services giant, and is expected to close in September 2023 pending regulatory approvals, the company added. The acquisition will enhance HCL Tech’s capability in the automotive space, especially in Europe and Germany. In this country, it focuses on serving automotive original equipment manufacturers and tier 1 suppliers, the company said.
CEO Michael Neisen said both companies’ combined engineering and technology expertise will benefit customers in Europe, the Americas, and Japan, where HCL Tech sees substantial opportunities to drive growth. The acquisition will also help HCL Tech leverage the ASAP workforce and scale up its presence in Germany, where it has a significant operation.
In its Q1FY24 earnings report, HCL Tech said consolidated net profit for the three months ending June rose 7.65 percent to Rs 3,534 crore. The IT services company missed street estimates on almost all parameters but had a good performance in its three verticals- financial services, manufacturing, and life sciences- contributing 60 percent of its revenue. It also declared a 10-rupee interim dividend.
However, the attrition for the first quarter was 16.3 percent, compared to 18.9 percent in the previous quarter. The company said it is rebalancing the workforce to focus on higher growth areas and enhancing digital transformation skillsets.
HCL Tech maintained its annual revenue growth guidance of 6.0%-8.0% in constant currency and earnings-before-interest-and-taxes margin of 18%-19%. It said it remains confident about achieving its annual operating income target of Rs 8,500 crore for the fiscal year 2022-23.
On the capital front, HCL Tech plans to invest Rs 6,535 crore in FY24 on new projects and expansion. It also earmarked Rs 1,500 crore for inorganic investments to boost its presence in its target segments, such as digital and security. The company said it would also increase its investment in RD and innovation and its research and development centers. In addition, it will focus on improving operational efficiency. The company expects to achieve its operating expense ratio target of 65% by FY24.