Cognizant to acquire CoreLogic’s Indian business

In a move that will boost Cognizant Technologies Ltd’s (CTL) capabilities in the end-to-end mortgage services, the US-headquartered tech company with a large base in India on Tuesday announced the acquisition CoreLogic’s Indian operation for a cash payment of $50 million.

The deal also includes adjustments for working capital and other charges or credits which will be determined at its closing.

As part of the transaction, the two IT companies have also enter into a services agreement with a minimum revenue commitment of $324 million, plus applicable inflation adjustments, over five years with various renewal and extension rights.

R Chandrasekaran, president & managing director, global delivery, Cognizant, said the acquisition will extend his company’s footprint in the consumer lending space in North America and enhance partnership with CoreLogic.

“We want to expand our portfolio offerings with CoreLogic and strengthen presence in the consumer lending industry in the US. The deal will also enhance our go-to-market capabilities with a deep understanding of the CoreLogic process, data, and technology platform; along with the knowledge of how to leverage that platform into new or expanded market offerings that Cognizant and CoreLogic agree to pursue,” he told DNA.

He said the partnership will also allow Cognizant to provide a compelling value proposition to customers by leveraging complementary capabilities that Cognizant and CoreLogic India bring to the table.

Chandrasekaran said the revenues of CoreLogic would start reflecting on CTL’s books after completion of the deal in August.  
He said the deal was neither margin dilutive or accretive.  

“Post the deal, the company is confident of maintaining its margins at 19-20%,” he said. The acquisition is being funded from CTL’s cash reserves.

Analysts feel the timing of the acquisition was apt with Cognizant all set to upstage Wipro as the number three IT services player in the Indian market in the quarter gone by. The company is due to announce its April-June quarter results on August 2, where it is most likely to report higher revenues than Wipro’s dollar revenue of $1408 million in the same quarter.

“Cognizant is a cash-rich company which is all set to overtake Wipro to become the third largest IT player in India. It is, therefore, natural to acquire smaller companies to boost revenue and expand geographical presence during the growing phase,” said an analyst from Angel Broking, who did not want to be named.  

Anis Chakravarty, director, Deloitte, feels CoreLogic would fill the gap that Coginizant has in the mortgage and real estate consumer lending space.

“CoreLogic has many US-based customers in the mortgage and real estate space. Cognizant did not possess competency in this field and hence with the acquisition it aims to move up the value chain,” he said.

Chakravarty views the acquisition as a smart move; “Besides providing capabilities in software product development, CoreLogic is also strong in analytical modelling,” he said.

CoreLogic’s approximately 4,000 associates across the company’s offices in Bangalore, Hyderabad, and Mangalore will become employees of Cognizant after the acquisition.