Rolta on the prowl for BI acquisition

Geospatial information solution (GIS) provider Rolta India is scouting for companies with business intelligence (BI) capabilities for acquisition.

The company had said after announcing its third quarter (Jan-Mar) results that it had board approval to raise $125 million for funding future acquisitions.

“We haven’t yet started the process of raising capital,” K K Singh, chairman of Rolta Group told DNA.

“Currently, we are looking at a couple of targets. We are looking to acquire in the BI space. It may be in FY11, but I cannot provide further specifics. We will use the option of raising capital the moment we finalise the target company,” Singh said.

In order to enrich its stack of GIS solutions, Rolta acquired the Indian subsidiary of Canada-based PCI Geomatics Enterprises on Monday, for about Rs 50 crore. The acquisition provides it licences on geo-imaging technology used in earth imaging, remote sensing and related geo-positioning solutions.
In April, Rolta had acquired Atlanta, US-based OneGIS Inc Solutions. That acquisition provided it capability in mobile GIS targeted at field force automation usages.

Rolta currently earns about 75% of its revenue from GIS and engineering design ser-vices.

The firm is pursuing acquisitions with the aim of offering more and more IP-based solutions, which earn better margins.
“The PCI acquisition gives us hundreds of product and IP on a perpetual basis. That is the most important part in this. The demand for imaging technology is growing rapidly. This acquisition will help us in securing additional revenue of Rs 40-50 crore per year,” said Singh.

It aims to earn a fifth of its revenues from IP-based solutions, up from about 8% now.

However, its engineering business has slackened somewhat, which threatens to impact the topline.

Merrill Lynch analysts Pratish Krishnan, Mitali Ghosh and Kunal Tayal wrote in a June 29 note to clients, “Rolta derives 25% of its revenues from the engineering segment. It provides detailed engineering design services to oil & gas (45% exposure) and power firms (~50%). With new capacity announcements by refiners delayed, deal closures are taking longer than anticipated. We believe management guidance for FY11 revenues could bake in cautiousness and fall short of street expectations of 20% revenue growth; we forecast 17% YoY revenue growth.”

Singh conceded as much, but was optimistic on the BI business. “The traditional engineering business is going through slack. But BI segment in that is finding good traction. Our OneView suite of solutions is seeing good demand,” he said.