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IBS software to consider IPO if large acquisitions come up

To tap US market for raising funds

After onboarding Apax Fund as partner, travel and logistics technology company IBS Software is planning to strengthen its position in the industry further and then go for an initial public offer of equity in the US market, founder and executive chairman of the company VK Mathews said.

“We don’t need funds for our growth, except in case of big acquisitions. We are a cash-rich company, IPO-ready and have a very predictable outlook for the future,” he said.

In May, Apax Partners LLP (Apax) invested approximately $450 million to acquire a significant minority stake in IBS Software from Blackstone.

IBS, in February, acquired the freight and logistics business of Accenture. In 2019 it acquired a company in Montreal AD OPT which is into aviation crew optimisation software from, Kronos Inc. In total, IBS Software has acquired eight IT companies and businesses in the US, Europe, Canada and India.

“Currently, we are weighing a few more acquisition opportunities, but cannot reveal more details on it,” Mathews said. “We look at both organic and inorganic options for pursuing growth. If we see synergy in acquiring firms or businesses, we will certainly consider it. The size of the company does not matter as long as we feel that the fit is right.”

Whenever IBS decides to list, it will be in the US markets as in India the profile of the company would make it difficult for investors and analysts to value the company.  One of the difficulties for investors would be what do they compare IBS with? In India you have MphasisTCS and these are all services companies. We are a platform vertical SaaS (Softwares as a Service) company. There are not  many firms in the country of our size and scale in our vertical.”

“The US is the most advanced market for vertical SaaS software companies. That’s the reason the market can appreciate what we are doing. They will be able to discover the value better,” Mathews said. “Markets (for tech IPOs in the US) have been very, very bad. In the last 18 months, there has not been a single tech IPO in the US. That’s the best place for an IPO because that’s where you’ll find comparable vertical SaaS companies of similar financial (strength),” he added.

Mathews said Covid has accelerated many changes that technology was driving in the economy and companies which are agile, who are asset light, they were able to turn around and survive compared to very asset heavy companies and those who are not agile.

The Covid and technology changes have changed systems and now the greatest value in a supply chain is extracted by the company which manages the end consumer while others end up becoming producers. Consumer facing businesses can have pricing power while producers end up operating on a cost-plus model.

“So these changes are taking place and this is where we will be supporting and playing for our consumers. And this is really big and very exciting,” Mathews said. IBS is now providing tools to the participants in the travel and logistics business like airlines, hotels and car rental companies to become full service companies.

IBS is privately held. Its revenues in FY22 grew 18.4% on year and stood at `1213.7 crore as the travel industry recovered post Covid.
Aviation accounts for 70% of the company’s revenues, tour and cruise segments 15% and hospitality 8%

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