Updater Services Pvt. Ltd, which is backed by Motilal Oswal Private Equity, has acquired a majority stake in an outsourcing firm with an eye on diversifying its offerings as a business support services provider.
The integrated facility management firm said in a statement that it has bought a 75% stake in Matrix Business Services India Pvt. Ltd. It did not disclose the deal amount.
Updater Services has valued Matrix at around Rs 67 crore ($9.5 million) in the structured transaction, one of the persons privy to the development told VCCircle. Another person said Matrix was valued at around Rs 50 crore ($7 million). Updater is believed to be shelling out around Rs 37-50 crore to buy the stake, based on the estimated valuation range.
This would mean that Matrix is being valued at around 6-7 times its operating profit and around the same level as its revenues. The firm’s revenue has been stagnant at around Rs 56 crore for the previous two financial years -- 2017-18 and 2016-17 -- for which data is available. Its operating profit has been hovering around Rs 8-10 crore for the last five financial years, according to VCCEdge, the data platform of Mosaic Digital.
Updater said it had purchased part of the stake from Kotak Mahindra Investments Ltd (KMIL), a wholly-owned real estate and corporate financing subsidiary of Kotak Mahindra Bank. Apart from KMIL, which was the single-largest shareholder in Matrix, Updater Services bought 2.67% stake from Mahindra & Mahindra Contech and the balance 52.56% from other shareholders, mainly from all the non-executive shareholders.
Matrix’s managing director and chief executive PC Balasubramanian, who held around 13% stake as of March 2018, will continue to spearhead the business.
Updater Services said the buyout will expand its range of services into the business assurance and background verification segments. Matrix has operating margins of 15% as opposed to Updater’s 5%. It appears to be trying to build a diversified business services firm along the lines of listed Quess Corp, which is backed by Canadian billionaire Prem Watsa’s Fairfax.
“We see this acquisition as a move towards expanding and strengthening UDS’ comprehensive portfolio in business services,” said Raghunandana Tangirala, founder and managing director of Updater Services.
As per the statement, Matrix is currently servicing 350-plus customers, including 25 of the Fortune 500 companies. Its workforce of more than 1,000 employees is spread across 70 cities.
Veda Corporate Advisors acted as the sole financial advisor for this transaction.
Founded in 1985, Updater Services manages 250 million sq. ft of commercial space across India for about 700 clients with a workforce of more than 46,000 permanent employees.
In 2017, Motilal Oswal Investment Advisors Pvt. Ltd had invested $15 million in Updater Services for a minority stake.
This marked the third private equity investment for the company. It had previously raised money from New Vernon Private Equity and ICICI Venture in 2004 and 2008, respectively.
Later in 2017, Updater Services had invested an undisclosed amount in Fusion Foods and Catering Pvt. Ltd.