Systems Limited to acquire NdcTech

In a notice sent to exchange yesterday, the board of directors of the company authorized Systems Limited and its wholly-owned subsidiary in Singapore, Systems Internal IT Pte Ltd to enter into a shares purchase agreement with NdcTech comprising of National Data Consultant Pvt limited, NDCTECH APAC Pte. Limited Singapore and National Data Consultancy FZC for the acquisition of 100% shares of NdcTech.

The size of the approximately US$35mn and the acquisition will be against consideration of US$10mn plus Rs5.07bn payable by the company partially in cash (Rs346mn) and partially in kind by way of issuance of 11.82mn new shares of the company to the sellers of NdcTech at Rs400/share subject to all necessary shareholder and regulatory approvals.

We believe that this issue of shares may be through other than Right the issue as per the ‘further issue of shares regulations, 2020’.

NdcTech is a leading core and digital banking implementation service provider, along with its subsidiaries/associated companies in UAE and Singapore. NdcTech offers Core Modernization, Digital Banking Services, Managed Services, Banking on the Cloud and Consulting Services.

It is a regional partner of Temenos, which has over 3,000 financial institutions across the globe, including 41 of the world’s top 50 banks. Temenos is recognized by renowned firms such as Gartner, Forrester, IBS Intelligence, Everest Group and Fintech Futures as a Leader in their respective quadrants.

The said deal is likely to help SYS upsell and cross-sell to its existing customers in the financial sector and to NdcTech customers as well.

As the company has not yet disclosed the financial numbers and what synergies SYS will achieve from this acquisition, it is too early to make an assessment of its impact on SYS future earnings.

SYS is currently trading at a 2022 P/E of 16x and P/S of 4x and we maintain our ‘Buy’ rating on the stock.

Courtesy- Topline Securities

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