Melstar mulls on acquisitions

by M Rochan    Dec 20, 2011

Mr. Richard D’Souza, CEO, Melstar Information Technologies Ltd. talks to CXOtoday about his company, their plans for growth and strategies.Richard D Souza

[Q] What is the growth in the application development / management spaces in India?
The demand for applications is steadily growing and application cues are picking up. To my knowledge, the growth in application development or management here is not very high at the moment… Application development in India is, in my guesstimate, growing at 10%-15% year-on-year.

[Q] Who do you cater to? Who are your clients?

We have 30 active clients on the staff augmentation side and five clients on the software development side. The target is to add three clients every quarter next fiscal onwards. We cater to the BFSI segment, 90% of our revenues come from professional services, consulting and staff augmentation i.e. we handle projects wherein our people work in the client’s offices.

We have 600 employees working across seven locations now. Application development constitutes 10% of our business at present. Our clients use applications for their business operations, in trading and back office functions. The RBI regulation, that reporting norms will have to change by April, also presents an opportunity for us to work with banks in the area of application development. And we’re focusing on that too and there are two, maybe three prospects that we’re exploring.

[Q] What are your growth plans?

Talking about our growth – staff augmentation will grow but software development will grow faster. The 90-10 mix will change. The Yash Birla Group (YBG) took over in the year 2008.

The previous owners had a different focus - they were into the hardware business i.e. providing value additions to IBM products, PCs and networking products.

Post the YBG takeover, the focus is to move in the direction of application development, the application service provider (ASP) model and cloud computing (CC). In a nutshell, from services to a product company; which is the natural law of economics.

We would like to introduce new software practices. but are holding back owing to turbulent economic conditions in Europe and elsewhere. It’s a wait- and-watch policy for now.

[Q] Will you consider taking the inorganic growth route in 2012? How will acquisitions help you? Where would you consider acquisitions?

In terms of growth, some companies will do better than others. We’re known for our quality in service delivery and software development, and that’s our strength. Being part of the YBG now, we have access to resources that would aid our inorganic growth plans. Acquiring in a market that is down would benefit us and we are scouting for potential acquisition targets in India.

An acquisition will strengthen our top-line and, in the long run, our bottom-line as well. It would help increase our visibility - we are a smaller company in terms of revenues right now. Under the previous owners, the hardware business had touched Rs 100 crore. For FY 2010-11 our revenues were Rs 25 crore. But one major client addition could turn things for us.

Profile of Mr. Richard D’Souza, CEO, Melstar Information Technologies Ltd:

Richard D’Souza has nearly four decades of experience in the corporate world across the IT, consulting and finance domains.

He has held senior management positions including that of India Country Head for IT & Telecoms at Bank of America, where he led the Bank’s transformation (1983-1986) in India, from a pen and ink operation to an automated environment. He was on the RBI Committee that pioneered item processing in India with the introduction of the MICR line in 1986. Subsequently, he headed Tata Unisys’s banking and financial services vertical, which he set up and grew over a period of over five years.

He has served as the CEO of two small IT firms as well as the CFO of an IT distribution company (an Indian subsidiary of a Singapore-based MNC). He has also served as the (interim) CEO of Trinity Computers, an insurance KPO and a wholly-owned subsidiary of the multinational Willis Group. He worked with Philips India, Crompton Greaves and WIMCO Ltd., earlier in his career.

He has a Bachelor of Science (Honours) degree from St. Xavier’s College, Mumbai and an MBA (with a specialization in Finance) from XLRI, Jamshedpur. He is an Associate Member of the Indian Institution of Industrial Engineering (AMIIE), the Institute of Cost & Works Accountants of India (AICWA) and the Institute of Company Secretaries of India (ACS).