HFCL on the prowl for software companies - Views on News from Equitymaster

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HFCL on the prowl for software companies

Mar 11, 2000

Himachal Futuristic Communications Limited (HFCL) has stated that it is in the process of identifying companies in the software sector (involved in telecom software) for the purpose of acquisition. The announcement comes close on the heels of a successful private placement and a preferential allotment of a 10% stake in the company to Kerry Packer. Telecom software is one of the most lucrative areas in software development currently in view of the large-scale investments being channeled into the sector.

The company’s decision to acquire software companies involved in telecom software related work is aimed at increasing the competitiveness of its core telecom hardware business. Moreover, having an in-house software development unit will reduce the costs involved in out sourcing such services.

Given the company’s cash rich position the decision to acquire a company would not exert pressure on its existing cash position. Instead, an acquisition would enable the company to deploy its burgeoning cash reserves in a related area of business that would both improve its competitiveness and its profitability (in view of the higher margins that software companies earn).

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