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Infy bags Axon for 3300 cr.

Infy news: it has just bought Axon group for Rs. 3,300 cr. Axon is listed in the UK, and makes about Rs. 160 cr. (Rs. 20 billion) a year in net profit.

For Infy, the EPS addition is about Rs. 3 per share. They will lose the interest/dividend income on the 3,300 cr. which at 7% comes to 230 cr. so net-net this deal will probably break even on EPS in the near term.

There might be synergies – moving work to India, consolidation of management and sales etc. But this is a pretty expensive deal – at a P/E of 20, they had better be growing like crazy. Axon has been doing well – as these figures show.

I thought they’d get a sweeter deal than a 20 P/E in a slowing economy, but I guess this is what it is. I’m not sure if this is positive – in the near term it surely isn’t – but inorganic expansion is definitely a good thing.

Disclosure: No current positions