Tanla Solutions acquires Karix Mobile for Rs 340 crore


“Tanla Solutions Ltd. acquires Karix Mobile for Rs 340 Crore in a cash and stock transaction from GSO Capital Partners, a Blackstone Company: Combined entity to be India’s leading Enterprise Cloud Communications Company”

Hyderabad, India: Tanla Solutions Limited, (NSE:TANLA, BSE:532790), one of the largest cloud communication providers in the world, today announced a definitive agreement to acquire Karix Mobile Private Limited and its affiliate, a leading mobile engagement and communication provider from GSO at an enterprise value of Rs 340 Crore. This acquisition accelerates Tanla’s growth strategy and deepens its enterprise reach. Globally, Enterprises increasingly rely on cloud communication services as part of their digital transformation strategy.

This acquisition will be instrumental in strengthening Tanla’s position as a leading Cloud communication services provider.

Mumbai-based Karix Mobile Private Limited is a leading business cloud communications provider with reach to over 1,500 enterprise clients in various industries across the country. With this transaction, the combined company will be one of India’s leading enterprise cloud communications providers with marquee customers in banking, insurance, automotive, DTH, retail, consumer products, e-commerce, m-commerce, and the government.

This strategic acquisition leverages Tanla’s strong telecom carrier partnerships and Karix’s enterprise selling expertise to build a rationalized yet comprehensive solutions portfolio that can quickly generate revenues & reduce go-to-market timelines. Tanla is excited to be partnering with GSO as we continue to grow the company. Both Tanla and Karix will synergize to upsell & cross sell offerings to enterprises and mobile carriers.

Key highlights:

  • Tanla Solutions (NSE:TANLA, BSE:532790) today signed a definitive share purchase agreement to acquire 100% of Karix Mobile (formerly known as mGage India) and its wholly owned subsidiary Unicel from GSO Capital Partners, a Blackstone Company, at an enterprise value2 of Rs 340 Crore.
  • GSO will receive a cash payment of Rs 112 Crore. This will be funded from Tanla’s internal accruals. Further GSO will be issued Rs 125 Crore worth of Tanla stock at a price of Rs 56.79 per Equity share. Tanla will take over a Debt of Rs 103 Crore.
  • On a fully diluted basis, GSO will own approximately 14.6% in Tanla, Promoters 30.6%, Employees 5.6% and Public shareholding 49.2% on completion of the acquisition. GSO will have an observer seat on Tanla’s board.
  • The Promoters have to subscribe to 7.9 Mn number of shares to retain their pre-acquisition shareholding of 30.6%. The agreed price for subscription to shares is Rs 40, subject to SEBI (ICDR) regulations and approval of shareholders.
  • GSO is entitled to pre-emptive rights3 in future allotment of capital, to enable GSO to avoid dilution.
  • Karix Mobile an 18-year-old global brand, has offices in four major Indian cities with over 1500 enterprise clients globally, and a revenue of Rs 540.24 Crore in FY2018.
  • With combined revenues 5 of Rs 1170 Crore in FY2018, Tanla will emerge as a leading cloud communications company in India providing formidable digital transformation strategies to its enterprise clients.
  • Tanla expects cost synergies6 of approximately Rs 15 Crore, over the next six quarters of operations.
  • This acquisition is expected to close by October 2018 and is subject to approval from Tanla’s Shareholders and regulators, if any.

Uday Reddy, Tanla Solution’s Chairman and Managing Director, said: “Tanla is excited to be partnering with Blackstone as we continue to grow the company. Karix is an ideal strategic fit furthering our stated objective of adding diverse and high value customer base and business, capable technocrats and incremental financial scale. Our combined entity will unarguably be a CloudCommunications behemoth with innovation led offerings in the Digital space for our partners and clients alike.”

Uday Reddy, Tanla Solution’s Chairman and Managing Director

Jason New, Senior Managing Director of Blackstone, said: “We are delighted to realise part of our investment and look forward to supporting the company in its next phase of growth with Tanla.”

Jay Sheth, CEO of Karix, said: “We are very pleased with the announcement of this deal. “The combined strength of Karix and Tanla will afford our enterprise customers a single source for a comprehensive suite of communications services, and an assurance that their future emerging requirements will be met timely.”

Deepak Goyal, COO of Karix, said: “This strategic integration will also provide new and exciting opportunities for our talented employees as they become part of the undisputed market leader.”

Transaction Details:

  • This acquisition is a combination of cash and stock of Tanla, with an aggregate purchase consideration of Rs 340 Crore.
  • GSO will receive Rs 112 Crore in cash and Rs 125 Crore worth of shares (2.19 Crore equity shares of Tanla at a price of Rs 56.79 per share), Tanla to pay Rs 112 Crore from its internal accruals and take over the net Debt (term loan and net working capital) of Rs 103 Crore.
  • GSO is entitled to pre-emptive rights in future allotment of capital, to enable GSO to avoid dilution

– Annual cost synergies with an estimated value of approximately Rs 15 Crore, expected to be realized over the next six quarters post-closure of the transaction.

– The major expected source of cost and capex synergies include: –

  • Rationalizing platform infrastructure, optimizing connectivity(ies) and generating operational efficiencies.
  • Potential better negotiation with partners, optimized operational, general and administration costs as a result of scale benefits.

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