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Wednesday, December 27, 2006

Applabs Tech eyes buyouts, plans IPO

Applabs Technologies, a global software testing and development services company, is scouting for acquisitions and also considering the initial public offer, IPO route to fund these acquisitions.

"If we maintain this momentum of growth then it is conducive to think on these line. We would be making a few decisions very shortly as our focus has been growth through acquisitions and for that you need funds," says Sashi Reddi, CEO, Applabs Technologies.

Despite a disappointing end to its merger plans with VisualSoft and eSolutions early this year, the company (expecting to touch USD 70 million by March 2007) made news with the acquisition of the UK-based IS Integration for USD 37 million (Rs 170 crore), reports Business Standard.

With this acquisition, Applabs acquired foothold in the UK. Till then, it had a strong presence in the US and India.

Additionally, following the transition AppLabs now has an increased portfolio of services, encompassing; product testing, product development, offshore testing and banking, insurance and financial services; retail; utilities; public sector; technology and telecommunications sector expertise.

The software testing market is estimated to be around USD 13 billion out of which the outsourced part is USD 3 billion with India's share being about a billion.

"Of this billion dollar market players such as Infosys, TCS, Wipro and the likes take the chunk of it whereas third party players such as Applabs have eyes on USD 300 million. Applabs has about 7% share of this segment," says Reddi.

Despite this the company is undeterred about the competition and Reddi has reasons to be confident. "What we have seen in the US and UK is that customers do not prefer to give development and testing work to the same company," he says. India too is following the trend.

A case to point out is Bombay Stock Exchange. While the software was developed by CMC, the testing part was done by Applabs. Similarly, in case of Pantaloon, Applabs did the testing for their security software whereas it was developed by some other company.

Reddi reasons that a third party role in the testing makes sense as there is someone from the customer side who would certify on the product.

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