Geometric to be acquired by HCL

Apr 4, 2016 | Hot Topics

When we think of PLM, we tend to focus on the biggest of the big: Siemens PLM, Dassault Systemes, Autodesk, ANSYS, and so on — but these companies rely on a host of component developers, outside software development resources and integration partners to bring their suites to market. One of those key, but often unknown, players is India’s Geometric Solutions.

Geometric is a long-time partner of DS, Siemens and other PLMish suppliers, creating commercial and custom add-ons for Product Lifecycle Management, embedded systems and other technologies, as well as services for end-customers. For the year ended March 2015, it reported revenue of Rupees 11.05 billion (about $180 million) and employs 4800 people in the US, France, Germany, Romania, India, and China.

But it’s hard to go it alone, when your customers are often 10 or more times larger so today Geometric announced that it will be acquired by HCL Technologies Ltd (HCL Tech), with the exception of it joint venture with DS, which will be acquired by DS. Indian securities law is baffling, but this is being characterized as a  demerger in which Geometric shareholders will receive shares in HCL Tech “in a swap ratio of 10 equity shares of HCL Tech for every 43 equity shares of Geometric”. For the DS-related business, “shareholders of Geometric Ltd shall receive one listed redeemable preference share of Rs. 68 each carrying dividend of 7% p.a. in 3DPLM against every one share of Geometric Ltd.”

Who is HCL? Good question. HCL says it’s a global engineering services business, with revenue of $1.2 billion in calendar 2015. HCL says “the acquisition strengthens HCL’s presence significantly, in the PLM consulting as well as mechanical and manufacturing engineering space. It also significantly strengthens HCL’s Automotive and Industrial practices … The transaction thus creates a unique portfolio of end–to–end engineering and R&D capabilities across the full product lifecycle – hardware, software, mechanical & manufacturing engineering and PLM consulting.” My quick look discovered that HCL is India’s fourth biggest outsourcer, with engineering services making up about 20% of HCL’s total revenue.

Manu Parpia, CEO Geometric Ltd. said “I welcome this as a truly synergistic transaction, as both our employees and customers will benefit. Our customers will have access to a wide range of engineering services which complement
Geometric’s offerings. Geometric’s employees will have the opportunity for growth as they can serve HCL Tech’s large customer base.”

The deal still needs to be approved by shareholders and regulators, though it appears shareholders voted with their wallets, sending Geometric and HCL’s share prices up today.

Digging through news reports on the deal, I discovered that the total value of the deal is valued at Rupees 1,283 crore for the non-DS business and Rupees 441 crore for the JV that’s going to DS. A crore is 10,000,000 million Rupees, so this comes out to about $195 million plus $65 million.

There’s an interesting article here about how the deal came together. If it’s true, the joint venture with DS was both a plus and a stumbling point for potential acquirers; several good lessons for entrepreneurs who, like Mr. Parpia, make compromises in order to grow their businesses.