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February 3, 1998

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IHS Database wants to buy out India partner

Email this story to a friend. IHS Database Services Inc, the US-based Fortune 500 company, has offered to buy out its local partnerís stake in IHS India Private Limited.

The local partnerís 40 per cent stake amounts to 19,400 shares of Rs 100 each. IHS Indiaís fair value, which has been worked out by the companyís attorney-at-law as per the Reserve Bank of Indiaís evaluation criterion, stands at Rs 1,500 per share.

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Price Waterhouse is also working on arriving at a value for IHS India.

According to industry sources, the Rs 1,500 figure has been arrived at on the basis of various criteria like future profitability and profit track record.

IHS India had posted a net profit of Rs 15 million and a net profit margin of 48 per cent during the period April 31 to December 10, 1997.

The deal has run into rough weather owing to disagreement between the parties over the terms of the share transaction. The local partners have filed a case against the US major, alleging that it should honour its commitment to buy out the shares according to the agreed terms.

The local partners had earlier signed an agreement with IHS to sell out its entire stake in their favour. The agreement signed on December 10, 1997, mentioned the total valuation of IHS India as $758,000 as on November 30, 1997.

It further stated that IHS would pay 40 per cent of the valuation upon review of the books by C Krishnan and Virender Raheja.

IHS was to pay the said amount within 30 days.

IHS India specialises in the business of a scanning unit including OCR conversion to transfer information/data from paper to electronic media and exporting the output through satellite communication and floppy discs.

According to an industry source, the parent company has already marketed some popular CD-ROMs in the US and now stands to export cheaply manufactured CD-ROMs there, the source pointed out.

The acquisition represents a growing trend of domestic software companies being bought out by their foreign partners.

Recently, the UK-based FI Group took over IIS Infotech, a Delhi-based Rs 430 million software services firm for Rs 1.45 billion.

The Foreign Investment Promotion Board recently allowed some foreign companies to buy out the stake of their Indian partners and acquire majority stakes. For instance, the US-based SWAT Systems was allowed to increase its stake in Scott Systems.

NASSCOM Executive Director Dewang Mehta has said, "It is becoming a growing trend in the software industry for local partners to be bought out by their foreign partners. The trend is more vivid in 100 per cent export oriented units in the software development segment wherein the investment levels are very low and the returns very high.

"IHS India, which was set up in 1994 with a paid-up capital of Rs 4.9 million, had three Indian directors on the board - C Krishnan, Virender Raheja and nominee director Valsamma Thomas.

Earlier: Decks cleared for FI Group to bring in £28 million

- Compiled from the Indian media

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