Wipro’s Drivestream deal is third in under two months

Wipro is in the final stages of fully acquiring Drivestream, a management and IT consulting firm in which it had picked up a minority stake in March, reports Deborshi Chaki in Mumbai. Company sources told FE that a formal announcement was expected in January. Headquartered in Washington, DC, Drivestream provides Oracle-based cloud services across sectors ranging from insurance, healthcare to telecom and lists several Fortune 500 companies as its customers. Drivestream was founded by Indian-origin entrepreneur D Gopal Krishna in 2002 and has delivery centres in the US and in Chennai.

Earlier this year, Wipro announced it had invested $5 million in Drivestream through its venture capital arm, Wipro Ventures, though it did not disclose the size of the stake.

Wipro and Drivestream are working together on integrated cloud solutions. Sources say Drivestream currently has annual revenues close to $11 million and a workforce of around 250 employees in the US and India.

Industry analysts maintain that typically valuations of IT services companies such as Drivestream tend to be close to their annual revenues with exceptions. Sources pegged the deal size at close to Rs 300 crore.

When contacted, a Wipro spokesperson said, “Wipro does not comment on market speculation.” Drivestream did not respond to an email query.

Drivestream will be Wipro’s third acquisition in less than two months. In December, Wipro announced the acquisitions of US-based Viteos Group for $130 million and Germany-based Cellent for 73.5 million euros.

Incidentally all of these companies, including Drivestream, were founded around the same time. While Drivestream and Cellent were founded in 2002, Viteos was founded in New Jersey in 2003.

Industry analysts say acquisitions are a part of Wipro’s overseas growth strategy through small and mid-size companies in segments where it wants to ramp up presence. Led by Wipro’s chief strategy officer Rishad Premji, Wipro Ventures was launched in July last year and the company has set aside an initial corpus of $100 million for exploring investment opportunities in start-up companies that focus on niche technologies such as big data, open source and SaaS platforms.

Drivestream would be the latest addition to a series of acquisitions by Wipro in the past two years under its “string of pearls” strategy. Announcing this in mid 2012, Wipro chairman Azim Premji had unveiled plans to acquire companies valued between $50 million and $300 million in targeted domains while clarifying that the deal size will not be a limiting factor in case of worthy targets. Accordingly, Wipro constituted an in-house team led by Premji’s son Rishad to scout for deals in the overseas markets. So far the acquisitions have been funded by Wipro’s internal reserves and the company had initially set aside $1 billion to be spent over a period of four years.