Tech Mahindra will pay Comviva Rs 125 crore (approximately $23 million) upfront payment while the balance amount will be paid over the next five years, after meeting mutually agreed targets.
Bharti group through Bharti Enterprises will retain 20 per cent stake after the deal is closed.
Tech Mahindra hopes to buy out the 20 per cent stake over the next five years, Vice Chairman Vineet Nayyar said. Comviva, which boasts of 130 service providers including Vodafone, MTN and France Telecom as its clients across 90 countries, will be rebranded as Mahindra Comviva.
Cisco and Sequoia Capital, which owned 5 per cent and 4 per cent stake in the company, will be exiting the company. WestBridge Capital will continue to remain invested in the company.
For Tech Mahindra, the buyout will launch its first big move into the mobile commerce business. The M&M group company hopes to ride the data wave across telecom networks to scale up its m-commerce business.
Major telecom companies earn nearly 12-15 per cent of revenues from data services at present. Gartner has predicted enterprise mobility business as a $30 billion market. With the launch of 4G services, wireless broadband in India is expected to explode which could propel demand for mobile data services.
Tech Mahindra had bought out the stake of Motorola in a joint venture that the two operated for mobile data services. Along with CanvasM, Tech Mahindra’s mobile data services and today’s acquisition, it hopes to touch Rs 1,000 crore (approximately $180 million) by FY13, ending March next year.
Tech Mahindra is awaiting the court nod for its merger with Mahindra Satyam. After the merger is completed, it will be among India’s top five IT service companies.
Tech Mahindra, India’s sixth largest software exporter has announced the acquisition of 51 per cent stake in mobile Value Added Services (VAS) provider Comviva for Rs 260 crore. The deal, on a fully diluted basis, will be subject to regulatory approvals.
Billionaire Sunil Mittal's Bharti Group, which controls top telecoms carrier Bharti Airtel, is the biggest shareholder in Comviva. WestBridge Capital, Sequoia Capital and Cisco Systems are the other investors in the company. Bharti Airtel does not own any stake in Comviva.
Tech Mahindra, a unit of tractor and sports utility vehicles maker Mahindra & Mahindra, earlier this month agreed to buy Hutchison Whampoa's back-office call centre business in India for $87.1 million.
Shares in Tech Mahindra closed 0.7 per cent lower at Rs 903.45 on the BSE. Bharti Airtel gained 3.8 per cent at Rs 264.70.
(With inputs from Reuters)