R Systems International Limited has announced a strategic acquisition of Novigo, a specialist in low-code/no-code development and intelligent automation, in a deal valued at ₹400 crore upfront. This move is set to significantly boost R Systems' artificial intelligence capabilities and expand its presence in the Middle East market.

Acquisition Details

• Deal Value: ₹400 crore upfront
• Funding:
  • ₹125 crore from internal accruals
  • ₹275 crore through listed Non-Convertible Debentures (NCDs)

Novigo's Performance

Novigo has demonstrated impressive growth and profitability:

• 44% Compound Annual Growth Rate (CAGR) over three years
• EBITDA margins consistently above 25%

Strategic Benefits

Revenue Expansion

• R Systems' revenue base expected to grow from $208 million to nearly $240 million
• Novigo to contribute approximately $30 million in revenue

Market Entry

• Provides R Systems entry into the Middle East market
• Novigo generates 47% of its revenues from the Middle East
• Target spend market in the Middle East estimated at $25 billion

Margin Improvement

• The acquisition is expected to be margin-accretive from day one
• Novigo's EBITDA margins (>25%) significantly higher than R Systems' (17.5%)

Management Commentary

Nitesh Bansal, CEO of R Systems, expressed optimism about the acquisition, stating that the combined entity is expected to achieve market-leading growth.

Market Performance

As of the latest trading session:

This acquisition marks a significant step for R Systems in expanding its technological capabilities and geographical reach. The integration of Novigo's expertise in low-code/no-code development and intelligent automation is expected to enhance R Systems' service offerings and competitive position in the rapidly evolving AI and automation markets.

R Systems International Limited , a global leader in digital product engineering, has announced a strategic acquisition that is set to reshape its position in the market. The company has entered into a definitive agreement to acquire 100% equity of Novigo Solutions, a specialist in low-code/no-code (LCNC) development and intelligent-automation services, for up to ₹400 crore.

Strategic Acquisition Details

The acquisition creates a formidable player in the digital product engineering services arena, with the combined entity boasting a revenue of ₹2,060.00 crore ($240 million) and an EBITDA of ₹380.00 crore ($45 million). The deal structure includes an upfront cash consideration of ₹400.00 crore, with an additional stock consideration linked to future EBITDA achievement.

Enhancing Capabilities and Market Reach

This strategic move is designed to significantly bolster R Systems' capabilities in several key areas:

• Product Engineering: The acquisition strengthens R Systems' digital product engineering services, particularly in the FinTech and Hi-Tech domains.
• Agentic AI: By integrating R Systems' OptimaAI Suite with Novigo's UiPath Diamond-tier automation practice and Microsoft Copilot Centre of Excellence, the combined entity is poised to lead in Agentic AI offerings.
• Market Expansion: The deal helps R Systems expand its presence in the fast-growing Middle East market and gain delivery capabilities in Bangalore and tier 2 cities like Mangalore.

Financial Highlights of Novigo

Novigo has demonstrated impressive financial performance:

• Revenue CAGR of 44% over the last three years
• 25% EBITDA margin
• Healthy free cash flow

Synergies and Growth Prospects

The acquisition is expected to be EPS accretive for R Systems from the first year. It offers significant revenue and cost synergies, including:

• Cross-selling opportunities in the Middle East
• Leveraging Novigo's low-code and automation capabilities for R Systems' global clients
• Cost advantages through delivery centers in tier 2 cities

Management Continuity

Novigo's management team, including CEO Praveen Kalbhavi and CTO Mohammed Hanif, will continue to be part of the combined platform, ensuring continuity and driving future growth.

Funding and Closure

R Systems plans to fund the upfront cash consideration through a combination of debt and internal accruals. The acquisition is expected to close in the coming weeks, subject to customary closing conditions.

Additional Corporate Actions

In a separate but related development, R Systems has also approved a private placement of rated, listed, unsecured, redeemable non-convertible debentures worth ₹275.00 crore. This move indicates the company's proactive approach to capital management and growth financing.

As R Systems International Limited embarks on this transformative journey, the acquisition of Novigo Solutions marks a significant milestone in its quest to become a leader in the evolving landscape of digital product engineering and Agentic AI. The strategic fit between the two companies, coupled with the potential for synergies and market expansion, positions R Systems for accelerated growth in the coming years.