HCL to acquire German auto tech firm ASAP for $279 mn

HCL Tech has signed an agreement to acquire 100% equity stake in ASAP Group, a German automotive engineering services provider, at an enterprise valuation of $279 million. The transaction is expected to close in September 2023.

The acquisition will boost HCL Tech's engineering services by strengthening its technology capabilities in the fast-growing automotive engineering services segment in Europe and other key global markets, the IT company says in its stock exchange filing.

Headquartered in lngolstadt, Germany, ASAP is focused on future-oriented automotive technologies in areas such as autonomous driving, e-mobility and connectivity.

ASAP, which employs over 1,600 people across nine locations in Germany, serves automotive original equipment manufacturers (OEM) and tier-l suppliers in Germany. ASAP's services portfolio comprises electrics, electronics, software, consulting, service testing and validation and vehicle development.

HCL Tech claims it works with 63 of the top 100 global engineering R&D spenders.

"Core engineering is at the heart of HCL Tech's DNA and truly differentiates our services portfolio. ASAP has developed some exciting capabilities in automotive engineering and we share their vision for future of mobility. This agreement will enable us to scale these capabilities and innovations across our global network," said Hari Sadarahalli, corporate vice-president, engineering and R&D Services, HCL Tech. "This investment also reinforces our commitment to Germany which is a focus market for us. We will continue to nurture local talent and innovation ecosystem to unlock their potential."

"We are delighted to align our growth journey with HCLTech's purpose of bringing together the best of technology and people to supercharge progress for all stakeholders," said Michael Neisen, CEO of the ASAP Group. "We are confident that the combination of HCLTech and ASAP's engineering and technology performance will bring best-in-class advantages to the automotive industry worldwide."

HCL Tech reported an 8% rise in its consolidated net profit to ₹3,534 crore during Q1 FY24, missing industry estimates. The company's Q1 FY24 revenue grew 12.1% YoY to ₹26,296 crore, while revenue in constant currency surged 6.3% YoY. Earnings before interest and taxes surged 11.7% to ₹4,460 crore.

HCL Tech retained FY24 revenue guidance at 6-8% in constant currency, while services revenue growth is expected to be between 6.5%-8.5% YoY in constant currency. The EBIT margin is expected to be 18-19%. HCL Tech announced a dividend of ₹10 per equity share.

"In Q1 FY24, our revenue and people strength sequentially moderated in line with the demand environment. We delivered a 6.3% YoY growth in constant currency. We experienced strong growth in our largest verticals—Financial Services, Manufacturing, and Life Sciences and Healthcare—fueled by large deals. These large deals helped offset cuts in client discretionary spending in these verticals. We are expecting other verticals to pick up as well shortly. This, combined with the strength of our record-high pipeline, enables us to maintain our guidance for the year," said C Vijayakumar, CEO and MD, HCLTech.