HCL Tech and NEC Joint Venture

A few days back Economic Times carried this headline on the front page of the newspaper. Perhaps none of us took it very seriously or gave it a second thought but this is a very important news for the Indian IT Industry. HCL Tech is the fourth largest software development company of India. Nippon Electronic Corporation is a Japan based software company which specializes in Enterprise Solutions delivery. The JV is a 51:49 one with higher stake on the side of HCL. It is expected that the JV will completed in the month of June. Also the CEO of the combined company will be from the HCL side only. The thrust area of the combined entity would be to provide end to end Integrated IT solutions to the customer. It is said that this deal will mark the return of HCL to inorganic growth path. For those who do not know what is organic or inorganic growth here is a quick reference. Organic growth is the one which comes from company's existing businesses as opposed to acquisitions. Inorganic growth is characterised by acquisitions and take overs done by the company to increase its turn over and top line growth. Till recently HCL had bought out its JV partners in the six of the companies it had floated earlier and made them wholly owned subsidiaries.

Interestingly NEC is one of the few HCL Tech's Japanese customers. NEC is a giant in the area of IT makes products ranging from Mobile phones and Super computers. Notably the NEC Earth Simulator Series which was the fastest supercomputer available on this earth one time. NEC has already outsourced close to $ 50 m - 60 m business to India and has ties up with Infosys and Wipro also.

The enriched pool of application development from the HCL and the NEC's expertise across several domains should definitely strengthen the merged entity. Let us see whether the JV really takes off or not.