Oracle could raise its stake in I-flex, Indian software group, by as much as $610m, boosting its involvement in banking industry software through an unusual arrangement under which it has left local managers in control.
The US company said on Monday that it would inject $125m into I-flex to help back an acquisition by the company, along with other growth plans.
It added that the purchase triggers a provision of Indian law requiring it to offer to buy up to 20 per cent more of the company’s outstanding shares, a stake that would be worth $485m.
Oracle took a majority stake in I-flex last year as part of its broader push into applications software.
While that strategy has involved the outright acquisition of other, bigger applications companies such as PeopleSoft and Siebel Systems, the US company has left I-flex under the control of its existing managers.
Chuck Phillips, Oracle co-president, has joined the I-flex board, though the US company took a decision at the outset to leave the company’s founders and long-time management team in charge, according to the Indian company.
Oracle refused to comment on its plans for the Indian group.
Rajesh Hukku and R Ravisankar, former Citibank software engineers, started I-flex in 1992 with the help of a $400,000 investment from the bank’s venture capital arm.
That stake, representing about 42 per cent of the company, was eventually sold to Oracle a year ago for $593m.
In all, the US software company has already invested $1bn in the Indian company, which makes applications software used by many of the world’s biggest banks, according to I-flex.
The latest investment will enable I-flex to mount its biggest international venture to date, with its purchase of Mantas, US software company, for $123m. Mantas specialises in software to detect money-laundering.
Oracle said that the cash it had injected to back the Mantas stake would lift its stake in I-flex to 55.1 per cent. It said its offer for a further 20 per cent of the company would be made at Rs 1,475 ($31.77) a share, a price that values the company at about $2.4bn, or 70 per cent more than the valuation implied by its initial investment.
I-flex said its revenues had risen 15 per cent in the year to the end of March, to $333m.
Oracle’s shares climbed by nearly 2.5 per cent early Monday afternoon in New York to $15.37.