Infotech Enterprises has bagged a Rs 386 crore (Rs 3,860 million) long-term contract from the $18 billion Bombardier Transportation, a United States-based rail equipment manufacturing major, to provide a range of services in design engineering projects for the railway industry.
B V R Mohan Reddy, chairman and managing director of Infotech, said the order size for the current fiscal would be about Rs 6 crore (Rs 60 million) which would increase to Rs 20 crore (Rs 200 million) next year and at the end of third year the size will reach Rs 60 crore (Rs 600 million) per annum. The duration of the contract is for four years and is extendable by another four years.
"The contract provides Infotech revenue visibility at a scaled level for the long term and there is every possibility that the order size will increase with the company reaching periodical milestones," Reddy said.
Infotech will set up a new engineering services unit for the US company in Hyderabad. The new unit will also execute projects in the area of software development services and embedded services. It will initially have 60 full time engineers which will be ramped up to 400 people by September 2006.
Infotech plans to spend Rs 60 crore to Rs 70 crore (Rs 600 million to Rs 700 million) on setting up the new facility and it is planning to acquire land near its existing Infocity facility for the same, Reddy said.
Bombardier has three business divisions - aircrafts, railways and snow mobiles manufacturing. It is the third major aircraft manufacturer after Boeing and Airbus.
We are currently providing aircraft related engineering services to Pratt & Whitney and we expect to render similar services to Bombardier too from January 2004, Reddy said.
Infotech has recently set up a near-shore center for Pratt & Whitney in Puerto Rico from which it expects a revenue of Rs 40 crore Rs 50 crore (Rs 400 million Rs 500 million) in 12 months.
"With this relationship our engineering services leadership extends into the railways along with aerospace, automotive and industrial products that we provide to other companies," Reddy said.
Bombardier's relationship with India goes back to 35 years ago with the manufacturing and supply of electric locomotives, traffic management systems and several other railway products to Indian railways.
Reconfirming the development, Sudhir Sethi, president & ED of Infotech, said that the new long term engagement, when completes its ramp up phase and reaches a stabilized level, will provide a business of over $12 million per year."
The scrip price of Infotech Enterprises has risen sharply on the bourses on Wednesday with the announcement of the contract signed with Bombardier Transportation.
On the Bombay Stock Exchange, the scrip closed at Rs 146.35, a 15 per cent gain compared to the previous close of Rs 127.20. On the National Stock Exchange too, the shares closed with 14.4 per cent increase at Rs 145.