Infosys?s announcement of acquiring UK-based Axon Group was in line with the management?s plans. Overall, analysts see this as a positive move for the IT major and expect the deal to be earnings-accretive.

The first cut optimism is based on several factors — primarily, because Infy is acquiring a debt-free, profit making company at a good price. Axon has reported revenues of $378 million with a profit after tax of $37.4 million and will be bought at $ 753 million.

The acquisition cost is less than twice the current revenues, something the investors should be happy about. Also, Axon is a debt-free company with cash and cash equivalents of $46.3 million. Moreover, Axon has a presence in the US, UK, China and Australia and will also strengthen the SAP practice for Infosys.

Says Sabhyasachi Satpaty, senior director at research and consulting company neoIT: ?Axon is a company with a strong SAP consulting practice in the UK and Europe. The deal helps Infosys, which has businesses in the industry solutions and banking sectors to strengthen its SAP practice and get access to a good breed of consultants and markets in Europe. We also see this as a risk-mitigating strategy for Infosys, given the tough times in its prime market.These are the two biggest motivators for Infosys to go after this deal.?

For Axon, the benefits are clear. ?The company does not have a very strong revenue?margin ratio. It can leverage on Infosys?s global delivery model and bring up the profitability to higher levels,? he added.

This is one of the biggest deals for Infosys after its acquisition of three captive BPOs from Netherlands based Philips NV?s for $250 million. Overall, the total subsidiary revenues recorded far higher growth than the parent company. The five subsidiaries added net Rs10.46bn (6.3%) to consolidated revenues after netting off the Rs 773 crore subcontract businesses between them and the parent company. The gross revenue contribution was 10.9% and the year end employee count was 19.4% of the total. The five subsidiaries added net Rs1,046 crore (6.3%) to consolidated revenues after netting off the Rs7.73 crore subcontract business between them and the parent company.

The gross revenue contribution was 10.9% and the year end employee count was 19.4% of the total. With a combined 10.4% net profit margin, these subsidiaries continue to dilute profitability of the consolidated company, says a report by India Infoline. However, the subsidiaries appear to have earned a higher combined gross profit margin than the parent (consolidated GPM higher than stand-alone GPM), it adds.