34426 - Grupo ASSA II

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Summary of Investment Information

Project Number

34426

Company Name

GRUPO ASSA CORP

Date SPI Disclosed

Jul 17, 2014

Country

Latin America and the Caribbean Region

Region

Latin America and the Caribbean

Projected Board Date

Aug 18, 2014

Environmental Category

C - No Impact

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Regional Industry INF LAC & EUR

Industry

Telecommunications and Technology

Previous Events

Approved : Nov 26, 2014
Signed : May 11, 2015
Invested : Jun 5, 2015

Sector

Computer Systems Design and Related Services (System Integration, Custom Computer Programming, IT Services etc.)

Project Description

Grupo ASSA Worldwide S.A. (“Grupo ASSA” or the “Company”) is an existing IFC client. The Company is a leading midsized pan-LAC IT service provider, with over 1,400 employees and 10 offices and delivery centers throughout Latin America, which offers: (i) Business Transformation and IT Consulting and Integration services; (ii) implementation and operations of Enterprise Applications, including Enterprise Resource Planning, Customer Relations Management and Business Intelligence; and (iii) Information Technology outsourcing (ITO), including maintenance and operation of software applications (application management services). The Company currently has offices and development centers in Argentina, Brazil, Mexico, Colombia and Chile.

Grupo ASSA plans to double in revenues over the next 4 years, reaching $200 million by the end of 2017. An exit in 1 or 2 years is the ultimate goal of the shareholders. In order to achieve the necessary scale and margins to be an attractive acquisition target, the Company is focused on achieving three objectives: (i) increase operating margins in its high-end consulting business by adding higher value services and a more efficient consulting pyramid structure; (ii) grow the Application Managed Services business by 3x by a) increasing market share in Brazil and Mexico, and b) acquire new clients in the US; and (iii) expand the Application Development business unit by designing and building specialized industry software solutions, by increasing teams organically, and making an acquisition of a mid-sized software development firm in the region.

Grupo ASSA is also seeking to refinance expensive short-term debt with a blended interest rate of approx. 13% with long term debt. This would allow Grupo Assa to free up operating cash flow in the short term that it could use to fund growth initiatives as described earlier. Debt with longer tenors would also improve the negotiating position vis-a-vis possible acquirers.

The Company is legally incorporated in Spain but founded and with administrative headquarters in Buenos Aires, Argentina.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	8.0
Equity

Development Impact

The Project is expected to generate the following development impact:
- Increase economic efficiencies: Help companies across diverse verticals achieve greater efficiencies through broader adoption of technology to help it manage its value chain (eg enterprise resource planning software).
- Support the expansion of the IT outsourcing sector in Latin America: The region has an opportunity to replicate the successful experience of India, where the sector represents over 5% of GDP and where it is a major source of value added exports. US and European are increasingly eyeing LAC to achieve efficiency gains from proximity, same time zone advantages, and a well-educated labor force.
- High Quality Job creation: Companies like Grupo ASSA benefit local IT professionals by creating high quality job opportunities and developing skills in the value-added IT services sector.
- South-South investments: Besides expanding its operations in Brazil and Mexico, Grupo ASSA plans to continue expanding its operations in other countries in Latin America, such as Colombia, Chile and Uruguay. Entering these markets enables transfer of technology, improving business practices, foster competition and promote further investment in the Region.

IFC''s expected role and Additionality in the Project is as follows:
- Long-term partnership: Grupo ASSA sees IFC as an the obvious choice to fund its growth via long term debt, after being a value adding equity investor for over 3 years.
- Longer Tenors: Given a light asset structure typical of IT companies, the Company is unable to secure financing with terms longer than 3 years, and over 50% of its debt consist of expensive short term revolving lines (blended interest rate of 12%-13%). IFC is able to provide loans with longer maturities than the ones available in the market for Grupo ASSA.
- Continue accessing IFC''s expertise and lessons learned: IFC has accumulated considerable expertise in various emerging markets related to investments in IT services and IT outsourcing; some comparable investments include Nasoft (IFClR2009-0024) in Mexico, Sonda (IFClR2004-0096) in Chile, Chinasoft (IFClR2005-0203) in China, Hisoft (IFClR2004-0199) in China and KPIT (IFClR2005-0170) in India. The Company values IFC''s partnership and wants to continue benefitting from it.
- Support in the process of a private trade sale: The Company expects a trade sale in the next 1-2 years, and IFC as a shareholder and a lender would boost the Company''s credibility vis-a-vis future buyers and investors.

E&S Category Rationale / Risks and Mitigation

Environmental and social performance under IFC''s first investment in Grupo Assa has been satisfactory. In addition, environmental and social risks and impacts in the proposed new investment were reviewed, and they are expected to remain minimal, as they were under IFC''s first investment in Grupo Assa. Accordingly, this project has been classified as Category C according to IFC’s environmental and social review procedure.

Contacts

For Inquiries About the Project, Contact

Paul Dougall, VP of Corporate Development
Lima 241, Ciudad Autonoma de Buenos Aires (C1073AAE)
Buenos Aires, Argentina
T: 54-11-4510-7200
E: mailto:pdougall@grupoassa.com
W: http://www.grupoassa.com

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