A bidding war broke out in India yesterday for Axon Group, the British IT services company.

HCL Technologies has made a 650p-a-share cash offer, trumping a bid from its fellow Indian software exporter Infosys Technologies and valuing the UK company at about £441 million. It tops Infosys’s 600p-a-share recommended offer. Analysts said the 650p offer was not a knockout bid and a further offer was expected from Infosys.

Infosys urged Axon shareholders to take no action and said it would make an announcement in due course. Infosys made its offer to acquire Axon in August, valuing the company at £407 million. Both offers include Axon’s interim dividend.

Infosys and Axon are among two dozen companies worldwide that implement back-office software systems designed by SAP, the German software group. Whichever company wins out, the final deal will be the largest overseas acquisition by an Indian IT company. Axon shares rose sharply, closing up 7.5 per cent at 682p.

The bidding war is the latest sign of growing confidence among cash-rich Indian companies. Three years ago, Apeejay Surrendra, whose interests range from tea and retailing to property and finance, bought Typhoo for £80 million. Tata followed up the acquisition of Corus Steel in 2006 with the £1.1 billion takeover of Jaguar and Land Rover this year.

HCL said that it had been in talks with Axon since July. Vineet Nayar, chief executive, said: “We see Axon as a transformational opportunity for HCL to become a significant player in the SAP services space.

“When it comes to SAP, Axon is the only pure-play large global firm in the world. We had shortlisted another US firm with revenues below $100 million but Axon is a better match.”

Indian outsourcing companies such as Infosys and its bigger rival Tata Consultancy Services are expanding in Europe, Asia, the Middle East and Latin America to cut dependence on the US market, which accounts for more than half the sector’s revenue. HCL earns about 29 per cent of its revenues from Europe.

Axon employs 2,000 and numbers BP, Xerox and Microsoft among its 200 clients. In the public sector it works for Transport for London and Wolverhampton City Council, among others. It derives close to 55 per cent of its revenues from Europe and about 40 per cent from the US.

Axon was set up in 1994 by Mark Hunter, who stands to make at least £44 million from any takeover. The Surrey-based company floated in 1999 and generates more than £200 million a year. However, its shares have fallen by nearly 50 per cent in the past year amid fears that its clients will begin to shelve project work in the tougher economic climate.

HCL Technologies plans to fund the bid through a £400 million loan and cash in hand, with loan facilities from Standard Chartered.

Analysts said that Infosys is likely to bid again. Jonathan Imlah, of Altium Securities, said: “The bid by HCL does not close the door and I would be surprised if we did not hear something further over the weekend.”

But in Bombay, Tejas Doshi, head of research for Sushil Finance, said: “I suppose Infosys will walk away. They are a very conservative company.”

On the menu

2007 Tata Steel buys Corus Group for £6.2 billion

2007 Tata Motors buys Jaguar-Land Rover for $2.3 billion

2007 Whyte & MacKay, the Scotch whisky maker, bought by United Breweries at £595 million.

2008 Hitchens, Harrison & Co, the stockbroker, bought by Religare Enterprises Source: KPMG

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