CompuCredit agreement is not restrictive: Allsec technologies

Chennai: Does the US-based, Nasdaq-listed CompuCredit Corporation, which holds a 7.5-per cent stake in Chennai's Allsec Technologies Limited, wield more power than other shareholders by virtue of its 'master services agreement' (MSA) / build-operate-transfer (BOT) agreement?

The question arises in the minds of those who cast even a cursory glance at the terms and conditions of the agreement between CompuCredit Corporation and Allsec Technologies Limited.

The Chennai-based company has entered into a build-operate-transfer (BOT) agreement with CompuCredit whereby the American company has the option to acquire the clearly demarcated assets of Allsec Technologies including the employees located at its Velachery facility. CompuCredit can exercise the option after 31st March 2009 and before 31st March 2011.

As per the agreement, Allsec Technologies cannot enter into similar BOT agreement with any other party without the prior consent of CompuCredit. Similarly written approval is required from the American company for the following: (a) promoters divesting their stakes within two years of the initial public issue (b) pursuit of new business (c) altering the articles of association or memorandum of association (d) any merger, demerger, reconstruction, amalgamation or any other transaction of similar nature and (e) mortgage of any fixed assets or issuance of any debt instrument in excess of $3 million.

Allsec Technologies has segregated around 500 seats out of its 700 in favour of CompuCredit. CompuCredit is a speciality finance company and a marketer of credit cards for consumers who are underserved by traditional financial institutions.

"The conditions mentioned in the contract are normal as a major client would like to protect his interests," says R Jagadish, chief executive officer, Allsec Technologies. According to him, Allsec Technologies derives nearly 52 per cent of its total revenues from CompuCredit.