MUMBAI, May 7, 2010 - Mastek Ltd. said on Friday it is in talks with four or five overseas companies about a potential acquisition as it seeks to arrest a decline in revenue.

"We are talking to four to five companies in North America and the United Kingdom for an acquisition. These companies have annual revenue of between $20 million and $30 million," Sudhakar Ram, chairman and managing director of the information technology services company, told Dow Jones Newswires in an interview.

"These companies operate in the government and insurance verticals," he said, adding that Mastek intends to buy companies for their domain expertise and client base. Mastek provides software services to insurance, government and financial services firms. Mr. Ram didn't say when a decision on any acquisition might be made.

While bigger rivals like Infosys Technologies Ltd. and Tata Consultancy Services Ltd. have been boosted by a revival in developed country demand for their outsourcing services, Mastek has continued to struggle. For its third quarter through March, Mastek's consolidated net profit slumped 54% from a year earlier to 152.6 million rupees, and the company has forecast it will fare even worse in the fourth quarter, with net profit likely to come in at 100 million rupees-110 million rupees. Mastek has been particularly hurt by a drop in revenue from a project it is executing for the U.K.'s National Health Service via BT Group Plc. In an earnings release, the company said the project weighed on its third quarter revenue, which slid 26% year-on-year to 1.70 billion rupees. Mastek tips revenue to drop to 1.60 billion rupees-1.65 billion rupees in its fourth quarter through June, but it hopes acquisitions will help it stem the decline.

Mr. Ram said the company is also looking for opportunities in India, which currently only contributes about 2% of its overall revenue. He said Mastek wants to cash in on the country's burgeoning health insurance market and is in talks to sign up 4 or 5 customers in India for its health insurance software.

Currently, Mastek only has one health insurance software customer in India. Mr. Ram added that Mastek expects to add one or two new customers this quarter.

Reference: THE WALL STREET JOURNAL