Genpact beats Firstsource to bag Citi BPO deal

After many a false alarm and multiple rounds of negotiations, the sale of Citigroup’s captive BPO operations has finally been concluded with Genpact winning the final bid in a closely-run race with Firstsource Solutions. The transaction is the first such sale of a large captive BPO and sets the precedent for other captive managements that were closely following the process. In terms of transaction value, it is the largest deal in the business process outsourcing segment.

The deal was reportedly done for $630 million with Genpact getting close to 90% in the 10,000-strong operation. The last round had seen some tense moments with the Firstsource turning out to be the dark horse and entering a bid higher than that of Genpact. Genpact was tipped to be the favourite all along, and Firstsource was not expected to be serious contender, more so because of its $330 million acquisition of US-based MedAssist barely a few months ago.

The Firstsource bid was around $100 million more than that of Genpact and although Citi was keen on doing the deal with Genpact, it was caught in a bind over the bids. ET had earlier reported that Citigroup had asked Genpact to match the bid put in by Firstsource. According to sources, the Genpact management considered the proposition but ultimately decided against it. The final deal was structured with Genpact agreeing to a higher bid but with a larger equity holding in the BPO, investment banking sources said.

Read more in The Economic Times article.

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Citigroup PE in race for group BPO subsidiary

Private equity player Citigroup Venture Capital (CVC) is learnt to have entered the race for buying Citigroup’s BPO arm — Citigroup Global Services. Sources in the industry say BPO majors Genpact and WNS Holdings and PE firm CVC are the final three players who are interested in the transaction. While NYSE-listed Genpact is believed to be as the front-runner in the deal, CVC may benefit from being part of the Citigroup family.

Citigroup has put its captive BPO outfit, Citigroup Global Services, on the block for some time but valuation of the deal and the lack of commitment of future business from Citigroup is making the transaction protracted.

While valuation was earlier learnt to be hovering around $750-800 million, sources say it has now come down to $600 million. The captive is expected to report revenues of about $200 million this year. This means a valuation of three times its revenues.

Read more in The Economic Times article.

Genpact leads pack in race for Citi BPO

An end to the long search for Citigroup BPO’s buyer finally seems to be in sight. Genpact is said to be ahead in the race for the BPO. The decision is expected by the month end. Firstsource and WNS also remain in contention, according to sources.

According to sources, the final valuation will depend on a number of parameters, including the number of years for which Citigroup is willing to give the BPO-committed business. It is currently looking at giving a contract for five years.

However, a final decision is yet to be taken. While the valuation being quoted in industry circles is around $850 million, it could be higher or lower depending on how long the contract would be. Sources also indicated the payment for the deal is likely to be a mix of cash and shares in the winning company.

Read more in The Economic Times article.

General Atlantic invests $60 mn in IBS Software

Private equity (PE) investor General Atlantic Llc. (GA), headquartered in New York, has stepped up its pace of dealmaking in the country. It has closed three deals worth more than $175 million (about Rs744 crore) in the first seven months of the year, including the $60 million investment in Thiruvananthapuram-based transportation and logistics software firm IBS Software Services that was announced on Wednesday. The change of pace, in terms of the number of deals, is significant when seen in the context of the six deals the $17 billion PE firm had concluded till December 2006, five years after it started investing here in 2002.

IBS marks GA’s ninth investment in India and its fourth in the information technology services sector. The firm has invested more than $700 million in the country till date and its largest investment here has been $250 million in Gurgaon-based business process outsourcing (BPO) firm Genpact Ltd in 2004 for a 30% stake. The BPO, which was spun off from General Electric Co., will make an initial public offering (IPO) on the New York Stock Exchange soon and expects to raise $731 million. GA is expected to partially exit Genpact at the time of the listing.

The PE investor has taken a minority stake in IBS Software Services, but the percentage was not disclosed. IBS Software Services plans to use the funding to boost its sales and marketing teams, increase its business consulting services and make two acquisitions in the US or Europe.

Read more in The Livemint article.

WNS, Accenture join race for Citi`s BPO arm

The race for Citigroup Global Services, the business process outsourcing arm (BPO) of Citigroup is hotting up with the entry of the BPO firm WNS and consultancy firm Accenture.

Sources close to the development said these were the latest entrants into the fray. The list of suitors includes IBM, Automatic Data Processing (ADS), Infosys, EDS, Genpact, Capgemini and private equity players such as Blackstone and General Atlantic. A Citigroup spokesperson declined to comment.

Although there was no official confirmation on the impending sale of Citigroup’s business processing arm, sources in the know said Citi might receive Rs 3,000 crore from divesting this non-core area of its business.

Sources said Citigroup might sell 80 per cent stake in the BPO firm currently and pull out at the time of listing after divestment. Citigroup might induct a strategic partner for the BPO arm, they added.

Citigroup Global Services, which changed its name from e-Serve in November, employs close to 8,000 people in Mumbai and Chennai.

Read more in The Business Standard article.

Genpact acquires Axis Risk Consulting

Genpact, the largest BPO in the country, on Monday announced it has signed an agreement to acquire Axis Risk Consulting Services for an undisclosed amount. The acquisition is expected to be closed in the next 60-90 days, subject to necessary regulatory approvals.

The acquisition expands Genpact’s finance and accounting (F&A) solutions that include outsourced transactional services and financial planning and analysis.Post-acquisition, Axis will operate as an independent unit of Genpact within its governance practice. Axis managing director and founding partner Ameet Parikh will lead the governance business unit.

The acquisition, Genpact said, will enable it to offer end-to-end internal audit service solutions by combining its own process and technology expertise with Axis’ audit staff and automated control testing.

Read more in The Economic Times article.

Citi to exit, captive BPO units no longer attractive

The captive outsourcing story is turning sour .. or so it appears with the latest market buzz that Citigroup is on its way to pull out of its local business process outsourcing (BPO) unit Citigroup Global Services (formerly eServe).

While Citigroup continues to maintain that "the bank's policy is not to respond to market speculation," industry sources say "it makes logical sense for Citigroup to exit the business since it's not core to its operations".

The BPO currently has close to 8,000 people spread over two centres in Mumbai and Chennai. Some of the names floating to acquire the business include IBM, Automatic Data Processing (ADS), Infosys, EDS, Genpact, Capgemini and private equity players like Blackstone and General Atlantic.

When contacted, Genpact denied comment saying that it is in silent period. While IBM and Capgemini, too, maintained the no-comment stance, a senior Capgemini official, on condition of anonymity, said: "We have studied Citi Global services, it seems to be a decent company and has a good set up." The official, however, was concerned about the valuation of the Citi's BPO arm, which market rumours pegged at $1-1.2 billion.

Read more in The Business Standard article.

IBM, ADP, Genpact, Infy in race for Citi’s BPO biz

The first round of bids for Citi’s business process outsourcing operations — Citigroup Global Services (formerly known as e-Serve) — is likely to be completed this week. A host of global IT companies and also private equity firms are said to be in the initial race. However, Citi is likely to look at selling part of its operations only to a strategic partner, given the sensitivities involved in the deal.

According to sources, IBM, Automatic Data Processing (ADP), Genpact, Infosys and private equity firms such as Blackstone and General Atlantic are in the race for Citi’s BPO business.

Citi is likely to follow the Genpact model, where it is likely to sell off over 50% stake in the BPO firm. It is, however, likely to retain a part of the stake in the firm so that they can not only get the benefits in case of a future listing but would also handhold the firm. According to sources, one of the main reasons that the group is looking at bringing in a strategic partner is to bring down the overall costs and not monetising the stake.

Read more in The Economic Times article.

Infy, TV18 set up media process outsourcing firm

Infosys BPO (formerly Progeon) and media company TV18 have entered into a strategic alliance to launch Source18, a media process outsourcing company that will offer a range of services to media and entertainment companies globally. Among its first few clients is National Geographic International (NGCI). The new firm will re-purpose current as well as archival content for the mobile platform.

This is the second such major alliance in the media BPO space, the first being the tie-up between NDTV and Genpact, announced a year ago. To begin with, there will be no equity tie-up between Infosys BPO and TV18, but the nature of the relationship could change in the future, Haresh Chawla, CEO, TV18, said. Amitabh Chaudhary, CEO and MD, Infosys BPO, said that media and entertainment would be a key growth driver for the company.

The media process outsourcing opportunity is huge since most of the existing contents worldwide are in the analogue form and they need to be digitised for new platforms.The global media and entertainment industry is expected to grow to almost $2 trillion by 2008, and in view of the proliferation of content in multiple formats across media platforms, there is a sizeable business opportunity in the media outsourcing market waiting to be tapped.

PE investors to buy 24% in NDTV Networks

A clutch of private equity (PE) investors, which include Lehman Brothers, Goldman Sachs, CSFB and eight others, would acquire nearly 24 per cent stake in NDTV Networks, a fully owned subsidiary of NDTV India, for $120 million. The valuation of the new company would, thus, be over Rs 2,200 crore.

The UK-based NDTV Networks has five companies in its fold. It holds 100 per cent in NDTV Labs, which will develop the market and sell software and technology products; NDTV Imagine, which will operate a non-news Hindi mass entertainment channel; NDTV Lifestyle, which will provide content to TV channels in India and abroad; and NDTV Convergence, which houses all dotcom and mobile properties of the group. NDTV Network also owns 50 per cent in NDTV Media services with Genpact for media process outsourcing.

NDTV India controls news channels, NDTV 24x7, NDTV Profit, among others.

The group flagship has a market capitalisation of Rs 1,992 crore compared with Rs 3,609 crore of rival TV18.

The broadcaster is also believed to have scrapped its initial public offer for the moment and may reconsider it later.

Genpact eyes $600-million US listing

Genpact, one of the country's largest business process outsourcing firms, is mulling a US listing through an initial public offer to raise over $600 million for the company and its promoters.

The company is planning to sell about 15% equity through a public float on either Nasdaq or New York Stock Exchnage later this year, merchant banking sources said.The company's major shareholders — GE and US-based private equity giants Oakhill Capital and General Atlantic — are likely to sell part of their holding through this IPO, which could value the firm at around $4 billion.

Genpact has appointed three US-based investment banks — Morgan Stanley, JPMorgan and Citigroup — for the IPO and it may file the regulatory prospectus in the next few weeks, to be followed with a listing later this year.

Read more in The Times of India article.