GE may sell Indian BPO operations

By siliconindia staff writer   |   Wednesday, 08 September 2004, 19:30 IST
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MUMBAI: This one could be the biggest BPO deal yet. General Electric (GE), reports an Indian daily, has initiated a low-key exercise which could see the company getting out of its massive business process outsourcing (BPO) operations run by GE Capital International Services (GECIS). GECIS’ BPO operations, which does captive work for GE, is the largest in India in terms of the number of people employed. Convergys, the $2.3bn US-based BPO company, and tech major Hewlett Packard are believed to be front-runners for acquiring the company, with Convergys having a slight edge. At the moment, market sources say GE’s asking price is around $1bn, which would make it the largest cross-border deal involving an outfit based in India. However, this is the one factor that could stall the sell-off, as potential buyers may not be willing to pay the price, according to Economic Times' report. If it materialises, this would mean that GE is strongly reducing its presence in the outsourcing space, not just in India but internationally. Sources also said that besides almost all of the Indian captive BPO operations , GE has also sent feelers for selling GECIS’ operations in Hungary, Mexico and China. The daily when contacted, a GE spokesperson said, “GECIS India employs around 12,000 people and has 700 processes, structured under 10 Centers of Excellence (CoE). We are extremely competitive in the market place and have consistently delivered increased productivity to GE. During the course of our business, we frequently hold discussions with a number of existing and prospective business partners, suppliers and customers. These discussions are internal to GECIS. We do not comment on rumour or speculations.” GECIS was earlier trying to sell a small portion of its BPO business with revenues of around $30m, as ET had reported on March 15, ’04. The company, industry sources said, was asking 3-4 times of revenues for this business, which included a call centre and a technical help centre. Now, the scope of the deal is believed to have expanded from a piecemeal approach to a comprehensive exit. Sources said that investment bankers have been asked to test the waters to determine whether the whole business can be sold. Citigroup is advising GE on this deal and is involved in the bigger transaction also, though there may not a formal mandate, sources said. Merchant bankers have started sending out information to potential buyers. Convergys and HP have indicated their interest. Though there were a number of bidders, the earlier sale proposed has not yet gone through, as the valuation was considered too high. While most local Indian companies were not invited for the due diligence, some MNCs found the premium too high. GECIS set up its first development centre in India in 1997 to carry out back office operations for its parent company in the US. Now, GECIS has centres in Gurgaon, Hyderabad, Bangalore and Jaipur. It has four centres in Gurgaon, two in Hyderabad and one each in Bangalore and Jaipur. It has also set up three centres outside India — in China, Mexico and Hungary. GE will retain a BPO presence where units belong to its other group companies or joint ventures, but none of these have the scale of GECIS’ operations. Convergys employs around 60,000 people at its call centres across the world. HP also has BPO operations under HP e-Global, based in Bangalore. Computer hardware and printer maker HP has been looking at strengthening its delivery base in India as a part of its global push into services. GECIS’ services include ERP and Oracle database consulting, IT help desks, knowledge services, software solutions, analytics, data mining and modelling, remote network monitoring, e-learning and customer contact centres. GECIS’ expertise lies in areas like finance and accounting, insurance, collections, customer fulfilment industrial & equipment businesses, analytics, learning, IT Services and software. Besides the 12,000 people, the buyer will also acquire infrastructure with a robust telecommunications network supported by dedicated earth stations. GECIS is one of the largest private users of international bandwidth in India.