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Global majors eye Indian BPO firms
By siliconindia staff writer
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Monday, 03 May 2004, 19:30 IST
NEW DELHI: Welcome to the seismic zone of the $1.2 billion Indian BPO industry. There are telltale signs of the sector coming of age. The space is red hot and both domestic and global players are on the prowl ready to strike at the right price, reports Hindustan Times.
The pure-play BPO firms, that have shown explosive growth in the past, cannot find funds to sustain themselves, especially as most venture capitalists are exiting. So they will increasingly be up for grabs for a better market reach and growth. On the other side are buyers who need to balance their domain, process and technical expertise, says Gartner principal analyst BPO for APAC Ravindra Datar.
Progeon CEO & MD Akshaya Bhargava seconds him: The sector is under pressure from both the demand as well as the supply side. While size and scale mitigate risks in the buyers mind, economies of scale work better for the suppliers.
The message is loud and clear, says ICICI OneSource president & COO Raju Bhatnagar: Global majors want a significant presence in India. While some like Convergys and Accenture will take the organic route, others like IBM have chosen to grow inorganically. But the end game is the same. Rumour mills have it that ICICI OneSource may itself let in more private equity funds to increase the capital base.
Interestingly, even domestic bellwethers like Infosys that, as a matter of philosophy, do not believe in acquiring large operations due to the cultural complexities involved, are toeing the acquisition line. Adds Bhargava: We will certainly not acquire solely to add numbers. But, it will only be for companies that can give us a larger market access or greater domain advantage. And there arent many Indian BPOs that can add value for us? So does GECIS fit the bill? Obviously, Bhargava doesnt want to field that one, but speculation is rife.
Close on the heels of the IBM deal, its EDSs turn to poach a company to consolidate its Indian operations. It seems to be eyeing US insurance giant Phoenixs stake in its Bangalore-based subsidiary.
One look at the growth curve and one can easily categorise the industry into three types of players: The acquirers (buyers like Accenture, TCS, Amex, EDS, AT&T, AOL, HSBC, JP Morgan, that need to ramp up Indian operations); the targets (companies that would find it logical to exit). The third category is that of captive vendors like HCL Technologies BPO Services and HP Global eBusiness Operation. (See box) This category also comprises operations like Msource that do not have the option to exit.
Prospective targets
GlobalVantage: Rs 55 crore investment from ChrysCapital, specialises in receivables management, plans to ramp up Gurgaon facility to employ 1,000 people by 2004-end.
Technovate: Kipotechniki BVBA acquired 6.25 per cent shares, travel-focussed, total evaluation pegged at $160 million, main client ebookers.
Vcustomer: Four centres in New Delhi, Pune, to have 4,000 employees in the next two quarters, investment by Warburg Pincus and WestRiver Capital.
WNS: Revenues of $56 million in 2003, expects $85+ million in 2003-04, multilingual capabilities in European languages such as French and German, 3,500 seats in Mumbai, Pune and Nashik. Warburg Pincus holds a majority stake.
EXL Services: Oak Hill Capital Partners L.P. (Oak Hill) and Financial Technology Ventures hold majority stake along with the EXL management. Plans to end 2004 with 6,000 employees at Noida facilities.
Transworks: Facilities in Mumbai, Bangalore, Omaha, Neb., Sunnyvale, Calif. 1,800 employees, acquired by AVB Group for $13 million.
24/7 Customer: $22 million venture capital by Sequoia Capital, centres in Bangalore, Hyderabad; 7,000 people by 2004.
Datamatics: Acquired US-based Corpay Solutions for $9 million.