Processing .....please wait.. 
The article has been forwarded.... 
News >> Technology >>
WestBridge plans $70 M investment in India
By siliconindia staff writer
|
Tuesday, 15 June 2004, 19:30 IST
BANGALORE: WestBridge Capital Partners sees big money only in small firms. The U.S. private equity firm plans $70 million investments over the next two years in Indian outsourcing companies on the expectation of good returns when the firms go public.
The Silicon Valley firm, which counts Goldman Sachs Group Inc. among its cornerstone investors, is eyeing strategic stakes in what Managing Director K.P. Balaraj called "niche outsourcers" that are dedicated to the U.S. market.
"We can unlock the value of our stakes in specialized outsourcing businesses through initial public offerings," Balaraj told Dow Jones Newswires Friday. "Our success rate is good and, so far, we are doing well in India as a fund."
But IPOs may not be the only exit option available to private equity firms investing in the country. Over the past two months, India's outsourcing industry has witnessed major acquisitions.
In April, International Business Machines Corp. acquired unlisted call center Daksh eServices Ltd. for an estimated $150 million. The next month, Asia's biggest software firm, Tata Consultancy Services Ltd., acquired Bangalore-based Phoenix Global Solutions Ltd., a company for which Electronic Data Systems Corp. was reportedly in the race.
"We expect to play into the consolidation process in the industry. There are companies who are eyeing acquisitions in India," Balaraj said.
India-focused WestBridge, based in Port Louis, Mauritius, has an investment outlay of $140 million. Its portfolio includes stakes in call center company ICICI OneSource Ltd., a unit of India's biggest private sector bank ICICI Bank Ltd.; marketRx Inc., an outsourcer serving U.S. medical device makers and insurance sellers; and Indecomm Global Services Ltd., which helps U.S. customers settle health care claims.
WestBridge's future investments are likely to be between $4 million and $8 million each. "We are lining up new stake purchases in efficient companies. We hope to close two deals by July or August," Balaraj said.
The outsourcing industry is booming and is already being billed as one of India's strongest growth prospects over the next five years, with U.S- and U.K.-based companies shipping thousands of white-collar jobs to the country to rein in costs.
For now, Balaraj is focusing on back-office services companies catering primarily to clients in the U.S., where India's outsourcing industry generates the bulk of its $3.6 billion annual revenue.
"The U.S. remains the biggest outsourcing market and presents the best growth opportunity," Balaraj said.
He said the software market has already "matured" and doesn't provide strong growth opportunity for private equity funds looking for big gains from the outsourcing boom.
"Software is so well-established that it provides limited growth potential. Back-office services will be the growth area, and we want to be a major player in that domain," Balaraj said.
Observers expect that over the next five years, revenue growth in the software industry will be lower than in the call-center and back-office services business, which is likely to employ a million-plus English-educated Indians by 2008.