Mumbai:On Monday, the management of Mumbai-based business process outsourcing (BPO) firm Intelenet Global Services Pvt. Ltd pulled off a $200 million (Rs820 crore) management buyout bid backed by US private equity (PE) investor Blackstone Group. The company, however, did not confirm the deal size. This is the second successful PE-backed management buyout in the BPO sector after Delhi-based EXLService Holdings, Inc.s’ management staged a similar buyout funded by Oak Hill Capital Partners in 2002.
Blackstone will own 80% of SKR BPO Services, the joint venture holding company floated for the purpose of the buyout, while Intelenet’s management and employees will hold 20%. Mumbai-based mortagage major Housing Development Finance Corp. (HDFC) and UK’s Barclays Bank are selling their respective 50% stakes in the company. This is Blackstone’s third deal in India, after Emcure Pharma and Ushodaya Enterprises. The firm will have four board seats in the BPO. This includes two executives from the $34 billion firm’s New York headquarters.
Intelenet chief executive officer Susir Kumar, who led the management buyout (MBO) deal, spoke to Mint about the deal and the company’s future plans. Edited excerpts:
What triggered the MBO?
For a while, our existing shareholders, HDFC and Barclays, have been wanting to exit due to regulatory issues. Barclays, in particular, was under pressure from the UKregulators and wanted to shift some of its core processes to a captive operation.
Both investors could have either exited through a strategic stake sale or an initial public offering.
We (the management) felt an MBO was the best option in the interest of the company and started looking for an investor to back us some months ago.
How is the 20% management/employee stake spread out?
It is actually spread out across 350 people. We will soon be taking that to 1,000 people. The stakeholders run across the ranks from supervisors and team leaders to senior executives.
When will you hit the capital market with an initial public offering?
We want to put through certain strategic initiatives before we make a public issue. This would include plans to set up delivery capabilities overseas.
We will take at least six months to a year to hit the capital market.
What percentage of your revenues come from Barclays?
Currently about 25% of our Rs400 crore revenues comes from Barclays.
After acquiring 80% stake, what role will Blackstone play in the company?
Like any sophisticated private equity firm, Blackstone will be a passive investor. It will be on the board, of course, but its role will be limited largely to opening access to customers through its portfolio companies and helping us with our inorganic growth plans.
Could you elaborate on the proposed acquisitions?
We want to build our own delivery capabilities in the UK, the Philippines, Mauritius and the US. So far we have been operating through partners. The Philippines and Mauritius will be organically built. We want to have up to 2,000 employees in the Philippines and 1,000 in Mauritius. Our plans in the UK and the US will be inorganic.
We’ll acquire companies that will offer us new capabilities. We’re comfortable acquiring companies with annual revenues of $20-30 million.
Where will your headcount and revenues be by the end of the current fiscal year?
We’ll add about 3,000-4,000 people to the 17,000-strong employee force that we already have. Revenues will grow above average industry rates. I can’t give you specific numbers at this point.