HCL wins $200 million deal from UK insurance firm

HCL wins $200 million deal from UK insurance firm
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First Published: Mon, Nov 23 2009. 11 01 PM IST

Updated: Mon, Nov 23 2009. 11 01 PM IST
Mumbai: India’s fourth largest software services firm, HCL Technologies Ltd, has won a $200 million (Rs930 crore) deal that will span 30 years from Equitable Life Assurance Society, a UK-based insurance provider, the company announced on Monday.
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While the main part of the contract will kick in around March 2011, HCL expects to earn around £8 million (Rs62 crore) till then through preparatory work required to set up systems and processes required, said Stuart Drew, a senior vice-president at HCL. He added that HCL was chosen from among 11 firms in a selection process that lasted a year.
While estimated revenue of $200 million is spread over 30 years, a majority of it is expected in the first five-six years, the company said without giving more details.
Equitable Life, which stopped taking on new business in 2000, is engaged in servicing the policies of its existing client base of about 500,000. The insurance company has an asset pool of nearly £8 billion.
HCL will take over the contract from Lloyd’s Banking Group Plc, which currently has about 340 staff working for Equitable Life. About three-fourth of these employees will be taken into HCL to comply with European regulations.
Nearly 240 of them, however, are likely to be redundant once the integration is complete, Equitable Life chief executive Chris Wsicarson said in a call with reporters from London. Besides the staff in HCL’s UK offices, between 50-70 staff stationed out of India will be working for the client.
Shares of HCL rose 5.41% on the Bombay Stock Exchange (BSE) on Monday to close at Rs343.65, while the exchange’s benchmark index Sensex, rose 0.93%, or 158.33 points, to close at 17,180.18. BSE’s IT sectoral index fell 0.30%.
“This deal is the first major win for the Liberata insurance platform that HCL acquired in 2008. There is more business to be won in this particular space as several other European insurance providers are also looking,” to do similar deals, said Ankur Rudra, an IT analyst with UK-based investment advisory Noble Group Ltd.
HCL acquired UK-based business process outsourcing firm Liberata Financial Services (LFS) in July 2008. While it paid $2 million for the fixed assets for LFS, the actual value of the acquisition was not made public. The Liberata software platform offers full lifecycle support for insurance and pension policies.
Technology researcher Gartner Inc. had in a July 2008 report estimated LFS’s annual revenue at about $60 million, with a client base of six customers. “However, the company (LFS) has found it difficult to acquire new customers in recent years and has been unable to add new clients. This is likely due to the limited IT capabilities within LFS,” the report said, commenting on HCL’s acquisition.
“To continue to grow this business, HCL must significantly overhaul the systems used within the BPO (LFS) unit. Investment in new policy, claims and other core systems will be critical to enable the BPO unit to compete with other local players, such as the UK’s Capita Group and India’s Tata Consultancy Services,” Gartner had said.
In the insurance space, HCL faces competition primarily from Tata Consultancy Services Ltd’s Diligenta platform and from Capita Group, US-based Unisys Corp. and EDS, said Rudra. TCS’ UK-headquartered subsidiary, also named Diligenta, has been operating since 2006.
HCL, which employs about 55,000 people, had a revenue of $2 billion for the year ended March 2009. For the three months to September, HCL reported a 10% decline in its net profit to Rs356 crore. Its profits were severely dented by foreign exchange losses, which stood at Rs151 crore in the September quarter.
Graphics by Yogesh Kumar / Mint
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First Published: Mon, Nov 23 2009. 11 01 PM IST