Mumbai: Aegis Ltd, the back-office services company that is part of the $17 billion, or Rs82,110 crore (by revenue), Essar Group, is looking to acquire four companies as it works towards its target of becoming the most profitable back-office services company in the world by 2012.
“We will try to become a billion-dollar company in the next three years,” said Aparup Sengupta, managing director and global chief executive officer of Aegis.
Aegis was acquired by Essar Group in 2004. At the time, the back-office services firm was making losses of $22 million on a revenue of $52 million. The firm currently has revenue of around $500 million and claims to have a return on equity of 40%. It doesn’t disclose its profit numbers, but said in a presentation made at a recent event organized by industry lobby Nasscom that its profits in 2009-10 would be at least $100 million.
No stake sale: Aegis Ltd managing director and global CEO Aparup Sengupta.
Aegis’ growth has been built around a focus on the US business and acquisitions in the country, India, the Philippines and South Africa. It has made 14 acquisitions since 2004.
“It was scary. Everybody told us, cannibalize the business, bring it offshore and make it profitable. We grew the business there and made it profitable,” said Sengupta.
Aegis is the largest company in the domestic business in India by revenue, Sengupta claimed.
A?domestic?rival claimed that this scale has been achieved on the back of aggressive pricing. “In the last couple of deals in the domestic segment, Aegis appears to be spending to buy market share,” said a senior executive at a company that competes with Aegis, who did not want to be identified.
Gaurav Gupta, principal and country head of Everest Consulting Group India Pvt. Ltd, the Indian subsidiary of the global management consultancy firm, said Aegis has demonstrated its ambitions through aggressive acquisitions, but now has to stay profitable and differentiate from the rest. “Both are huge challenges. Aegis will have to justify the premium paid to these acquisitions and face the challenge of integrating these business to be different in cost, value and service terms from others,” Gupta added.
In July 2008, Nasscom ranked Aegis 13th in a listing of top 15 back-office services firms in the country. The 2009 ranking is yet to be released.
Sengupta said that Aegis wanted to focus on “services” and not just back-office offerings.
According to Nasscom’s report, Perspective 2020, back-office services will overtake technology services and become the country’s largest export-oriented opportunity with a potential export market of $615-670 billion by 2020.
This will be in addition to a domestic back-office services potential of $280-310 billion that will emerge in new countries such as the Bric countries (Brazil, Russia,India and China).
In India, Aegis acquired Customer First, Orion and BPL’s customer care unit at a time when the other players were targeting the overseas market. Aegis spent $300 million acquiring 13 firms and $250 million more to buy People Support in the Philippines. Aegis would make large acquisitions as it grows, if they make sense, said Sengupta.
Edelweiss Securities Ltd has been given the mandate of identifying acquisition candidates, and Sengupta denied that the company is also eyeing a 10% stake sale on which it is being advised by the Mumbai investment bank.
“They (Edelweiss) are advising on various acquisitions. There is no exit pressure, as the company is owned by the Essar Group and is not a venture-funded company or funded by a private equity (PE) player where there is a seven-year sunset clause,” he said.
Typically, when a venture capital or PE firm invests in a firm, the business is listed in five years and by the seventh year, investors exit the firm.