Cognizant buys UBS’ India arm for $75 mn

Cognizant buys UBS’ India arm for $75 mn
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First Published: Thu, Oct 15 2009. 10 26 PM IST

Upper hand: Cognizant’s Chennai office. According to analysts, the US-based IT company has closed the deal at a reasonable price. Madhu Kapparath / Mint
Upper hand: Cognizant’s Chennai office. According to analysts, the US-based IT company has closed the deal at a reasonable price. Madhu Kapparath / Mint
Updated: Thu, Oct 15 2009. 10 26 PM IST
Mumbai: New Jersey, US-based Cognizant Technology Solutions Corp. has agreed to buy UBS AG’s India back-office operations for $75 million (Rs344 crore) to strengthen its financial services business, the latest is a lineup of such deals by other firms in India since last year.
Analysts expect more such deals involving the outsourcing units of global financial services firms caught in the slowdown and looking to re-focus on core operations. But they warn time may be running out as the global recession recedes.
As part of the agreement, Cognizant, an information technology (IT) consulting and services firm, has won a five-year contract worth at least $440 million from the Swiss financial services firm to provide it outsourcing, IT and remote infrastructure management services globally.
Upper hand: Cognizant’s Chennai office. According to analysts, the US-based IT company has closed the deal at a reasonable price. Madhu Kapparath / Mint
Cognizant will also absorb UBS India Service Center Pvt. Ltd’s nearly 2,000 associates in Hyderabad.
The company disclosed the value of the deal and the contract in a filing to US market regulator, the Securities Exchange Commission.
“This acquisition deepens our relationship with UBS and extends our leadership position in financial services,” Cognizant chief executive Francisco D’Souza said in a statement on Thursday.
“The acquisition gives Cognizant a good presence in the European market besides giving it BPO (business process outsourcing) capabilities, both of which were areas that the company needed to strengthen,” said Sid Pai, managing director of the India arm of global outsourcing advisory TPI.
More such deals are likely, he said. “(But) the window period for such deals are fast closing as we are getting out of recession and the valuations will now start going up.”
According to analysts, Cognizant has closed the deal at a reasonable price, especially when compared with other recent deals.
“At $440 million, the annual revenue run rate from this acquisition comes to nearly $90 million, which is more than the cost of the acquisition,” said Nitin Padmanabhan, an analyst with Mumbai-based Centrum Broking Pvt. Ltd.
Last December, Wipro Ltd, the country third largest IT firm, acquired Citi Technology Services Ltd, Citigroup Inc.’s technology arm in India, for $127 million.
As a part of that deal, Wipro won a six-year software services and infrastructure management contract worth nearly $500 million. It also took on board Citi Technology’s 2,050 associates.
Similarly, Tata Consultancy Services Ltd, India’s largest IT firm, bought Citigroup Global Services Ltd (CGSL), Citigroup’s back-office centre in India, for $500 million with assured outsourcing revenues of $2.9 billion over nearly 10 years.
Earlier, in July 2008, WNS Global Services, one of India’s largest outsourcing firms, bought Aviva Global Services, the outsourcing arm of British insurer Aviva Plc, for $228 million. WNS had acquired nearly 5,800 personnel with the deal.
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First Published: Thu, Oct 15 2009. 10 26 PM IST