There is an interesting paradox on display in the public and private equity markets right now. Software stocks have lagged the rest of the market over the past few months, mainly because of fears that the sharp rise of the rupee this year will lower the profits of the likes of TCS, Infosys and Wipro.
At the same time, there is transparent eagerness among private equity firms to buy assets in another sector that should ideally also suffer because of a strong currency—BPO. Blackstone Group has bought a large stake in Intelenet this week. And Mint reported on Tuesday that Citigroup is talking to various private equity firms to sell its BPO, Citigroup Global Services.
So, there you are: two types of investors, two parts of the outsourcing industry, two different responses. What does this tell us? One possibility is that the strong rupee is unlikely to damage the outsourcing engine in the long run. But, only private equity has the patience to wait it out.