Bangalore: Citigroup Inc., reeling from $61 billion (Rs2.97 trillion) in credit-related losses, agreed to sell its back-office unit in India for $505 million in cash to Tata Consultancy Services Ltd, or TCS, as the deepening financial crisis forces banks to raise funds.

As part of the accord, Citigroup will award orders worth $2.5 billion over nine-and-a-half years to TCS, India’s largest software services provider said in an emailed statement on Wednesday.

Big deal: S. Ramadorai says the move will help drive TCS’ growth. AFP

The deal allows TCS to more than double its number of back-office workers, helping the it widen its lead over Infosys Technologies Ltd and Wipro Ltd.

“We view this as a positive move for TCS," Diviya Nagarajan, a Mumbai-based analyst at JM Financial Ltd, said in an emailed note to clients. The deal gives the Indian provider “much needed visibility and stability with a top client in the context of the current demand environment", she wrote.

“This transaction will complement our domain expertise and bring new capabilities to TCS that will help drive growth," the company’s chief executive S. Ramadorai said.

TCS said the deal, expected to close this quarter, will start contributing to revenue in the March 2009 quarter.

Citigroup Global Services Ltd, formerly known as E-serve International, employs 12,000 back-office workers and offers transaction processing and customer services for the New York-based financial firm’s businesses globally, according to its website.

TCS employed about 8,000 back-office workers, N.V.K. Raman, head of Tata’s back-office outsourcing unit, had said in a February interview.

The sale “fits squarely into (Citigroup CEO) Vikram (Pandit)’s goal to reorganize Citi, strengthen our balance sheet, divest assets that are not aligned with our growth strategy to free up resources that can be better used as investments in higher-growth, higher-return opportunities," Sanjay Nayar, chief executive of Citigroup’s India operations, wrote in an email to employees. “This is a strategic step in Citi’s stated objective to focus on our core competencies."

Talks for Genpact Ltd to buy the Citigroup back-office division failed after the firm was unwilling to pay $700 million for the division, The Economic Times had reported in February, citing unidentified people.

The deal comes two days after Nomura Holdings Inc., Japan’s biggest securities firm, agreed to buy the back-office operations of Lehman Brothers Holdings Inc. in Mumbai, which employed 3,000 workers. Nomura is also buying the Asian, West Asian and European operations of Lehman, which filed for bankruptcy last month.

TCS has no plan to merge the Citigroup unit with itself, and will retain the current management team, chief operating officer N. Chandrasekaran told reporters.

In 2004, General Electric Co. sold 60% of its Indian back-office unit, now Genpact, for $500 million to buyout firms General Atlantic Llc. and Oak Hill Capital Partners Lp. British Airways Plc. sold its controlling stake in WNS Holdings Ltd in 2002.

Citigroup has the largest amount of losses tied to the collapse of the mortgage market with $61 billion, followed by Wachovia Corp.’s $53 billion, according to data compiled by Bloomberg. Globally, asset write-downs and credit losses have cost the world’s biggest banks and securities firms a combined $593 billion, according to Bloomberg data.

Shares of TCS fell 5.07% to close at Rs546.60 each on the Bombay Stock Exchange on Wednesday, on a day when the exchange’s benchmark Sensex index fell 3.14% to 11,328.36. TCS shares have lost 51% this year compared with a 45% decline for the Sensex.

Govardhana Rangan in Mumbai and Reuters contributed to this story.