Blackstone’s first buyout deal in India could be with Intelenet

Mumbai:US private equity (PE) investor Blackstone Group may have found its first buyout deal in India. The firm is backing a bid by the management of Intelenet Global Services to buy out existing shareholders Housing Development and Finance Corp. (HDFC) and Barclays Bank Plc., which own 50% each. Blackstone is expected to take 51% or more in Intelenet. While Intelenet CEO Susir Kumar wasn’t available for comment, people close to the development said an announcement was expected on Monday.

Intelenet, which started out in 1994 as a 50:50 joint venture between Tata Consultancy Services (TCS) and HDFC, has had a somewhat chequered history. In 2004, TCS sold its stake to mortgage major HDFC for Rs161 crore when it decided to focus on its own business process outsourcing (BPO) business. Subsequently, HDFC sold 50% to the UK-based Barclays, which was looking to outsource back-office processes to India.

People close to the development said with Blackstone’s entry, Intelenet may ramp down its exposure to Barclays. Blackstone is currently in a “quiet period” ahead of its forthcoming initial public offering (IPO). About 70% of Intelenet’s revenues, which reports say were at $100 million (Rs410 crore) as on 31 March, currently comes from Barclays. “Such high exposure to one bank will make it difficult for the company to pitch for business from other players in the financial services business,” they said. The selloff comes amid talks of Barclays’ plans to set up a captive outfit here.

Blackstone’s entry gives Intelenet exposure to Fortune 100 firms in the US and Europe through the New York-based PE investor’s extensive portfolio of investee firms. It will also gain credibility ahead of a proposed IPO, which has been hanging fire for nearly two years now. Younger peers such as WNS Global Services, Firstsource and EXL Services have seen successful debuts on the bourses in the last six months.

As the fast-paced BPO sector consolidates, mid-sized firms such as Intelenet are under increasing pressure to deliver returns to their investors. Firms, which have been unable to diversify their revenue dependence beyond two or three large clients, are prime targets for consolidation. “If your top 10 clients account for more than 10% of revenues, you’re in trouble,” said the CEO of a BPO firm in Bangalore. The going has gotten tougher for mid-sized players because of the huge BPO plays built by global IT services giants such as IBM, Accenture, EDS and local players Infosys and TCS.