Blackstone buys Serco’s India BPO operations for Rs2,558 crore
This is the largest acquisition by Blackstone in India in terms of enterprise value
Mumbai: Private equity (PE) investor Blackstone Group LP has repurchased the India-based business processing outsourcing (BPO) operations of the UK’s Serco Group Plc for £250 million (about Rs.2,558 crore), four years after selling the unit.
In 2011, Blackstone sold the BPO business—then known as Intelenet—to Serco for £385 million. With the acquisition, the largest deal by Blackstone in India in terms of enterprise value, the US-based PE firm is re-entering the BPO business.
“We are excited to embark on the Intelenet 2.0 journey and delighted to once again partner with the company’s management team. With a market-leading position in the offshore banking and travel/hospitality verticals and No. 1 position in domestic India BPO, Intelenet has the core platform to capitalize on future growth opportunities,” said Amit Dixit, senior managing director and co-head of PE in India at Blackstone.
The BPO operations expect an annual revenue of around £235 million this year. The company has 51,000 full-time employees across 67 centres in eight countries.
In the past four years, the BPO unit’s revenue has gone up by four times, Dixit said, adding that Blackstone hoped to “replicate” the same success. Its focus on India, and on sectors such as banking and finance, travel and hospitality, and a strong management team prompted Blackstone to buy back the unit, Dixit said.
In 2012, the Serco Group consolidated its BPO assets and created Serco Global Services. Serco has the third largest BPO operation in India, behind only Genpact Ltd and Tata Consultancy Services Ltd (TCS). The deal with Blackstone is limited to the unit that was previously known as Intelenet and does not include the British BPO business of Serco.
After the change in ownership, the business will be rebranded as Intelenet Global Services. The sale is expected to be completed in the coming months, subject to customary closing conditions and approvals, Blackstone said.
Blackstone hopes to use the network of its portfolio companies around the globe to secure business for Intelenet. At the time of selling the business in 2011, seven portfolio companies of the PE firm accounted for a fourth of Intelenet’s revenue, Dixit said.
The deal brings to rest speculation around who will buy the business, which was officially put on the block by Serco in March. Intelenet was founded in 2001 in a joint venture between TCS and Housing Development Finance Corp. Ltd. In 2007, Intelenet’s management team initiated a buyout backed by Blackstone, which four years later sold the company to Serco.
“Serco was a good owner for Intelenet and had significantly grown the BPO business in its tenure. The business, however, was sold because of change in strategy of Serco which led to the sale of its private sector BPO business. We have retained almost all of our clients and key staff that we have had since our inception and look forward to continuing to add value to them,” said Susir Kumar, chief executive officer, Serco Global Services.
Under the terms of the transaction, the business will continue to be led by Kumar and the existing management team.
Blackstone has been investing in India since 2005 and has made investments worth over $3 billion in PE and real estate.
In the recent past, India has seen several large acquisitions by global PE firms, a reflection of investor confidence in the Indian economy.
Till date in 2015, the Indian PE industry has seen 18 buyout transactions worth $3.4 billion, out of 461 PE deals worth $11.8 billion. In 2014, PE funds completed 18 buyout transactions worth $671 million, out of 542 PE deals worth $13.1 billion, according to data from PriceWaterhouseCoopers Pvt. Ltd. In 2013, PE funds were involved in 21 buyouts worth $2 billion.
Recent buyout transactions by PE firms in India include the acquisition of Crompton Greaves Ltd’s consumer electricals business by Advent International Corp. and Singapore’s state-run investment firm Temasek Holdings Pvt. Ltd, and the purchase of Destimoney Enterprises Pvt. Ltd by the Carlyle Group.
In May, Blackstone sold its controlling stake in cash management company CMS Info Systems Ltd to Baring Private Equity Asia in a deal worth $440 million.
“Financial sponsors are increasingly getting comfortable with buyouts in India, particularly in the services sector, and backing management teams to grow business. The real advantage of the buyouts is financial sponsors’ ability to be involved in active management and drive superior performance and also in some cases the ability to take leverage and improve returns,” said Pramod Kumar, managing director of Barclays Capital India.
Barclays, a former shareholder in the Intelenet BPO business, advised Blackstone on this transaction.
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