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A rchive Date
[ 08-04-2004 ]
Category
[ International Relations ]
sub-Categoy
[ IBM ]
      [http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=4773456

      IBM buys leading Indian back office service firm
      Wed Apr 7, 2004 07:23 AM ET
      By Anshuman Daga

      BANGALORE, April 7 (Reuters) - International Business Machines Corp (IBM.N: Quote, Profile, Research) said on Wednesday it would acquire Daksh, India's third-largest back-office services firm, in the biggest acquisition yet in the nation's booming $3.5 billion sector.

      Both companies declined to give financial details but industry sources estimated the buyout, IBM's first in India, at between $150 million to $200 million, making it one of the biggest foreign acquisitions in India in the past few years. The deal, expected to be closed in May, will give the world's largest computer maker access to privately held Daksh's 6,000-strong employees, who mainly offer call centre services to 13 clients including Internet retailer Amazon.com (AMZN.O:       Quote, Profile, Research) .

      "This investment is indicative of our commitment to supporting our clients in this region and leveraging local capabilities," Abraham Thomas, general manager at IBM India, said in a statement, confirming an earlier Reuters report.

      The acquisition of Daksh, based in Delhi's satellite town Gurgaon, would help IBM add to its already significant muscle in India, where it employs more than 9,000 people in software, services and back-office work through captive units.

      Four-year-old Daksh, set to become part of IBM's Business Consulting unit, is estimated to have doubled its revenue to about $60 million in the year to March 2004, and had been planning a public issue of shares before it agreed to be bought.

      "This deal means that business process outsourcing companies need to be part of a bigger outfit," said Ravi Ramu, chief financial officer of mid-sized sofware exporter Mphasis BFL (MBFL.BO:       Quote, Profile, Research) , which has a fast-growing back-office unit MsourcE.

      "Stand-alone back-office firms require scale, financial stability, and being part of a bigger group also helps to attract clients," said Ramu.

      EARLY MOVER IN THRIVING INDUSTRY
      Daksh is an early mover in a sector which is thriving by tapping India's English-speaking knowledge workers to provide services such as accounting and insurance claims processing to foreign customers looking for low-cost outsourcing.    

      The company's rivals include MsourcE and Wipro Spectramind, India's largest back-office firm which is part of Wipro Ltd (WIPR.BO:       Quote, Profile, Research) , India's third-largest software exporter.

      Infosys Technologies (INFY.BO:       Quote, Profile, Research) and Satyam Computer (SATY.BO: Quote, Profile, Research) , the No. 1 and No. 4 software firms, have also jumped into the fray and set up subsidiaries to offer back-office outsourcing.

      Daksh, a Hindi word for alert, had four co-founders including its chief executive, Sanjeev Aggarwal.

      Venture firms who invested $29 million in three rounds to acquire a majority in Daksh are expected to have done very well out of the IBM deal, which comes less than two years after Wipro acquired Spectramind for $102 million.

      There have been other smaller acquisitions in the industry, in which competition for the best employees is intensifying with the entry of global giants including American Express Co. (AXP.N:       Quote, Profile, Research) and third-party vendors like Accenture Ltd (ACN.N: Quote, Profile, Research) and Convergys Corp (CVG.N: Quote, Profile, Research) .

      Daksh's first round saw Britain's CDC Capital Partners invest $3 million in 2000, and Citigroup's (C.N:       Quote, Profile, Research) private equity arm put in $6 million a year later. General Atlantic Partners invested $21 million in 2002.

      © Reuters 2004. All Rights Reserved.


      World Fact Book (CIA)]


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