EXL eyes acquisitions in health care, insurance and financial services

Business process management and analytics company EXL Service is looking at acquisition opportunities in health care, insurance and financial services domains and has got an active pipeline of potential targets.

The New York-headquartered firm recently acquired SCIOInspire Holdings for $240 million, which will strengthen its health care vertical. Rohit Kapoor, vice-chairman and chief executive officer, EXL Service, told Business Standard that in the US, about $400 billion worth of wastage or fraud takes place every year in the health care sector and it can be checked using deep analytics. 

SCIOInspire is primarily into health care and analytics and 80 per cent of its business is around payment integrity. With the acquisition, EXL is looking at increasing revenues from the health care vertical to about 25 per cent from the current 16 per cent. “There are three verticals that are important to us — insurance, health care, and banking and financial services. Those are the verticals where we are likely to do acquisitions,” Kapoor said. About the value of potential targets, he said it depended on the opportunity but they would like to buy firms worth $50 million-100 million. 

“We have got a very active pipeline of M&A targets. I can’t share the names, but I can tell you that we have got multiple companies which we are looking at. Many of them are in analytics, many are giving us more geographic exposure, some of the companies are in digital technologies,” Kapoor added. 

EXL, which already has presence in India, Philippines, Romania, Bulgaria, Check Republic, South Africa, Columbia and Australia, plans to expand to UK soon. “For us, the US, UK, Europe and Australia are the geographies to look at,” he said. Asked about plans for the India market, Kapoor said there were no plans because it was a very low-end and low-margin market. EXL counts insurance as its dominant vertical, which contributes about 42 per cent to its revenues. Its goal is to make health care also a similar dominant vertical. 

The company has a staff count of over 27,000, which include 3,000 data scientists. Though traditional IT companies have also started focusing more on digital as their main revenue source, EXL does not see it as a challenge. “We have a huge advantage against IT companies. We understand the business and we understand the process and we know how to apply the technology into the business and the operations. If you just apply technology, you cannot get a better business out of a company. You have to understand the business and the technology both,” he said.

The other advantage, he cited was the understanding of analytics. “So today analytics is about 28 per cent of our revenues, there is no other company with this kind of concentration on analytics and with the SCIO acquisition, that 28 per cent is going to go to 35 per cent,” he added.

The hardening of visa norms is also not going to impact the company as most of the staff is based on locations outside US. “The hardening of visa rules does not impact us at all. We have over 27000 employees, only 150 have H1 visa and a similar number for L1 visa, so the tightening of rules does not impact us,” he said. In case of IT companies, around 40 per cent of the staff is on shore that is a big challenge for them.