HeroITES eyes more buys

Gurgaon-based HeroITES, the over Rs 400 crore business process outsourcing (BPO) subsidiary of the two-wheeler maker Hero group, will not be stopping its inorganic quest with the nearly Rs 330 crore acquisition of Scotland's biggest BPO Telecom Services Centres (TSC).

"We will make at least one or two more acquisitions to scale up our offerings," said Rohit Chanana, president, HeroITES. "You have to be big if you want to succeed in this business," he added.

Chanana, however, would not commit a time-frame for such deals. With this deal, the combined company, christened TSC Hero, would have over 3,500 seats and provide BPO services to the UK, Australia and the US. Chanana insisted the move would not lead to any jobs being shifted offshore.

Goldman Sachs was to partner with the Hero group for the deal, according to sources close to the development, but later backed out because "it did not see any value proposition". Almost 80 per cent of the BPO's revenues came from voice. Goldman Sachs wanted HeroITES "to move up the value chain with an acquisition that gave it more non-voice offerings".

Chanana, however, was confident that the TSC acquisition made a lot of sense since the company wanted "a foothold in key customer markets such as the US and the UK, besides establishing an onsite, offshore and nearshore (near the customer's location) presence". Besides, despite being primarily in the voice segment, the company is estimated to have revenues upwards of $100 million and EBITDA margins of around 13 per cent, according to sources.

HeroITES is not new to the BPO business. "We understand this business well," said Chanana. It was established in 2000 as a division of Hero Corporate Service, a privately-held company of the Hero group in India. In 2005, the BPO division was demerged into a separate independent entity "for greater focus and implementing an aggressive growth strategy".

As a part of the expansion plan, HeroITES and LiveBridge(US) (subsequently acquired by ACS, US, a Fortune 500 company) formed a strategic partnership to provide BPO solutions to all the clients.

The company offers a gamut of eCRM and BPO services, including customer care, customer acquisition, data management and accounting back office. "It specialises in financial services as well as credit card, telecom and manufacturing verticals and caters to several Fortune 500 companies across the US, UK and Australia," said Chanana.

TSC employs over 3,000 employees at nine UK sites, majority of whom are in Scotland and Yorkshire's Dearne Valley. The move will allow TSC to offer a wider range of products and services. These new capabilities will help drive expansion and create more jobs in Britain and off-shore. "We see TSC's management skills and experience as a key to driving our expansion in the BPO business," said Chanana.

TSC's client list includes Vodafone, T-Mobile, Hewlett-Packard, HBOS, and HSBC.