International tech firm Startek announces $30 mn investment in CSS Corp

Startek, an international business process management firm, said it invested $30 million in CSS Corp in a limited partnership managed by its majority shareholder, Capital Square Partners.

Startek will acquire both an indirect beneficial interest of approximately 26 per cent in CSS, an IT services and tech support company. Startek said in a statement it had the option to acquire a majority stake in CSS without being obliged to do so. 

The investment was funded through a newly secured $185 million senior debt facility from CSP Alpha Holdings Pte. Ltd., a wholly-owned unit of Startek. This debt refinancing consists of a $165 million term loan and a $20 million revolving credit facility. The term loan bears a moratorium on principal repayment for 21 months and will amortize quarterly thereafter, beginning in November 2022. The loan is subject to certain standardized financial agreements. The proceeds of this loan were used to repay in full the previous senior debt facility and to also make the strategic investment in CSS.

“As we entered 2021, we further strengthened our commitment to enhancing the flexibility of our platform. Subsequent to the fourth quarter, we completed a $185 million debt refinancing that allows us to extend our debt maturities and enhance our overall liquidity position. With this reinforced balance sheet, we can comprehensively support our current operations while capitalizing on strategic opportunities to drive long-term, accretive growth," said Aparup Sengupta, Executive Chairman and Global CEO of Startek.

He added that the investment CSS represents one such accretive opportunity that will also help to ramp up Startek's digital initiatives. "CSS is a robust IT services company providing mission-critical AI, automation, analytics, cloud and digital solutions to a growing technology customer base across five continents. Given the success of our Startek Cloud omnichannel platform in 2020, we continue to view our digital services as a key long-term driver of both future revenue growth and margin expansion. Our investment in CSS accelerates our digitization initiatives and marks an important inflection point for Startek," Sengupta said.

Startek employs over 18,000 people in India across BPM centres and 40,000 in 13 countries.

Startek also announced fourth quarter results, for the quarter ended December 31, 2020. Net revenue for the quarter was $174.5 million, an increase of 4.7 per cent over the previous year, driven by elevated demand and seasonal strength within the company’s existing client network. 

Net loss attributable to Startek shareholders in the December quarter was $7.6 million, compared to a net loss of $5.3 million in the year-ago quarter. Net loss in the fourth quarter of 2020 included an approximate $13.2 million goodwill impairment from Covid-19 related forecasted declines in the company’s business in India, South Africa, and Australia and in Argentina owing to the devaluation of the local currency. 

Gross profit in the fourth quarter rose 11.7 per cent on an annual basis to $30.9 million. Gross margin increased 160 basis points to 17.7 per cent compared to 16.1 per cent in the year-ago quarter. The margin increase was attributed to its existing client base and a greater revenue mix of high-margin digital services. The margin expansion was also aided by incremental grants of $2.7 million received in the fourth quarter.