Aegis, the outsourcing services arm of the $15-billion Essar Group, which has 18 companies in the last four years, is eyeing five more. In an interview with Swati Garg, CEO and Global MD Aparup Sengupta outlines the company’s strategy, the outlook of the industry and issues of intellectual property. Edited excerpts:
You have spoken about the ‘double cylinder’ strategy? Please elaborate.
In a company that has to grow, the double cylinder strategy is a mixture of organic and inorganic growth. While organic growth is driven by the sales team, there is a period of gradual engagement before a deal actually materialises. In the case of inorganic growth, there is a quick influx of customers and business. A double cylinder strategy helps us consolidate a large part of the industry and become a global company.
After 18 acquisitions in 40 months, how difficult is it to manage integration and assimilation?
The different teams involved are the merger and acquisition (M&A) team, the transaction team and the operations team. The integration team works on five-nine principles. Assets are identified and acquired by the first team, leaving the task of assimilation to the integration team, which performs the task of integration over nine hours, nine days, nine weeks and 99 days. This is a team of about 30 people. Therefore, for us, integration is parallel to acquisition.
What are your acquisition plans for the near future?
While we are evaluating seven assets at any point of time, we are currently looking to expand our footprint in applications services. With this rationale, we are currently evaluating five companies across Latin America and Africa that primarily specialise in applications services. These companies range between $100-300 million.
You raised $200 million as debt. Are you looking at increasing this amount?
Currently, there are no plans of raising further debt, though will change if we zero in on an asset for acquisition. Augmentation of debt is always on the cards for us, given our focus on inorganic growth. We are primarily looking at a healthy 1/3 ratio and will not overleverage ourselves.
Are you focused on countries in the Americas and Africa?
We are in the process of evaluating some Indian companies though these would never be the focus, given the fact that we are looking primarily at a global footprint. Also, these are companies that are too expensive. Aegis would look at value propositions, and companies in less-developed geographies offer bright prospects for this, given that they are not just relatively less costly, but have a lot of untapped potential. Dual language capabilities in the Americas is an added incentive.
Given that spends are back in the global market, how do you the see the industry’s prospects in the future?
We do see a return of discretionary spends in the global market. However, you have to manage and enable consumer experience, which is inclusive of hardware, software and communication. The idea is to add value to the balance sheet, go the customer and outline profits per transaction. This is a customer-based transaction model and not a service-delivery model. There is a need for end-to-end solutions. There are blurring lines between luxury and needs, and these will be replicated in discretionary and non-discretionary spends.
Does emergence of China and the Philippines hold a threat to India?
I think the voice story is over for India. Countries like China and Philippines are exhausted as well. People are now looking at customer service no longer as a cost, but as an investment. What this means is that for a company, instead of an alien servicing a client, the focus is back to hiring locals. For us, this means hiring locals across geographies.
What is your take on the intellectual property regime?
We are looking at IP in countries such as Netherlands and US, which give us a patenting legal air cover, because of the maturity in intellectual property rights. The Indian ecosystem is more a sub-system of the global ecosystem, and will take time to mature. When one needs global air cover for a global company like Aegis, one has to look at global IP regimes.