StarTek's digital play gets leg up with stake purchase in CSS Corp

StarTek, which has 18,000 employees in India and half of which caters to the Indian market, is also seeing growth in business

StarTek, an NYSE-listed firm, is set to accelerate its digital play strategy, according to Rajiv Ahuja, president of the company. This comes on the heel of the firm’s 26 per cent stake purchase in Chennai-headquartered CSS Corp.
 
Earlier this month, the firm announced the stake purchase, for a consideration of $30 million.
 
Though both companies will work in tandem, StarTek will leverage upon CSS’ capabilities and collaborate in three areas.
 

One, to create a go-to-market strategy for leveraging the CSS platform-based technology support services to StarTek’s existing customers, and developing new customer opportunities for such services.
 

Two, to enhance complementary value creation via new service offerings — by leveraging StarTek’s service delivery capabilities under StarTek Cloud, and focused service offerings from CSS across AI, automation, analytics, Cloud, and digital solutions.
 
Three, to develop cross-selling opportunities on an arm’s length-basis — in which both entities can bring additional value to customers by building upon the additional service offerings and enhanced presence of the companies.
 
When asked if StarTek will acquire further equity in CSS Corp, Ahuja said: “CSS is a force-multiplier for us and will certainly add shareholder value. We have stated that we have the ability to take a controlling stake in the company in the next two years. The first option is to have a position in the company and they become a sister company. The second is that we have the ability to combine these two assets at some point in the next two years. Most importantly, though, it gives us is the ability to synergise each other's capabilities, especially in the tech support area, especially in the digital area where we can work together as teams.”

 
Ahuja added that the inorganic route of growth is something the company keeps evaluating and the final decision is based on finding right assets at the right price.
 
To give its digital entry a serious effort, the company recently hired a Digital officer based in New Jersey, who will work closely with CSS Corp.
 
StarTek, like several BPM players, was hit hard by the Covid-induced lockdowns and uncertainty in the market.
 
“While we were just turning the corner in 2019, the Covid-related lockdown hit us. But within seven days, we had our WFH plan rolled out with 24x7 support for our customers,” said Ahuja.

 
According to the firm’s recently announced fourth quarter and full year results, while it has seen a revival in growth, profitability needs some working on. Adjusted Ebitda has improved to $23.3 million for Q4CY20; the company reported a net loss of $7.6 million.
 
At present, the company has 52 per cent of its workforce working from home and 46 per cent working from brick and mortar. During the early days of the pandemic, the company had to resort to cost optimisation measures. One of the steps was to reduce its capacity by approximately 10 per cent, which meant 4,500 employees.

 
StarTek, which has 18,000 employees in India (40,000 globally) and half of which caters to the Indian market, is also seeing growth in business.
 
Over the next two quarters, the company plans to hire 3,000 in India. “The other strategy we are following in India is to open up centres in tier-III cities. With the second wave of infections coming in, we do not want to go through the same uncertainty and we feel being close to our employee base will work for us,” added Ahuja. The company will, over the next two months, finalise the cities it wants to expand into.