Buying India-centric IT outsourcer Syntel to rev up offshore play for Atos

The acquisition of Syntel, which has around 18,000 employees in India, will be beneficial for Altos, traditionally a strong player in Europe.

French IT outsourcing major Atos’ acquisition of Michigan-based Syntel for $3.4 billion will help the European firm bolster its offshore presence in India — something the company has been aiming at for a long time. 

Nasdaq-listed Syntel has around 18,000 employees in India, constituting roughly a little over 78 per cent of its global workforce. Having a strong offshore delivery base will also give Atos enough headroom to expand its profit margins, which still stand at a low double-digit figure as compared to Syntel's 24 per cent. The acquisition will be beneficial for Altos, traditionally a strong player in Europe. Atos can now expand its presence in North America, which accounts for close to 90 per cent of Syntel’s gross revenues. Apart from a gateway to a market, Syntel’s marquee clients in the banking, financial services and insurance (BFSI) sector will now come in Atos’ kitty, thereby helping it improve margins with decreased deal flow. 

BFSI is the biggest focus area for Syntel, which derives over 45 per cent of its revenues from the segment.

“This acquisition is significant for a few reasons. First, Atos, with a strong European presence, will now be able to enter the US market in a big way after Syntel buy. Also, their offshore presence will get a boost as Syntel has a huge India presence. Syntel’s digital offerings will supplement Atos’ margins," said Pareekh Jain, senior vicepresident and head of India operations at HfS Research.