. Starting out in 1988 as a textbook reprinter and then as a typesetter, the chairman and co-founder of Fairfax (Virginia)-based TechBooks has built a $55 million knowledge process outsourcing (KPO) company that has been ranked among the world's best. Today, TechBooks offers a wide range of content services and boasts a client list that includes textbook publishing majors Cambridge University Press, Blackwell, Hall, Pearson and McGraw Hill.
Now, Gupta is writing a whole new chapter in his company's growth. Flush with $45 million from Bethesda (Maryland)-headquartered mezzanine fund American Capital Strategies, TechBooks completed its takeover of Pune-based e-learning company, Maximise Learning, last month.
With plans to add another 1,500 employees in India over the next 12 months, it's little wonder that Gupta, who studied business administration at Carnegie Mellon University and electrical engineering at Ohio State University, visits his homeland at least half-a-dozen times a year.
Business Standard caught up with Gupta in New Delhi last week to discuss TechBooks' future plans and the potential of KPO. Excerpts:
Have you infused fresh funds into the company?
US-based American Capital Strategies has invested $45 million in TechBooks. It is very different from typical investors in India who only offer equity.
American Capital offers different layers of capital like equity, mezzanine and senior debt. I have encouraged them to come to India and they are very keen to do so. American Capital has invested close to $3 billion this year in the market, up from $1.7 billion last year.
Do investors chase you or do you chase investors?
We get a lot of calls. There is a lot of capital available in the market and we're fairly well recognised in the outsourcing space in India and in the US. We have a very strong base of publishing clients.
With the acquisition of Maximise Learning we have developed a strong set of corporate clients as well.
Why did you pick up Maximise?
We were working with an investment bank to help us identify the best e-learning companies in India. This company had the best cultural fit with us, which is very important in an acquisition.
Besides, Maximise offers advanced e-learning solutions. It has over 400 skilled programmers and designers in multimedia courseware, working with a number of Fortune 500 corporations in technology, financial services, consulting, healthcare, and publishing
What's the synergy between typesetting and e-learning?
There is synergy because it is the same content. What happens today is that publishers go to one company for typesetting and then go to another company to develop the review questions.
Could you elaborate?
Our clients like McGraw Hill are already into e-learning. What is happening is that the institutions that are buying their textbooks are demanding e-learning solutions from them.
For instance, the review questions in a mathematics book can now be online and made interactive. Publishers have been very focused on the printed format. But all of a sudden they can deliver material electronically. Will this generate revenue? Publishers are still developing their business model.
So as a content outsourcing company, TechBooks has got into it early?
Yes, we are very unusual in that we offer typesetting services and a full offering of e-learning services. Most of our competitors in India and in the US don't have the e-learning capability.
But isn't typesetting very low-end work?
Actually it is not. Some of it comprises highly designed graphical textbooks ""almost magazine-like in nature. Some may be black and white and simple, or mathematical, dealing with tables.
We are also into data conversion. That is, taking content, say, in hard copy, and getting it web-ready, say, in XML or other formats.
Will content BPO ever move up the value chain?
E-learning is now being sourced out of India. It is fairly complex as it involves programming, instructional design, graphical elements and animations. It is a robust offering.
How will you use the $45 million investment?
It is primarily geared towards re-financing our capital structure. (We have) a strong financial partner who can support us in the future. Some money is for growth. In case we want to acquire companies, now we have the ability. We are looking at growing at a very good rate, organically and through acquisitions.
A significant percentage of growth will come from e-learning. Even though e-learning has been around for a while, it ebbed with the dotcom bust. Now, it is finally picking up momentum.
What is the size of the KPO industry today?
I only know the US figures. The US market for the kind of services we offer is about US$ 2-3 billion.
Is all of this coming to India?
No, not all. It is a very fragmented business: there are too many vendors. Business also goes to the Philippines and China. But I must add that it is becoming much more India-centric. This is because there are many more companies to choose from in India.
India has a significant competitive advantage. It's not just about cost, it is about technical training and English-speaking manpower. Culturally, there are more similarities between India and the US and UK than, say, between China and US and UK.
Are you happy with TechBooks' growth?
We started by doing reprints of college textbooks. We would get the rights of the textbook from a McGraw Hill or a Pearson. We realised that it was expensive for them to get the tyepsetting done in the US, especially for technical and scientific material. We saw that as an opportunity and started getting work done out of India and delivering it to the US in 1992.
For the first few years, publishers were worried about quality, the lack of control and intellectual property rights. It took about four to five years for market acceptance.
The year 1997 was the inflexion point for the business. We were doing sales of $3 million in 1997. Our total company sales this year will be between $55 million and $60 million.
