3i to buy more smaller BPOs

IT product and services company 3i Infotech is planning to increase focus on its business process outsourcing (BPO) operations.

While continuing to look at inorganic growth, the Rs 670- crore company will shortly launch a 'solutions' strategy with cross-selling of its products and services.

Formerly promoted by the ICICI Bank, 3i Infotech has till date acquired close to 21 companies in the product and services segments. Unlike its competitors, the company will continue to acquire smaller players rather than the captive BPOs that are on sale. Currently, BPO contributes about 9 per cent to the company's revenues.

With more than 500 employees and 20 clients, 3i Infotech is focused on the domestic market. The company has acquired three BPO companies, Delta Services, KNM Services and aok in-house Services.

The company's chief financial officer and executive director, Amar Chintopanth said, "The businesses we have acquired might be small, but they have been run by a competent team. Moving ahead, we want to acquire all those processes that a bank would like to outsource."

Each of these companies has not only brought process-driven transactions, but also added customers to 3i's portfolio For instance, the recently acquired in-house BPO Services and in-house Factoring Services provides capabilities to process credit cards and auto loans for the banking sector and proposal processing for the insurance sector.

It also provides access to customers such as American Express Bank, Max New York Life Insurance, and ABN AMRO Bank.

Similarly, KNM Services, in which 3i Infotech acquired a majority stake, brings to the table capabilities in the area of cheque truncation and six clients as well.

"Acquiring smaller companies makes sense as integration is not an issue. Besides, these companies carry niche expertise that allows us to give value-addition to the customers," Chintopanth said. Moreover, the company feels the valuations in the services segment is way too high in India.

Analysts believe that the strategy of concentrating on smaller firms has worked well. Most of these companies have been contributing 10-15 per cent to the company's margins within a year of acquisition.

From a single customer base (ICICI Bank), the company has 20-25 customers in the BPO segment today. "One of the BPOs we acquired had revenues of just Rs 12 crore. But within a year, it is generating close to Rs 30 crore," 3i Infotech CFO said.

According to analysts, "The idea behind acquisitions has been to fill in gaps. This is applicable for both, services and products section. In the past 4-5 years, the company was getting its product portfolio in place. Having done that, it is now keen on strengthening its service offering."