Apollo unit buys US BPO for Rs 697 crore

Hyderabad-based Apollo Health Street (AHS), a subsidiary of Apollo Hospitals Group (AHG), made its second US acquisition today, buying Atlanta-based business process outsourcing (BPO) and enterprise solutions company Zavata Inc for Rs 697 crore.

"The Zavata acquisition will enable us to enhance our offerings to our customer base and help increase our client base. With this acquisition, we will be able to position ourselves as one of the biggest global healthcare outsourcing companies," said Prathap C Reddy, chairman, AHG.

The acquisition, the fourth for AHS, will be funded by raising debt of $135 million (about Rs 550 crore) from Bank of India and Barclays Capital. AHG, which held 47 per cent in AHS pre-merger, has invested about $25 million (about Rs 100 crore) to retain the same holding in the merged entity.

Other AHS promoters, including Temasek Holdings and One Equity Partner (the investment arm of JP Morgan), have invested around $25 million (about Rs 100 crore) in the merged entity.

In October 2006, AHS took over New Jersey-based Armanti Financial Services for $31 million (about Rs 125 crore).

"The combined entity will have around 160 clients and over 2,500 employees across the US and in India. The run rate out of the merged entity will be over Rs 500 crore while we expect to close the current financial year at above Rs 400 crore," said Sangita Reddy, managing director, AHS.

While AHS is growing at a compounded growth rate of around 70 per cent, Reddy hinted that the company might look at growing inorganically as well, though she said, there are no immediate plans on that front.

Reddy said the addressable US outsourcing market which could be effectively utilised is around $30 billion and $48 billion in the payer and provider segments respectively.

Andrew DeVoe, the new chairman and chief executive officer of AHS, said, "We will be very happy if we are able to tap even $1 billion of the addressable US outsourcing market in the next two years."

AHS has two BPO facilities in Delhi and Hyderabad, which employ close to 1,200 people. The company is setting up a third facility in Chennai, which is expected to go live by the end of the current financial year.