ICICI Venture to invest in non-voice BPO firms

ICICI Venture Funds Management Company has earmarked Rs 100-150 crore to invest in local business process outsourcing (BPO) companies. ICICI Venture, which had raised over $220 million in its India Advantage Fund (IAF), is looking at a few non-voice BPO firms.

"After proving its capability in delivering voice-based outsourcing services, its time for Indian vendors to move towards delivering higher value-added services. Currently, most vendors do a piece of a larger process that is easier to outsource such as outbound customer acquisition or customer care or collection with no sector specialisation," Renuka Ramnath, managing director, said.

"The future is exciting for companies delivering services that include full-fledged process outsourcing, serving niche industry verticals or specific horizontals and doing more complex piece of a process" Ramnath added. For instance, finance and accounting BPO is expected to have a CAGR of 14.3 per cent in 2000-05, and almost double in market size from $34 billion to $66 billion.

Interestingly, Infomedia India (earlier Tata Infomedia), which ICICI Venture had acquired a year back in one of the first management buy-outs, recently forayed into publishing BPO. "Infomedia India has a proven track record in the domestic market and we are confident of leveraging its strengths to make a dent in the growing and challenging publishing BPO sphere on the global market," Ramnath said.

Publishing BPO, which is estimated at $2.5 billion, today is expected go up to $4.6 billion by 2007. Indian companies enjoy attractive cost advantage and margins on publishing BPO is estimated as high as 40-50 per cent.

Infomedia is identifying potential strategic alliance opportunities with publishing BPO firms. This would enable it to exploit in-house production strengths effectively and use the export marketing skills that these companies have established in the last decade.

This business typically have a margin of in excess of 40 per cent and results in almost 70 per cent cost saving for Yellow Pages companies globally. "This business is expected to contribute significantly to Infomedia profits in the coming years," Ramnath said.