Serco's private BPO arm returns to Blackstone

PE major agrees to buy majority of this business for Rs 2,560 cr; deal to be completed by Dec, with mgmt team staying on

Four years after it exited Intelenet, selling it to the UK-based Serco group, Blackstone has once again reposed its faith in the company, its business model and the management team led by Susir Kumar, announcing its decision to buy it out.

The private equity (PE) major on Wednesday said it had entered into a definitive agreement with Serco to buy the majority of its private sector business process outsourcing (BPO) operations, a major component of which would be the erstwhile Intelenet business, for £250 million or Rs 2,560 crore. This makes it the largest acquisition by Blackstone in India so far.

In 2011, Serco had acquired Intelenet from Blackstone, co-investor Barclays and the promoter group for $634 million, one of the largest deals in domestic BPO.

The deal would be a mix of equity and debt, said Amit Dixit, senior managing director and co-head of the India PE business at Blackstone, in a conference call on Wednesday. He said the details would be disclosed later. Sources, however, say of the £250 mn Blackstone and the management have agreed to pay, £230 mn would be in cash and the rest in loan notes.

Between 2011 and now, the annual revenue of Intelenet has grown from Rs 1,400 crore to close to Rs 2,500 crore. For the current financial year, the piece of the business that Blackstone has agreed to buy is expected to clock revenue of £235 mn (Rs 2,405 crore).

“We are excited to embark on the Intelenet 2.0 journey and delighted to again partner with the company’s management team. With a market-leading position in the offshore banking and travel/hospitality verticals and number one position in domestic India BPO, Intelenet has the core platform to capitalise on future growth opportunities,” said Dixit.

Serco Global Services has 51,000 full-time employees across 67 centres in eight countries. The private sector BPO business provides a range of middle and back office services.

It has a strong customer base of international organisations, predominantly across the financial services, insurance, telecom, travel and health care sectors.

The acquisition provides an opportunity to increase business for the BPO firm. Some of Blackstone’s partner companies could also become clients of Serco Global Services, as they did in the previous term, Dixit added.  The deal does not include sale of a small unit of Serco Global which has operations in the UK. The deal is expected to be completed before December and the new entity will be called Intelenet Global Services, original name of the Mumbai-based entity.

“We are delighted to have another opportunity to partner with Blackstone. Serco was a good owner for Intelenet and had significantly grown the BPO business in its tenure. The business, however, was sold because of change in strategy of Serco, which led to the sale of its private sector BPO business,” said Susir Kumar, chief executive officer at Serco Global. Under the terms, the business would continue to be led by Susir Kumar and the existing team. Kumar would become the chairman of Intelenet Global Services.

Kumar said the company had retained almost all of its clients and key staff that it had since inception in 2004. It would soon start working on a strategy to enhance its offering to existing customers and prospects.

In March this year, after Serco Group announced its intention to sell its private operations, it attracted several prospective buyers. Prominent among these was PE entity CVC Capital and its portfolio company, SPi Global of the Philippines, initially seen as the preferred bidder. The talks could not proceed, owing to resistance by the current management team. Last month (On August 28), Business Standard reported that Blackstone, backed by the management, is close to acquiring the private sector BPO business from Serco for around £250 million.

INTELENET'S JOURNEY SO FAR

• 2000 Started as an equal JV between TCS and HDFC
   
• 2004 TCS sold out its 50% stake to HDFC; Barclays acquires 50% stake from HDFC
   
• 2006 Intelenet forays into Indian BPO industry with acquisition of Sparsh BPO
   
• 2007 Management buyout backed by Blackstone Group
   
• 2010 Barclays re-invests, picks up 12.75% stake
   
• 2011 UK-based Serco Plc buys Intelenet for $634 million (Rs 4,200 crore), largest M&A in Indian BPO space
   
• 2012 Formation of Serco Global Services
   
• 2015 Blackstone re-invests, acquires the private sector BPO operations of Serco Global Services; to revive it as Intelenet Global Services