24/7 Customer closing in on BPO firm

Bangalore-based 24/7 Customer, a business process outsourcing company, is all set to acquire a going BPO unit in the next two months.

24/7 Customer which started operations four-and-a-half years back is also slated to start reporting net profits from this fiscal.

Shanmugam Nagarajan, co-founder and chief operating officer, 24/7 Customer told Business Standard that the company's acquisition would either be in the US or in UK.

"We are talking to three companies based out of the US and UK and the due diligence is on, and we would be ready to make an announcement in the next two months," Nagarajan said.

24/7 Customer is according to Nagarajan ready to pay a valuation of 1x of the target company's revenues and the acquisition costs would be in the region of between $20 million and $25 million.

"This will be the first acquisition for us and we can go up to $25 million to snag this deal. The acquisition will augment our capabilities," Nagarajan pointed out.

24/7 Customer which had revenues of about $22 million last year expects to close this fiscal, March 31, 2005, with revenues of between $40 million and $45 million.

"If we were to include the revenues that could accrue to us because of our acquisition then our turnover this year could touch anywhere between $60 million and $65 million," he said.

Giving reasons for the attractive valuations available for potential take over targets in the US and UK markets, Nagarajan pointed out that the BPO industry as such was not a growing business in the US or UK.

"Everybody needs to have an Indian presence today on the cost front and there are lots of players out there who do not have deep pockets or can invest on their own in setting up shop in India."

The company's revenues at this point in time are heavily skewed towards voice based services.

"We need to ramp up our non-voice business as it is a higher margin business. At present close to 80 per cent of our revenues come in from voice based services and the rest from non-voice services. "

Nagarajan indicated that the acquisition when made would be to ramp up its non-voice based revenues.

The other reason for 24/7 Customer to keenly look at ramping up its non-voice business is to put to optimal usage the infrastructure it has created across its Bangalore, Hyderabad and Chennai centres at a cost of about $10 million.

"We have a total seat capacity of about 3000. Most of this is used in the night because of the voice business. But if we acquire non-voice businesses then our utilisation rates go up substantially as these processes can be done during the daylight hours."