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Warburg Pincus controlled WNS Holdings is working on an outright acquisition or a strategic merger with rival outsourcing firm Firstsource Solutions, in which ICICI Bank holds a little over 26 percent. WNS is looking to buy out ICICI Banks stake and mop up shares held by some other private equity investors as well, sources said.
However, the WarburgWNS combine may run into counteroffers from Blackstone, which acquired Intelenet, and buyout fund Carlyle, as the existing shareholders seek to exit at an enterprise valuation pegged at well over USD 500 million. With the backing of the two private equity giants, WNS and Intelenet have signalled their intent to script bigticked consolidation in Indias decadeold BPO story.
Carlyle, on the other hand, has also been scouting for buyouts in the BPO space and was seen last year leading the race for Cambridge Solutions before calling it off. Both ICICI Bank and WNS declined to comment.
Temasek holds 21.51 percent stake in Firstsource, while Sequoia has 4.56 percent. A Temasek spokesperson said it was not looking for an exit.
Firstsource, which has pushed for inorganic growth, reported a Rs 130 crore net on revenues of Rs 1,333 crore during FY08.
For the fourth quarter of FY08, it reported a net profit of Rs 34.9 crore, showing a yearonyear drop of 40 percent, while revenues jumped by 37 percent to Rs 375.6 crore.
Last year, it acquired US firm MedAssist for USD330 million, giving it access to the healthcare services segment in that country.
Banking solutions firm Metavante picked up a stake in Firstsource following a joint venture, through which the Indian outsourcing firm would service the latters clientele in North American markets.
Sources said Firstsource would be an ideal M andA target because it has grown to a reasonable size following a series of acquisitions. But some sector analysts view the high component of voicerelated services and lacklustre organic growth as apparent negatives.
It is unlikely that ICICI sees Firstsource as a key part of its business and would be looking at an exit option, given the right price, sources said.
The BPO company has nearly 17,000 staff with centres in a number of geographies. It has mix of voicebased and transaction processing services, BFSI, telecom and media and healthcare as its major focus segments.
It is believed that investors may be looking at an exit now as the rupee has been weakening against the dollar in recent weeks. The dollar has gained 5 percent in the last month.
Industry observers believe that private equity players will be increasingly interested in the domestic BPO sector as there is enough headroom for growth and is not saddled with too many expectations, unlike in IT services. Further, the BPO industry itself has not seen any major new entrants, leaving enough space for consolidation.
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