HCL BPO eyes BFSI buys in US, UK & Australia

Written by Surabhi Agarwal | New Delhi | Updated: Mar 1 2009, 04:03am hrs
HCL BPO, an arm of HCL Technologies, is scouting for acquisitions in English-speaking geographies such as the US, UK and Australia.

The company is looking at firms in the banking financial services and insurance (BFSI) verticals and in areas like supply chain management and finance and accounting. Valuations have hit rock-bottom. So, this is a good time to acquire, said Ranjit Narasimhan, president and CEO, HCL Technologies, BPO Services.

The company has a broad range of $50 to $200 million for the acquisition. Considering that HCL Technologies has $500 million of cash reserves, price is not the sole criteria for us, said Narasimhan.

He added that HCL is looking for companies that offer platform-based services and are based on output-based pricing. There are good opportunities in the market as companies are available at two-thirds their valuation, he said.

HCL Tech recently acquired UK-based SAP consulting firm Axon Plc for 440 million, making it the largest overseas acquisition by an Indian IT company till date. In the BPO space, HCL made two acquisitions last year of US-based Control Point Solutions for $20.8 million and UK-based Liberata Financial Services at a meagre $2 million.

While the acquisition of Control Point enhanced HCLs services in telecom expense management, Liberata beefed up its insurance offering.

Narasimhan said that both companies have been fully integrated and future acquisitions will be in line with HCLs non-linear growth strategy.

Currently, around 73% of HCL BPOs revenues come from voice-based services, the rest are accounted for by transaction-based services.

We are hoping to change that ratio to 50:50 in two years as there is more incremental work in transaction-based services model, he said. In line with the market scenario, HCL is trying to delink its revenues from the headcount.

In future, we expect around 56% of our revenues to come from inorganic growth which will be from platform-based services based on outcome based pricing. The rest 44% will come from organic growth based on output based pricing, said Narasimhan. HCL BPO reported revenues of $63.6 million in the second quarter ending December 31, 2008.