Blackstone leads buyout of Intelenet

Blackstone acquires the Indian business process outsourcing company from HDFC and Barclays, valuing the target at around $200 million.
Blackstone and the senior staff of Intelenet Global, an Indian business process outsourcing company, have acquired ownership of the business from HDFC and Barclays Bank.

Blackstone will own 80% of Intelenet while about 300 to 400 senior employees of the firm will own the remaining 20%. Details of the price were not disclosed by the buyer or sellers. Sources, however, speculate that the Indian outsourcing company was valued at around $200 million.

Intelenet posted consolidated revenues of Rs3.8 billion ($92 million) and profits of Rs611 million for the most recent fiscal year ended March 31, 2007. The company is on a high-growth trajectory with revenues growing by 41% from Rs2.7 billion in the previous year. At a firm value of $200 million, Intelenet has been valued at 13.2 times 2007 earnings and 2.2 times revenues.

A Barclays UK spokesperson also declined to comment on the valuation but confirmed that "assets of Intelenet were valued at $107 million".

Intelenet provides outsourcing services to 60 clients from its 18 delivery centres spread across India and abroad. It was incorporated in 2000 with 25 employees as a joint venture between Tata Consultancy Services and the Housing Development Finance Company. Its current headcount numbers 17,000. In 2004, TCS sold its stake to HDFC. HDFC subsequently inducted Barclays as a partner. Valuation of the firm at the time of the sale by TCS was in the region of Rs3.2 billion.

Sources close to the deal say Intelenet hopes to benefit from the introduction to Blackstone clients that the private equity firm will provide.

"The sale reflects Barclays' desire to move from a third-party outsourcing arrangement to a wholly captive offshoring unit to reflect both the enhanced scale of our offshoring operation and our intent to service our customers in the best possible manner," says a Barclays UK spokesperson. "Over the past three years we have been very happy with the services Intelenet provided and they will work with us during a transition to set up our captive unit."

The Barclays move follows that of a number of investment banks that have experimented with outsourcing processes to third parties in India then realised the opportunity was large enough to justify the management time and effort involved to set up a captive unit. Goldman Sachs, Deutsche Bank, HSBC and a host of others have large captive units in India which are growing rapidly as new opportunities present themselves to outsource discrete processes.

ôThe BPO business today needs more focus and we believe that the new arrangement will provide the right impetus (for Intelenet),ö says Renu S. Karnad, executive director of HDFC, in a written statement to the Bombay Stock Exchange. ôWe see the development as a win-win for all of us.ö

KPMG advised Intelenet.

This is Blackstone's third deal in India following its investments in Emcure Pharmaceuticals and media company Ushodaya Enterprises.
¬ Haymarket Media Limited. All rights reserved.
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