Citi BPO to get its first set of bids soon

Mumbai, May 25: First round of bids for Citi's Business Process Outsourcing (BPO) operations, Citigroup Global Services (formerly known as e-Serve), is likely to be completed this week. A host of global IT companies and private equity firms are said to be in the initial race. However, Citi is likely to look at selling part of its operations only to a strategic partner, given the sensitivities involved in the deal.

According to sources, IBM, Automatic Data Processing (ADP), Genpact, Infosys and private equity firms such as Blackstone and General Atlantic are in the race. Citi is likely to follow the Genpact model, where it may sell more than a 50% stake in the BPO firm. It is, however, likely to retain a part of the stake in the firm so that it can not only get the benefits in case of a future listing but can also do some handholding of the firm. According to sources, one of the main reasons the group is looking at while bringing in a strategic partner is to bring down overall costs and not monetise the stake.

"Though there is interest from a host of firms, the group is most likely to sell the operations to someone who has experience in the field. They would want a strategic partner in the firm. It's a core asset and they would not like to have any issues post a sell-off," said a senior private equity official of a leading firm. ADP and Genpact are said to be the front runners for the deal.
Citi officials declined comment. Pramod Bhasin, president and CEO, Genpact, too declined comment while Infosys BPO's officials were unavailable for comment. However, experts believe Genpact has more synergies with Citi's BPO unit, as it has the experience of working out of a captive shell.

Genpact started off as a captive for GE in 1997. GE had, in 2004, sold 60% of its stake to Oak Hill Capital Partners and General Atlantic Partners. It was then renamed as Genpact. Citi had delisted Citigroup Global services in 2004. Citi held 44.4% stake in the BPO company. It had accepted an exit price of Rs 975 per share while delisting the firm. At that price, the company was valued at around Rs 1,200 crore. According to investment bankers, the value of the company would now be at around 0 million.

According to Forrester Research, nearly 60% of the captives in India are struggling due to spiralling costs, high attrition and lack of integration and management support. "Nearly 10% of these struggling captive BPOs are most likely to sell off and go the outsourcing way," a recent Forrester study says. Another Mumbai-based analyst voiced similar views about Citi's BPO stake sale. "It is simply following the trend set by the likes of GE and Deutche Bank," he added. Deutsche Bank later sold its stake to the Delhi-based HCL Technologies.

Citi has globally been on a major cost-cutting spree. It had recently announced that it would cut 17,000 jobs on the back of a restructuring plan that is targeting billions of dollars in cost savings over the next few years. It is also looking at moving out 9,500 jobs overseas and to smaller American cities. Citi's BPO operations have over 9,000 employees, with nearly 4,000 servicing its international businesses.

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