Infy to buy Citi's entire 23 pc in Progeon for $115 m

Bangalore, Apr 21: Infosys Technologies on Thursday announced that it will buy the entire 23per cent stake of Citicorp International Finance Corporation (Citi) in its business process outsourcing arm Progeon for 5.13 mn (Rs 518 cr), making it a wholly-owned subsidiary.

The consideration will be paid in cash and the transaction is expected to be completed by July this year. This deal values Progeon at around 0 mn (Rs 2,250 cr).

For some time now, the market has been abuzz with talks of Infosys buying out Citi's stake. On the day the infotech major announced its annual results, company officials had said they were in talks with Citi and were expecting to close the deal in the first quarter of the current fiscal.

Under the agreement, Infosys will buy all 23per cent of Citi's stake in Progeon on a fully-diluted basis, amounting to 8.75 mn shares, according to a company statement.

For the time being, Progeon will remain a wholly-owned subsidiary of Infosys and will not be merged with the parent.

Infosys company secretary V Balakrishnan said, "We are looking at various options as there are some issues of employee stock options in Progeon... but for the time being it will be a wholly-owned subsidiary."

For FY06, Progeon posted revenues of mn (Rs 382 cr) and Infosys provided a guidance of 5 mn (Rs 562 cr) for FY07. Mr Balakrishnan said the enterprise valuation of Progeon is a four-times multiple of its FY07 revenue guidance.

This buyout is also in line with Infosys' strategy of providing integrated IT services, including its business process outsourcing activity.

Infosys MD Nandan Nilekani had recently said the company had started the 'one infy' service, which included the entire range from application development and consulting to BPO.

The name of Progeon will continue for the time being but the Progeon management is hoping to use the Infosys brand name in a more open fashion in the near future.

Progeon is the country's 10th-largest third-party BPO firm as per the last Nasscom ranking for 2004-05, having over 7,000 employees with presence even in the Czech Republic and the Philippines.

It is mainly in the non-voice business, constituting around 80per cent. In fact, its decision to be a data-centric BPO meant that it took a while for it to gain traction, but in the past two years it has been posting triple-digit growth.

Progeon was started by Infosys in 2002 with mn venture funding from Citigroup. The shareholders funds stand at mn (Rs 145 cr).

The company offers customer services, finance and accounting, HR outsourcing, knowledge services, procurement and order services for a range of industry verticals such as banking, capital markets, telecom, insurance and healthcare and high-tech discrete manufacturing.

Sources