Indian IT, BPO market to grow at 30 per cent

New Delhi, June 20: The Indian IT and BPO industry is expected to grow over 30 per cent annually from the current 35 per cent, for another four years, an industry body said today.

Offshoring has enabled the Tier I (TCS, Infosys and Wipro) and Tier II players to grow at a much faster pace than their global peers such as IBM, Accenture, EDS, CSC, Fujitsu, Cap Gemini and Atos Origin, Assocham said.

This has led the Indian players to gain market share at the expense of Western-based players.

''Over the years many IT services and BPO players have moved up the ladder and in most cases are integral to the business of the client,'' Assocham President Venugopal N Dhoot said.

Considering the positive outlook towards Indian IT and BPO service industry, many investors are looking at investing in these companies witnessing the Indian growth story, he said.

Besides investing in main stream companies, investors are now increasingly investing in companies with niche focus such as Flextronics Software System, a specialised IT service in telecom domain, Geometric software, an engineering service, Quattro, a BPO firm focusing on new offering such as legal outsourcing, analytics, clinical data management, the study added.

In large merger and acquisition exits, one transaction which grabbed attention was the acquisition of 52 per cent stake in Mphasis-BFL for 380 million dollars.

Baring private equity partners realised about 170 million dollars by selling a 23.38 per cent stake in the company (it continues to retain a 15 per cent stake and baring private equity partners is estimated to have made 25 times return on its investment).

Another trade sale which attracted quite a bit of attention was the 250 dollar sale of Office Tiger to RR Donnely which enabled RR Donnely to significantly increase its BPO and Document management exposure.

IPO worth 224 million dollars of WNS global services (India-based BPO service provider) on NYSE was the largest PE backed IPO during 2006.

Warburg Pincus acquired 68 per cent equity in WNS in 2002 via partial buyout of British Airways stake. In the IPO about 60 per cent consisted of secondary sale by exiting shareholders.

In the form of exit where one PE or VC sells to another PE or VC, baring private equity partners exited from Cybernet Software System and its subsidiary Slash Support by selling it stake to SAIF for 21 million dollars.

In a large buyback exit route, Citigroup sold its 23 per cent stake in Progeon (BPO service provider) for 115 million dollars to its parent, Infosys. Citigroup invested 20 million dollars in 2002, thus making a return of about 5.7 times on its investment over four years.

UNI