Aegis eyes organic growth to turn into a $2-bn company by 2015

Aegis, Essar Group’s information technology and business process outsourcing arm, is targeting organic growth of 26 per cent and revenue of $1.25 billion in 2012-13. It also plans to record revenues of $2 billion by 2014-15. The company believes its promoters would be able to dilute their stake in the company by the end of this financial year.

“Our target is to be a $4-billion company in five years. It took us five years to be a $1-billion firm. We are sure to clock $2 billion in revenue in three years and $4 billion in five years. More importantly, the next $2 billion would come entirely through the organic route,” said Managing Director and CEO Aparup Sengupta.

The company’s revenue rose 42 per cent last year. Its deal pipeline, worth about $2.6 billion, is spread over 500 deals across the globe. For Aegis, organic growth was crucial, as so far, it has grown through acquisitions, aiming to acquire one company every quarter. “We wanted to see if we have the capability to achieve growth organically. We have been successful in our inorganic strategy. Also, when you go to the capital market, it is very important to show the return on equity and the return on capital employed. Therefore, the organic growth becomes critical. Inorganic growth is also prone to risks and is an expensive way to grow,” Sengupta said.

In February 2011, the company had signed a $2-billion deal with Saudi Telecom, under which it was scheduled to manage the customer care operations of the telecom firm. As part of the deal, Aegis and Saudi Telecom Company formed an equal-stake joint venture, Contact Centre Company. “At that time, our revenue was about $704 million, and it went on to hit $1 billion. That represented growth of 42 per cent last year. The joint venture with Saudi Telecom is also ramping up. We have doubled the people (1,200) working on the deal and added seven clients. We are also close to signing a $650-million deal, spread over seven years,” Sengupta said.

In 2011-12, the company saw growth in regions like Africa, where it grew 25 per cent, the US and India. “We also aim to enter markets like Japan, China and Russia, though not this year,” Sengupta said. The company has also moved from being a pure business process outsourcing player. Now, the company’s technology and consulting businesses account for 30 per cent of its revenue. The company plans to raise its margin of earnings before interest, tax, depreciation and amortisation from 12 per cent to 13-15 per cent.

Sengupta is also in talks with private equity and financial investors, as promoter Essar Group is keen to dilute its stake. “Essar has been a great angel investor, and this had allowed the company to grow. The promoters would look at an initial dilution of minority holding in the range of 15 and 30 per cent…then go to capital markets. So, when we go for an initial public offering, there will be no shareholder holding more than 50 per cent stake in the company,” he said.

He added more than a dozen investors had approached the company. Asked if Essar would look at a complete exit, Sengupta said, “Over a period of time, they might exit the company and focus on their core business. But the exit would depend on the value they get.”