Blackstone in race to acquire Serco's BPO unit

Private equity giant Blackstone is in the race to buy the Indian BPO unit of Serco as the London-listed group scouts for a new owner for the outsourcing firm it acquired four years ago.
According to sources, Serco is in discussions with the PE major to sell the unit (formerly Intelenet) for about USD 400-450 million.
When contacted, a Serco spokesperson said: "The divestment process is at an early stage and we are not going to comment on the details of the process."
A Blackstone spokesperson also declined to comment stating that as per company's corporate policy, it does not comment on market speculations.

Analysts believe that Blackstone making an offer to buy back Intelenet is a "rare incident" in the Indian context.
"Blackstone's entry in the bidding is significant as it will help Intelenet to further strengthen its client portfolio through Blackstone invested companies," Greyhound Research Chief Analyst and Group CEO Sanchit Vir Gogia said.

In November last year, Serco had announced that it would explore divesting some of its private sector BPO businesses as it plans to focus on being a business to government provider across five core areas and four key geographies.
"This (private sector BPO business) is a good business with highly capable people but does not fit with the future strategic direction of Serco and will find a better home with a new owner," the spokesperson said.

Sources said Blackstone has emerged as a strong contender even as other offers are also being considered. Serco has mandated Citigroup to run the sale process.
Gogia said: "Greyhound Research believes that in recent years profits of BPOs have considerably gone down owing to the small sizes of the deals and shift of business to the Philippines and other offshore locations.
"We believe that this has severely affected Serco's business, hence this decision to sell Intelenet."
In the first half of 2014, the Group's Adjusted Revenue stood at GBP 2.43 billion against GBP 2.55 billion in the first six months of 2013. But the firm showed loss (before tax) of GBP 7.3 million against a profit before tax of GBP 106.1 million during the same period.

In 2011, Serco had bought Intelenet for USD 634 million.
Founded in 2001, Intelenet was a joint venture between TCS and HDFC.
In 2007, a management buy-out was completed, resulting in business being majority owned by Blackstone Group, together with Barclays, HDFC and Intelenet's management team.
In the same year, HDFC and Barclays Bank exited the joint venture by selling stakes to SKR BPO Services, co-owned by Blackstone GVP Capital and Intelenet management, for an undisclosed amount.