Fidelity shortlists IBM, HP for its tech captive

IBM and HP are the two firms that the global financial services provider Fidelity Investments is understood to have zeroed-in to sell its technology solutions captive unit in India. The financial services firm has ruled out Indian players like Infosys, Wipro among others, said a source close to the development. The deal could be close to $100 million (over Rs 500 crore) with an assured revenue component or a multi-year outsourcing deal to the buyer.

“The deal should close by the end of March as the due diligence has started. Fidelity has ruled out Indian players as the company wants an firm that has global presence in at least 40 countries,” said the source. The technology solutions group with close to 2,400 people, is part of Fidelity Research & Management Company (FMR) India, which provides captive back office support to Fidelity in the US.

When contacted, an official spokesperson said: "I  cannot comment on the specific names but I can confirm that we are evaluating sourcing options with leading global technology service providers that will help us maximise the value we can offer to our customers, shareholders and employees in the long term.  We are always looking for opportunities to expand our global footprint.”

The captive--Fidelity Business Services India-- was set up in India in 2001 in Gurgaon and later expanded to Bangalore in November 2003 and subsequently into Chennai as well. Along with a captive Fidelity also has existing relationship with Indian IT vendors like. As a part of its consolidation process the company had closed its Gurgaon centre last year and had asked it employees to relocate at Bangalore and Chennai.

Meanwhile IBM and HP spokesperson said that they do not comment on rumours and speculation.

The Fidelity company spokesperson said the sale of the technology solutions operations captive was not being done due to cost pressures but as “...part of our global business transformation strategy to explore options to optimise our technology delivery model, including that contained in our captive unit in India”.

In a similar trend last year, Citigroup and Aviva--insurance firm--sold their captives to Tata Consultancy Services (TCS) and WNS respectively last year.