General Electric Co, one of India's largest business process outsourcing operators with over 12,000 employees, is said to be in talks to sell its BPO operations in India for $1 billion, according to a Wall Street Journal report.
GE, said the WSJ, might 'sell all or part of GE Capital International Services' to cash in on the success it has had with its offshore captive unit, which was set up in 1993.
GE has always been bullish on outsourcing, with its Chairman and Chief Executive Jeffrey Immelt affirming that GE is a global company and since it can save as much as $1 billion annually through outsourcing, it made great business sense to offshore operations.
However, the GE move is considered to be quite significant as it comes at a time when most Western companies are shifting their operations to low-cost offshore destinations like India.
In India too the outsourcing business is in a process of consolidation with global majors like Barclays acquiring a major stake in Mumbai-based BPO Intelenet and another leading BPO firm Daksh being bought out by IBM Global Services.
Thus GE's attempt to sell its booming BPO operations in India, which registered revenues of $400 million in 2003, comes as a surprise. Industry insiders say that this is a big opportunity for GE to cash to profit from some of its investment, although others feel that the price tag of $1 billion is a bit steep.
GE, says sources, feels it is the right price considering that the Daksh and Intelenet operations were sold to multinationals at a higher multiple of 1.4 and 2.5 times their revenues.
The WSJ said that although many big BPO players in India seemed keen to acquire the GE BPO operations, some seem to have backed down as they find the price too high. Reports said the large operators who had shown interest in the acquisition include Infosys' Progeon, HCL Technologies, L&T Infotech, Wipro Spectramind, Satyam, the Texas Pacific Group, and Warburg Pincus.
The WSJ reported that while talks are on between GE and potential buyers, no deal seems to be imminent.
GECIS employs 17,000 people, with 12,000 at four centers in India, and about 5,000 at its units in Hungary, Mexico and China.
GE began its BPO operations in India by handling minor insurance claims and answering calls from customers of GE's commercial- and consumer-lending units, but has since then moved into high-end software work, making it an attractive acquisition proposition for a serious player.
With India emerging as the world's most favoured BPO destination, more and more work is being shifted to the country. The lure of the gigantic, English-speaking talent pool combined with the low wages it demands makes India a natural winner. Reports say that the research and development outsourcing market for information technology in India will soon grow to over $8 billion by 2010 from the present $1.3 billion.
