Genpact Buys IT Services Co Headstrong for $550 m : Source ET
BPO major ventures into financial IT services to rival Infy, TCS & Wipro
India’s largest BPO firm Genpact on Wednesday announced the acquisition of Noida-based IT service provider Headstrong for $550 million, thus adding IT services capability to its BPO offerings and becoming a competitor to Infosys, TCS and Wipro in the financial IT services space.
Genpact, which has Wachovia, Wells Fargo and GE Capital as clients, will gain customers such as Morgan Stanley and Goldman Sachs with the Headstrong buyout. Headstrong claims to have nine of the top 10 investment banks as its clients. The BPO will pay $300 million in cash, and raise a debt for the rest of the funding. Genpact beat IT firms such as Capgemini, IBM and HP, which were believed to be in the race to buy Headstrong. “This is a signal that Genpact wants to build an IT business. Genpact’s BPO growth has been 11-13% while IT services majors have been growing at over 20%,” said Gaurav Gupta, managing partner at Everest Group. Genpact shares on NYSE jumped 4.4% to $15.4 in early trade following announcement of the deal.
But Genpact CEO and President Pramod Bhasin told ET the BPO firm will never venture to become an IT company. “We will rather build domains in Genpact. With Headstrong buyout we have added capital markets and healthcare domains to our business,” he said.
EQuity Theme: Analysis
Even though, it is a specific companies growth story and market may read on that way. However, Rerateing of BPO business is on card. One interesting play in this sector is FSL - First Source Ltd.
ICICI has stake in FSL, on which ICICI has expressed views many times in past - it is only an investment and searching for buyers. This will add fuel to its share price.
Keep watch on FSL and even venture for buying it with a stop loss, suiting your risk appetite.