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April 25, 2004

Satyam hires bankers to identify acquisition targets

India's fourth largest exporter of software and services Satyam Computer Services has hired a group of investment bankers to seek out potential acquisitions.

By CBR Staff Writer

At the company’s fourth-quarter results announcement, chairman B Ramalinga Raju said Satyam has hired various firms to look for potential acquisition targets in IT services and business process outsourcing, although he could not give details on the timing of the deals. Satyam also plans to recruit some 4,000 people in the year to March 31, 2005.

Satyam said full-year earnings for the year ended March 31, 2004 grew 36% to $111.9m on revenue that grew 23% to $566.4m. At the end of the period, the company had grown its cash reserves to $86.7m up from $62.2m in 2003.

Nipuna is Satyam’s nascent BPO arm, which secured $20m in second-round funding in October 2003 from Olympus Capital Holdings Asia (Olympus Capital), and Intel Capital Corporation (Intel Capital), and the division has since grown to employ 530 people, and provide call center and helpdesk services to 10 clients. However the division is considerably smaller than Progeon and Wipro Spectramind, owned by key Indian rivals Infosys and Wipro.

Indian offshore providers are now having to give serious consideration to their merger and acquisition activity. In a landmark shift in the market earlier this month, IBM Global Services made its first acquisition in India, when it paid a reported INR 7bn ($161m) for Daksh eServices, which employs 6,000 people in call center and back-office support services and ranks as the third largest BPO provider in the market. EDS and Tata Consultancy Services are thought to be bidding to acquire Phoenix Global Solutions, a Bangalore-based BPO subsidiary of the major US insurance firm Phoenix Companies Inc.

As a result, competition is going to become far more intense from Western IT services firms, and Indian providers are feeling under pressure to act quickly to keep pace. General Electric has put its 12,000-person GE Capital International Services BPO business up for sale, and US-based outsourced billing and call center giant Convergys Corp is thought to be in the bidding. Earlier this month, Global investment bank Citigroup Inc offered $126m to take control of call center outsourcer e-Serve International Ltd.

This article is based on material originally published by ComputerWire

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