Wednesday, 8 October 2008

TCS scores largest ever Indian deal

(By Anthony Miller). The much rumoured TCS acquisition of Citigroup’s Indian BPO captive, CGSL (see here for press release) finally came to fruition with today’s announcement that the largest of the Indian SIs is to pay Citigroup $505m cash for the CGSL business in exchange for a $2.5bn, 9.5 year outsourcing contract. At a stroke, this pushes TCS into the #2 spot in the Indian BPO rankings (behind Genpact), as well as turning Citigroup into a $400-500m p.a. client for TCS, i.e. around 7-8% of its total revenues.

This is proof again, were any needed, that the top Indian SIs have well and truly invaded ‘megadeal-land’, making it clear there really is no opportunity too large for them to contest – and win. And this is particularly attractive deal, given that CGSL was already running at 20% EBIT margin and TCS management feels confident there’s more to come.

Management also made great play on the cross-selling opportunity they perceive this deal affords – but on that point we may have to reserve judgment till case proven. TCS’s first BPO megadeal, with UK insurer Pearl, has yet to bear any real fruit in terms of follow-on business (the later Sun Life Canada (UK) deal is independent of the Pearl platform) and we believe still languishes in single-digit margins. Nonetheless, CGSL is a cracking win especially in these troubled times and TCS management deserve to feel pretty pleased with themselves.

1 comment:

SBL said...

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SBL - BPO Services