The group has started scouting for property in the commercial business districts of Mumbai to set up the headquarters.

Citigroup already has three IT companies -- i-flex, e-Serve and Polaris Software -- under its wings.

It is unclear what the new company's operations will entail. Citigroup spokesperson declined to comment on the matter but sources close to the bank confirmed the development.

Citigroup Inc through a group company Orbitech holds 43.11 per cent stake in i-flex, which is a leader in banking products. i-flex was incubated by Citigroup in the early 1990s with a $400,000 investment.

The investment is now worth about $429 million. Citigroup is expected to dilute a portion of its stake in i-flex in due course. i-flex's biggest customer is Citigroup.

Acquired by Citibank Overseas Investment Corporation (87.3 per cent) as a financial services company, e-Serve is a provider of IT-enabled services. The investment is now worth $236 million.

Since 1999 e-Serve has provided transaction processing, customer care solutions and technology services to Citibank India and Citigroup businesses in Europe, Africa, North America and South Asia.

Citibank NA holds 23.09 per cent stake in Polaris Software with the investment worth about $80 million. Polaris Software, a leading global provider of financial Technology Solutions and offshore IT Services, is a debt free and cash rich company with cash reserves of over $20 million.

i-flex recently acquired business process outsourcing company, Equinox Corporation, and a 33 per cent stake in France-based treasury software specialist firm Login SA both in a $5 million cash deal.

e-Serve provides services such as transaction processing, customer care and technology services and employs over 5,000 people. E-serve, is a Citigroup business process outsourcing company with Citigroup as its single largest customer and equity holder.

Citigroup completed its acquisition of the outstanding shares of e-Serve International Ltd, an IT-enabled services company, in a deal valued at $112 million deal in August, thus becoming the majority shareholder in the business process outsourcing space.

The outstanding shares were acquired through a shareholder-driven reverse book building process. E-serve was subsequently delisted from stock exchanges.

Polaris has 4500 employees, 22 offices in 13 countries, 6 Software engineering centres in India and a business continuity center in Singapore.