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Aegis on the lookout for buyouts
Leslie D'Monte & Shivani Shinde in Mumbai | December 17, 2007 16:08 IST
The Essar group firm is in talks with 7-10 companies for a "strategic fit", as it races to become a $500 million company by 2010. In some of these cases the due diligence process is in progress. Aegis is looking at firms in the US, South America and the Philippines.
"There's no cap on the deal size. Our strategy on acquisition is very simple," said Aparup Sengupta, managing director and chief executive office, Aegis.
"It is based on the internal rate of return (IRR) of that company rather than on speculative valuations. We are ready to acquire any company that aligns with the customer life cycle management service we offer."
Sengupta said Aegis BPO will adopt organic and inorganic mechanisms to achieve its target of $500 million. The company is growing at a compound annual growth rate (CAGR) of 45 per cent.
"While our current pipeline supports a growth of 20 per cent internally, the other 25 per cent growth will come from new businesses, such as retail, which is currently 5 per cent, and healthcare, which stands at 10 per cent," he said.
The company is undeterred by the rupee's appreciation against the dollar. Its domestic operations are "proving to be a natural hedge".
With a domestic employee base of 8,500 (Aegis employs a total 14,000 people), domestic operations contribute nearly $50 million to the revenues.
Despite the fact that banking, financial services and insurance (BFSI) contribute 40 per cent to the company's revenues, the sub-prime crisis has not hampered its operations.
"One of the reasons is that we are not in the non-discretionary cycle of business. Hence, business is continuous. Another is our presence in the recovery services."
At present, $25 million worth of business comes from recovery processes, which, the company expects, will increase in the next few quarters.
The company has a major share coming from the voice-based business. However, Sengupta said, "one cannot really segregate voice from non-voice activities." He said the belief that margins in non-voice work are better is a myth.
"Some voice activities we are doing are close to $42 an hour. The intensity and level of the value chain you work at is very important in the voice business," he pointed out.
From the beginning, Aegis has kept domestic and international business separate. It has nine centres in the US. Unlike others these centres are not for near-shore operations, but are outsourcing centres catering to US clients.
The company has about 3,500 employees in the US.