Citigroup to sell its Indian back office to TCS
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Indian IT services buying spree continues with banking giant’s captive sale
Banking giant Citigroup is to sell its Indian-based business process facilities to IT services provider TCS for $505 million (£289 million).
Citigroup Global Services (CGSL), which provides back-office and global-transaction services to the corporation, has around 12,000 employees located in sites including Mumbai, Chennai and Gurgaon. These will now add to TCS’ head count, which at around 120,000 makes it the largest of the Indian IT services suppliers.
As part of the deal, Citigroup has committed to $2.5 billion worth of orders from TCS over the next nine and a half years.
While it has not suffered as much as other Wall Street institutions in recent months, Citigroup has been severely affected by the credit crunch. The company has revealed plans to cut 10% of jobs its 650,000-strong investment banking division.
The cash raised from the sale of CGSL may help to fund Citigroup’s bid to acquire part of US-based Wachovia Bank, one of the credit crunch’s latest casualties.
Time to buy
Indian IT outsourcing providers are confident that the credit crunch will be good for business, as companies in all sectors seek ways to drive efficiency, cut cost and transform business processes. This is far from guaranteed: The industry relies heavily on the financial services industry, where customers are not so much cutting spending as simply disappearing.
But one benefit, as seen here, may be the cheap availability of fresh resources, as US banks sell off their ‘captive’ resources.
The trend of global corporations selling their Indian operations to local IT service providers began last year. In July 2007, Dutch electronics manufacturer Philips sold its finance and accounting back-office resources – based in India, Poland and Thailand – to Infosys for $250 million. Earlier this year, UK insurance group Aviva sold its India- and Sri Lanka-based operations for £115 million to a company called WNS Global Services – itself a former captive of British Airways.
As international banks look for anything they can sell to raise cash, the ‘recaptive’ trend will only continue.
Further reading
HCL in bid to gazump Infosys on Axon Group acquisition
Offshore 2.0
Organisations are now looking to their sourcing partners for technology and business process innovation
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