Tata Consultancy Services, India's largest outsourcer, has reached an agreement to acquire Citigroup's interest in Citigroup Global Services, its business process outsourcing arm in India, for about $505 million in cash.
Under the agreement announced Wednesday, TCS will provide $2.5 billion worth of services through Citigroup Global Services to Citigroup and its affiliates over the next nine years, six months, TCS said. The transaction is expected to close in the fourth quarter of this year
Citigroup Global Services has more than 12,000 employees in India, and is expecting revenue of $278 million this year.
The sale of Citigroup's BPO operation in India is however not directly linked to the current crisis in the financial services sector in the U.S., as Citigroup was known to be scouting for a buyer for this operation for some months.
A number of multinational companies such as Aviva and General Electric have hived off their back office subsidiaries to focus on their core business. Running subsidiary BPO and IT services operations in India is far more costly and cumbersome than outsourcing to local outsourcing companies, according to research by Forrester Research and other analyst firms.
The acquisition of Citgroup Global Services will however increase the exposure of TCS to the global financial services industry, which is seeing a shakeout. TCS earned 43% of its revenue in the second quarter from the banking, insurance and financial services sector.
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