MUMBAI: Global financial firms, emerging from the worst economic crisis since the Great Depression, are looking to shed India back office operations as they focus on core operations and cost cuts. AIG and Citigroup Inc, the insurance and banking giants bailed out by the US government, have already sold some of their India units in the past 12 months, and there are increasing expectations of more such deals.
On the block are units of UBS, American Express and BoA-Merrill Lynch, banking sources said, adding Credit Suisse may follow. There is no official word on the prices but bankers estimate deals to be worth between $100 million to $600 million.
"It is pretty straightforward. Banks don't want these operations anymore," said a banker who is advising a potential buyer of one of the operations. He asked not to be identified as he was not authorised to speak to the media. "Such captive units are almost passe. Internally they are asking, 'Do we want a few thousand employees working on supportive functions or do we outsource it (on a long-term contract) and pay a few hundred million?'" There are buyers galore right from top software services firms such as Tata Consultancy Services, Infosys, Wipro Cognizant to private equity firms such as KKR and Blackstone, which already own back office firms in India.
A big part of the attraction is that such sales usually come with a fat multi-year contract to run the services for the financial firm. And the time-tested operations can be used to attract other financial clients. For instance TCS, which bought Citi's back office for $505 million last October, got a nine and a half year contract worth $2.5 billion from Citi.
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