Capita, UK’s largest business process outsourcing firm, has shelved acquisition plan in India as BPO firm valuations in the country are very high, Simon Piling, the chief operating officer of the company told DNA Money.
The firm acquired 12 companies totalling 177 million pounds in 2009. “We were evaluating possible targets for acquisition in India. But we found the BPO valuations too high,” Piling said. Additionally, the BPOs here, according to Piling, are “too US focused” while Capita’s clientele is confined only in UK.
“Taking a stake is also an issue. The question we ask is how do you create value from an acquisition? We look at 100 opportunities a year for acquisition. The criteria that we adopt is can the acquired entity generate sustainable quality revenues by itself in the sense that how many contracts it has which will remain for a number of years. If yes, we then think of how we support it on an ongoing basis,” Piling said.
However Capita, with a total workforce of 36,000 people, is looking to hire another 1,200 people to take its India employee strength to 5,000.
The company has an order-book worth about 2 billion pounds, of which roughly half is from public sector entities in UK. Capita, with annual sales earnings of about 2.7 billion pounds, has a 27% market share in the 95 billion pounds UK outsourcing market.
In the life and pensions business, which earns Capita most of its revenue, it is the biggest player in UK followed by Diligenta, a Tata Consultancy Services subsidiary.
In 2008 HCL Technologies acquired Liberata Financial Services, a UK-based BPO provider for the life and pensions industry.
Besides competition from Indian BPO firms in UK, political protests against offshoring of work and jobs in recent times were thought to pose challenges for Capita.
“We don’t see that happening. Neither do we see Indian BPO players entering in a big way, other than a couple of them. We have jobs in UK. We have jobs in India,” Piling said. The firm believes new government that will come to power after May 2010 election in UK will act fast in favour of offshoring.
“We see pressure for cost reduction to increasingly make UK public sector units to go the offshoring way. We would make sure people understand that offshoring is a key component for quality efficiencies. So, the next 12 months will be interesting in terms of how public sector handles some of the cost pressures.” Piling said.
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