Chennai, June 25 “If you have cash, you are king,” may be a general adage for businesses. But when Mr Partha De Sarkar says it with a triumphant smile, it rings truer now, in the context of a global slowdown. Mr Sarkar, CEO of HTMT Global Solutions, part of the Hinduja Group and an outsourcing solutions provider, is keen to make an acquisition in the current environment when the average company’s prospects seem to be flagging and valuations are at an ebb.
In the city to launch HTMT’s second centre, Mr Sarkar told a press gathering that HTMT would acquire a BPO (business process outsourcing) company in Europe by the end of this fiscal.
It has earmarked around $110 million for the acquisition, which will mark its foray into the continent.
“We have short-listed four companies. We prefer to acquire a company in the UK, because of language affinities. We are interested in a company with revenues of about $50 million,” he said. “With a drop in valuations of companies, this is the right time to make an acquisition,” he said.
Till a few months ago, valuations used to be 9-10 times the operating profit (EBIDTA – earnings before interest, depreciation, tax and amortisation), but it is now 7-8 times. Mergers and acquisitions, in general, have dropped and there is a credit crunch with banks not too keen to fund such activity, he said.
As at March 2008, the company had about Rs 440 crore as cash reserves. For the year ended in that month, it reported revenues of Rs 673 crore.
Mr Sarkar ruled out acquiring BPO operations owned by customers such as big banks or telecom companies, due to over-valuation.
He said, “A captive BPO with revenues of around $150 million is sometimes valued at around $1 billion. Owners of captive units seem to be ambitious,” he said.New geography
According to Mr Sarkar, the acquisition in the UK will help the company foray into a new geography; while new customer markets and new delivery locations are other reasons HTMT is looking to acquire. The acquisition would be similar to acquisitions that HTMT made in the US and the Philippines, he said.
For the year ended March 2008, around 85 per cent of the Rs 673 crore revenues for HTMT came from the US and 15 per cent from Asia – with India contributing about Rs 91 crore.
HTMT provides BPO and contact centre services to global clients, including Fortune 500 companies. Other than the Bharti Group, Mr Sarkar did not want to disclose client names.Lease vs Buy
The company prefers to own its centres especially in metro cities or places where it wants to have a large set-up. Mr Sarkar said, “When you lease space, we have to invest some more and make it suitable for us. Every three or five years, owners raise rents, knowing that we cannot easily move out without seeing return on our investments. Hence, owning space in select centres is important.”
To this end, HTMT has raised about Rs 65 crore of debt recently. Mr Anand Vora, Chief Financial Officer of HTMT, said, “We have bought land in Vashi, Mumbai and in Durgapur, West Bengal to build a centre and campus, respectively.Chennai expansion
HTMT also inaugurated its second delivery centre at Nandambakkam in Chennai. Spread over 48,000 sq ft, the company-owned centre has a capacity of 1,200 seats, and will cater to both domestic and international businesses. Mr Sarkar did not disclose investment in the centre.
In Chennai, the company has 2,200 employees, and in the next two years will add 1,200 in the new facility, he said.
In India, the company has 11 delivery centres in Bangalore, Chennai, Durgapur, Hyderabad, Mumbai and Mysore. In addition, it has 10 global centres across Canada, Mauritius, the Philippines and US