Wipro buys Citi Technology Services for $127 mn

December 23, 2008
Wipro buys Citi Technology Services for $127 mn
In a move that can well send out a signal to the industry about the state of the affairs in the captive delivery centres of global banking giants in India, Wipro Technologies, the flagship business of consumer care to IT major Wipro, has announced to acquire Citi Technology Services, the captive delivery centre of IT services and solutions centre of Citigroup in India, for a consideration of $127 million (around Rs 609 crore) in an all cash deal.This is Citigroup's second India-based asset which is being sold out to one of its service provider, after the company recently sold its captive BPO arm Citigroup Global Services to TCS for about $505 million.While acquiring Citi Technology Services along with 1,650 odd employees working across its four delivery centres in Mumbai and Chennai, Wipro has managed to get a revenue commitment of about $500 million over the next six years, what Citi's Global Technology Head Jagdish Rao termed as 'minimum commitment' to the buyer.Citi Technology Services which started its operations in India in 2004, has reported a revenue of $53 million in the calendar 2007, and the company is expecting to corner a revenue of $80 million in the ongoing calendar."It is just the starting point. We feel there will be greater demand for their services as we go forward. This ($500 million of committed revenue) is what the minimum commitment we are making at this point of time," Rao told media persons on Tuesday.Citigroup has been working with Wipro for technology services during the last four years. The present commitment along with a BPO service contract what Citi has awarded to Wipro in the ongoing quarter, will make Wipro the 'top service provider for the company from anywhere in the world', he added.Wipro's BFSI practice which was one of the largest revenue earning vertical for the company with contribution of about 27 per cent to the company's consolidated revenue is under pressure much in the same way like most of its peers owing to global financial turmoil, which has hit the BFSI sector the hardest. The committed revenue from Citi as a part of the transaction is supposed to be the driving factor for going after the deal, according to industry analysts.Girish S Paranjpe, Joint CEO, of Wipro's IT Business, however, said the company decided to acquire the unit because of the values it brings to the table."We acquired it because of the quality of the unit that has been set up; and the knowledge and expertise of the people there. A very few global banks actually have done this kind of sophisticated works out of India. This brings us a unique capability which is not only in terms of people, but the experience on how to run a global operation like this. More than that, it also gives us the chance to scale it up and take it to the next level. I think this is a wonderful opportunity," Paranjpe told Business Standard.Wipro said that the Master Services Agreement that they have signed with Citi does not restrict them from serving other clients out of the centres. "We are under obligation to make sure that the works for Citi does not suffer," Soumitro Ghosh, senior vice president, Finance Solutions, Wipro said. Wipro will provide technology infrastructure service and application development & maintenance services to Citi as part of the transaction.Wipro has a cash reserves of close to $1 billion, including a short-term loan of close to $500 million it raised in March last year.Source: Business Standard