The Hindu Business Line : GE sells 60% stake in BPO arm for $500 m

GE'S BIG DEAL: (From right) Mr Scott Bayman, President & CEO, GE India; Mr Pramod Bhasin, President & CEO, GECIS Global & GE Capital India; and Mr Abhay Havaldar, Principal, General Atlantic Partners Pvt Ltd, at a press conference in the Capital on Monday. GE sold 60 per cent stake in its back-office GECIS to General Atlantic Partners and Oak Hill Capital Partners for $500 million. - Kamal Narang

New Delhi , Nov. 8

IN a bid to focus on its core businesses, General Electric on Monday announced its decision to offload 60 per cent stake in its BPO operation — GE Capital International Services (GECIS) — to leading private investment firms General Atlantic Partners and Oak Hill Capital Partners for about $500 million.

"We are a technology company. GE wants to put its energies, the corporate resources and the investments into its technology business and as we saw the opportunity for GECIS to grow it did not fit with our strategy. It is a very strategic decision," Mr Scott R. Bayman, President and CEO - India of GE, said while announcing the biggest deal in BPO segment here.

GECIS, which until now was a wholly owned subsidiary of GE, will become an independent company and will aggressively target third-party customers. The company has been going to external market in the last six months although its non-GE revenues still constitute a small percentage of its overall revenues. The announcement, which follows months of intense speculation on the divestment plans by GE, values GECIS at $800 million.

GE would retain 40 per cent stake in GECIS with board representation, and the entire transaction is expected to be completed in the next six months. Both General Atlantic Partners and Oak Hill would hold 30 per cent stake each in GECIS and have a majority representation on the board. GECIS would continue to serve GE under a multi-year contract. About 1,000 GECIS employees will also remain with GE.

Headquartered in Gurgaon, GECIS currently has on rolls 17,000 employees globally, of whom about 12,000-13,000 are in India, about 1,300-1,400 in China, 500 in Hungary and the rest in Mexico.

The company's revenues, which stood at $202 million in 2001, are estimated to be about $420 million in 2004 and $513 million in 2005.

According to a presentation by GECIS, the employee strength is also set to rise from 17,000 at present to 23,000 in 2005.

"In GECIS, we believe we have a huge competitive advantage and capability that is second to none. Combining this with the partnership of General Atlantic and Oak Hill will allow us to unleash its true power not just for GE but also for the external market," Mr Pramod Bhasin, CEO of GECIS, said.

"GE is committed to us. It is the single largest shareholder and will remain the largest customers for us for a very long time. We will now have the financial strength to fund expansion be it organic growth or through acquisition. In time we will look for those opportunities that will help us to get scale," Mr Bhasin said but added that it was still early days to talk about specific acquisition plans.

He said the company would draw up plans for employees to have a share in the value creation, but listing the company was not on the agenda for now.

"We will definitely try and find mechanism by which our employees can share the wealth. But we do not have any plans for listing as of now because we have just completed this transaction and we will take one step at a time. We feel we have a long way to go before we will like to be in a position where one needs to do an IPO," he said.

On whether or not GE would divest its remaining 40 per cent, he said, "Will it exit, will it not exit, that is speculation. We have not defined plans for any of that yet." Going forward, GECIS would put a lot of focus on marketing and sales efforts and expand operations to locations such as Romania and Tunisia, as well as smaller towns in India.

Meanwhile, the industry termed the mega-deal as a `game changer' and said it could force some existing players to re-look at their strategy. "This is a game changer as far as the industry is concerned. All those players who have captive operations will debate on whether or not they would like to continue the captive model in the backdrop of GE's move to sell stake. Some existing captives may look at a divestment and some new captives may debate the issue seriously," Mr Raman Roy, President and CEO of Wipro Spectramind, said.

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