Partners Group joins India’s IT crowd
Few investors need to be convinced of the wealth of possibilities that exist in India’s IT outsourcing industry. As of last year, the sector was valued in excess $100 billion with export revenues reaching $69.1 billion and domestic revenues of $31.7 billion – growing at rate of 16% and 9%, respectively.
It comes as little surprise that the sector has been prime hunting ground for VC and PE investors in recent years. At $275 million, Partners Group's acquisition of CSS Corp, which was officially confirmed this week, represents the largest private equity buyout seen so far.
The investor is understood to have taken an 80% stake in the company, with CEO T.G. Ramesh and private equity entrepreneur Sanjay Chakravarty holding the remainder.
Like many of the larger participants in the global technology support services sector, CSS emerged during the boom in India's business process outsourcing (BPO) and knowledge process outsourcing (KPO) industries. Established in 1996, the company provides a range of services, including mobility solutions, cloud enablement, technical support and remote infrastructure management to a blue-chip client base.
CSS now operates from 13 locations worldwide with a team of more than 5,400. The firm has revenues of $200 million, drawing on a customer base that includes Nortel, Deutsche Bank and Motorola. It is based in the US but most of its employees and delivery centers are in India.
"CSS Corp is already a leader in the supply of specialist technological outsourcing services," says Andreas Baumann, partner and head of Singapore at Partners Group. "This is a sector in which we expect to see strong growth going forward as demand for these services increases."
For Partners Group, the plan is to shepherd the company through the next phase of development by building out its sales capabilities and expanding its service footprint through the addition of delivery centers in new geographies. CSS is also expected to focus on its business in analytics-led customer support, mobility, virtualization and telecom services.
CSS stand out as India's largest tech support services buyout but there have been plenty of other sizeable transactions. The Blackstone Group acquired Internet Global Services in 2007 for $200 million, selling it four years later to Serco Group for $634 million, while last year Bain Capital paid $1 billion for a 30% interest in Genpact. The sellers, General Atlantic and Oak Hill Capital, still own another 30%.
The CSS deal facilitates the exits of SAIF Partners, Goldman Sachs and Sierra Ventures, which prior to the transaction owned 70% of the company. SAIF's first investment came in 2006, when it paid $22.5 million for Baring Private Equity Partners India's interest in the business. Goldman Sachs arrived the following year, leading a $25 million round that included Sierra and SAIF.
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