A couple of weeks ago, Hinduja Global Services (HGS) announced that it is to acquire Mphasis' Indian domestic BPO division for Rs. 17 crore. For around $2.7m, HGS will pick up seven contact centers in Noida, Raipur, Indore, Mangalore, Pune and two buildings in Bangalore, with a total seat count of 6,400, and ~7,500 employees - and a business that was generating around $22m in annual revenue. The cut-over date is planned for September 1, 2015.

Clearly, this was a fire sale, presumably of an unprofitable business. We were intrigued as to why HGS was buying further Indian contact center business - and indeed there is a story behind the announcement. The main reason for the acquisition is to more broadly expand the domestic Indian business as well as add banking and financial services clients.  This domestic Indian expansion will help HGS handle domestic India business for international accounts (it recently won some business in India for a global CPG client).

HGS is picking up two telecoms clients, which together account for ~88% of the acquired business, plus four insurance and banking sector clients.

This acquisition may have been opportunistic, but it has some other benefits:

• It will significantly expand HGS’ footprint for servicing the India domestic market (India CMS BPO accounts for ~6% of HGS global business, its India payroll business another 2%). As well as adding to HGS’ existing nine cities with contact centers (with ~7800people) for domestic business in  India, the Mphasis centers will bring in delivery capability in the northern Hindi-speaking states in India
• HGS will also acquire some premium level support capabilities for the Indian telecoms sector – for services which are often slightly less price sensitive
• And it will provide HGS with some referenceability in the key CMS BPO banking and insurance sectors. Expect HGS to look to win more BFSI BPO business in the region.

In short, what is a fire sale for Mphasis looks like as if it as the potential to become a great asset for HGS.