NEW DELHI (AFP) - General Electric Co., a pioneer in business processing in India, said it has sold a 60 percent stake in its Indian outsourcing arm, GE Capital Services, to two US private equity investment firms for 500 million dollars.
The buyers are General Atlantic Partners and Oak Hill Capital Partners.
"Upon closing, GE will retain a 40 percent stake in GECIS (GE Capital Services) and receive cash proceeds of approximately 500 million dollars which it plans to use to fund growth initiatives," GE India chairman Scott Bayman told a news conference in New Delhi.
The transaction values GECIS at 800 million dollars in total, he said, adding the parties aimed to complete the deal "sometime in the next six months" subject to regulatory approval.
Pramod Bhasin, who will remain GECIS president and chief executive officer, said GE's decision to "commercialise GECIS was driven by the opportunity to realise significant value." Analysts have said GE could save money by outsourcing more of its operations instead of having a captive unit.
Bhasin said the new partners, who are buying equal stakes in GECIS, would help realise the Indian company's potential to "become a top global outsourcing company" and "unleash a new entrepreneurial spirit."
"As a recapitalised standalone company, GECIS will no longer limit its cost savings, business support services to GE and GE customers. The new GECIS will offer these same services to companies all over the world, said Bayman.
At the same time, he said, "GE will continue to use and expand on the services GECIS provides it." GECIS provides support services to GE operations in North America, Europe, Asia and Australia.
GE "is not leaving India," Bayman added. He said GE's strategy continued to be "to capitalise on the intellectual talent in India and grow the industrial and financial services business faster than the local markets."
GECIS, a division the parent company launched in 1993 in New Delhi as part of its GE Capital unit, is the largest outsourcing operation by a US or European firm in India and is considered one of the country's greatest outsourcing success stories.
With 2003 revenues of 400 million dollars, GCEIS employs 17,000 people, with 12,000 at four call centers in India and another 5,000 at its operations in Hungary, Mexico and China. The new standalone company will include all its operations in China, Hungary, India and Mexico.
Analysts have said the divestment make sense as it comes at a time when the outsourcing industry is consolidating in India and gives GE a chance to take some profit on its investment.
GCEIS began handling insurance claims and answering calls from customers of GE's commercial and consumer lending units, and has moved into developing sophisticated software for analytics, data mining and business modelling.
GE was one of several multinational companies in the late 1990s that set up huge captive outsourcing operations to take advantage of India's vast pool of cheaper educated English-speaking workers.
GECIS' Bhasin said the sale "will be trendsetting."
"Other big multinational firms which have captive units might start thinking about whether they really want to have captive units," said Bhasin.
"It's not easy for a firm to come to India to set up a base for its backroom operations and tackle issues like high attrition in the outsourcing sector," he said. "I wouldn't be surprised to see other global firms sell their captive units and outsource their work to a third party."
"The market for process outsourcing continues to experience tremendous growth," noted Mark S. Dzialga, partner at General Atlantic, one of the buyers.
"We're investing 800 million to one billion dollars a year in this segment," said Abhay Havaldar, another partner at General Atlantic.
11/08/2004 - 11:38 GMT - AFP