Sanjeev Goenka buys BPO firm Firstsource for Rs 400 crore

India’s fifth-largest business process outsourcing (BPO) firm, Firstsource Solutions has finally got a buyer and the deal values the outsourcing firm at around Rs 650 crore.

Kolkata-based Sanjiv Goenka-led CESC will shell out around Rs 400 crore through its wholly-owned subsidiary, SpenLiq for a 49.5 percent holding in the ICICI-promoted BPO firm. The deal would help Sanjiv Goenka group’s flagship electricity generation and distribution firm CESC to raise funds to repay its debt and provide a part exit to private equity investment firms Temasek and Metavante Investments.

CESC will acquire 34.5 percent in Firstsource through a preferential allotment and a further 15 percent from the existing investors. “Besides offering purchase of 34.5 percent shares at price of Rs 12.10 each in FSL initially, CESChas offered to buy an additional 15 percent stake for Rs 12.2 each share in the firm from one of the promoter company - ICICI Bank and two investor firms, Metavante Investments and Aranda Investments,” CESC said in a statement.

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The open offer price would be Rs 12.10 a share, according to Sebi guidelines.

On Thursday, the Firstsource stock closed at Rs 14.24 on the BSE, up 7.63 percent.

“Growth opportunities in the power sector are getting … somewhat challenging and returns from the power sector are also not as lucrative as they were,” Sanjiv Goenka, vice chairman the RP-Sanjiv Goenka Group which controls CESC, told CNBC TV18.

“Given the current limitations of growth in the power sector, we have been looking at entering the BPO space for a while. FirstSource presents a very good opportunity in high growth BPO verticals and has a very strong management team,” Sanjiv Goenka said.

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Firstsource, which gets a majority of its revenues from healthcare, telecom and media clients in the US, had revenues of Rs 2,255 crore in the year ended March 2012, and a net profit of Rs 62 crore. Of the Rs 650 crore paid for the acquisition, Rs 280-290 crore will be invested into Firstsource.

Firstsource’s foreign currency convertible bonds are due for redemption in December and money infused into Firstsource will be used to repay the company’s bondholders. “According to a CRISIL note, the FCCBs will be redeemed partly through cash and partly through the issue of new bonds for up to $120 million. As of June 30, the company had a cash reserve of Rs 750 crore ($135 million). It does have a shortfall of around $85 million, for which the company has been in talks with bondholders,” said the Business Standard.

Analysts, however were surprised with this investment announcement as the economic slowdown in the West has directly affected Indian BPOs. “It is a surprising investment decision. Considering the uncertainties that Firstsource is currently facing, it may not be the right time to invest in the company,” an analyst at Elara Capital, told Mint.