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October 29, 2012
Transaction Analysis
RPG Group to Buy Stake in Firstsource Solutions Ltd.  

Financial Overview:
  • Transaction Value: $65 million
  • Transaction Structure: Cash

 martinwolf Analysis:

  • RPG Group, an Indian industrial conglomerate, is acquiring a minority stake in Firstsource Solutions Ltd. (BSE:532809), a global BPO provider, through its subsidiary CESC Ltd. (BSE:500084).
  • The transaction was consisted of a combination of stake purchases from existing investors and of new equity.
  •  CESC Ltd. component company Spen Liq Pvt. Ltd. will acquire a 49.5% stake in the BPO firm for a total of 3.5 billion rupees (approximately $65 million). Firstsource logo
  • This has also triggered an open offer from CESC to acquire another 26% stake in Firstsource, making CESC Ltd. a majority shareholder.
  • RPG Group also holds investments in Zensar Technologies, a software and services company that we profiled in 2010, and they have the means to continue growing in scale.
  • Firstsource was established in 2001 by martinwolf strategic partner ICICI Bank under the name ICICI InfoTech Upstream Ltd.
  • The deal continues the consolidation trend within Indian IT services being dominated by large players (such as Tech Mahindra's previous acquisition of Hutchinson Global).
  • Over the past few years, Indian BPO service providers have been restructuring their approach in order to deliver services across the entire value chain within particular verticals.
  • RPG is positioning for an increase in Indian IT BPO exports, which are expected to grow 11-14% according to a NASSCOM strategic review.
  • Indian IT BPO service providers are seeking large enterprise clientele in both U.S. and Europe and are therefore placing an increased focus cross-border partnerships and M&A. This transaction represents the opportunity to gain large accounts in both U.S. and the U.K.
  • With India poised for growth and 75% of total IT services revenue in India coming from the 4 verticals (government, manufacturing, telecom and BFSI), this acquisition positions RPG to capture growth in India.
  • In both short and long term, impending healthcare reforms in the US are expected to give BPOs like Firstsource a boost as they have expertise in healthcare.
  • We believe BPO business promises high growth in coming years, but companies who will choose aggressive inorganic routes will be the winners.
  • Based on our intelligence, we expect an increasing number of cross-border deals in the non-voice BPO sector originating from Indian buyers. 

Source: CapitalIQ


martinwolf was not the adviser in this transaction.


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With offices in San Francisco and Bangalore, India, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 115 transactions in six countries. We are a five-year member of the Merrill Lynch PS Referral Network, and were selected as ICICI Bank's (India's leading private bank) exclusive strategic partner for acquiring U.S. IT companies. martinwolf is a member of FINRA and SIPC. For more information, visit


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Please click here to view the announcement.   


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