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IT, BPO growth seen dropping to 30 per cent

However, an ASSOCHAM study says the companies in the two industries have seen a faster growth than their peers globally at the expense of western firms.

business Updated: Jun 20, 2007 15:11 IST

The annual growth of India's IT and BPO industries may fall to 30 per cent for the next four years, after expanding by 35 per cent in the past two years, says a study.

Nevertheless, both large and smaller companies in the two industries in India have seen a faster growth than their peers globally at the expense of western firms, says the study by the Associated Chambers of Commerce and Industry.

"Over the years most of the Indian IT services and BPO players have been moving up the value chain and in most cases are integral to the business of the client," chamber president Venugopal N Dhoot said.

"Considering the positive outlook toward Indian IT/BPO service industry, private equity and venture capital investors are looking at investing in these companies to be part of India growth story," he added.

The study says investors were particularly looking at picking up stakes in niche companies like Flextronics that specialises in telecom, Geometric Software that has major presence in engineering services and Applabs in software testing.

It also lists some major deals executed by investors in the domain - Carlyle Group's $170 million deal in Olympus Capital's $100 investment in BPO firms and ChrysCapital's $28 million deal in networking and system integration.

"Across all the sectors, venture capital and private equity firms obtained exit routes for their investments in 37 Indian companies during 2006, including 19 via initial public offerings," says the study.

"For 2005, this figure stood at 41, including 17 via initial public offerings."

The study says the one merger and acquisition that grabbed global attention was when the US-based EDS acquired 52 per cent stake in the Indian BPO firm Mphasis-BFL for $380 million.

Similarly, Citigroup sold its 23 percent stake in Progeon, another BPO firm, to its promoters Infosys Technologies for $115 million, resulting in a return of over 5.7 times in four years. Citigroup had invested $20 million in 2002.

First Published: Jun 20, 2007 14:52 IST