Infosys Technologies signed a $250 million outsourcing contract with Royal Philips Electronics on Wednesday and bought three of the Dutch firm's back-office centres to extend its presence in Europe.
Infosys, India's second-largest software services exporter, said it would it would take on 1 400 employees from Philips' business process outsourcing (BPO) centres in India, Poland and Thailand.
"This helps expand our operations in an important market like Europe," chief executive Kris Gopalakrishanan told reporters. Revenue from the seven-year outsourcing contract to provide finance and accounting services would start accruing from October, CFO V Balakrishnan told Reuters.
Bangalore-based Infosys will pay $28 million for the three captive back-office centres, and the transaction is likely to be completed by October, Balakrishnan said.
Despite sitting on a cash chest of about $1.6 billion, Infosys has been very conservative about overseas buys.
Low-risk acquisition
"It's a low-risk acquisition because they are getting assured revenue from Philips over the next seven years. They are getting capacity as well as a big client," said Harmendra Gandhi, VP of research at BRICS Securities.
Amitabh Chaudhry, CE of Infosys BPO, the back-office services arm of the technology firm, said the company hoped to get new clients by leveraging the expertise of the acquired centres in nine to 12 months.
"Our hope is that this kind of large outsourcing contract will position us very well and we will attract more business," he told Reuters.
Ahead of the news, shares in Infosys, whose clients include ABN AMRO, Goldman Sachs and Airbus, ended up 0.7%, at 1 989.95 rupees, in a Mumbai market that fell 0.6%.
Indian companies in a broad range of industries have been buying overseas firms to penetrate new markets and gain access to advanced technologies.
Outbound India M&A deals this year so far have totalled $15.26 billion from 108 transactions, according to data from Dealogic. That compares with $5.95 billion from 89 deals in the same period last year and $21.7 billion from 167 deals in the whole of 2006.
Share