India: Let The Deals Begin

It felt like the lights went on again in Bangalore. Almost as soon as U.S. President George W. Bush was reelected and the specter of a Democratic Administration that might pull the plug on outsourcing receded, the deals began to flow. On Nov. 8, Infosys Technologies Ltd., India’s top software services company, announced a $1 billion secondary offering of its shares. That same day, General Electric Co. sold a stake in its New Delhi-based outsourcing subsidiary to U.S. investors for $500 million.

Bangalore is talking deals again. India’s $16 billion tech outsourcing sector — centered around the southern city of 6.5 million — is growing at 30%-plus annually as ever more foreign companies farm out help desks, software writing, accounting, and more to armies of young Indians manning phones and computer workstations day and night. By 2008 the business could bring in $50 billion a year, estimates India’s software services trade association, Nasscom. The group believes as much as 30% of corporate tech work can be outsourced, and so far less than 10% has been.

That potential has dealmakers from around the world licking their chops. In the next 18 months, investment bankers are expecting a wave of mergers and acquisitions as competitors rush to achieve the critical mass needed to serve global clients in everything from call centers to financial analysis. “It’s going to be a sizzling sector,” says Vedika Bhandarkar, head of investment banking at J.P. Morgan India. “There will be more M&A, more consolidation, more U.S. listings.”

For this complete story, please visit India: Let The Deals Begin.