$505m deal sees TCS swallow Citi's BPO

Outsourcing giant TCS has snapped up Citi's BPO unit in a $505m deal.

The acquisition will see TCS take over Citigroup Global Services Limited (CGSL), which will continue providing business processing services to Citi under a separate deal worth $2.5bn over nine and a half years.

TCS is already a Citi supplier, providing application development, infrastructure support, help desk and other outsourced services to the financial services group.

According to TCS COO, N Chandrasekaran, the deal will allow the company to expand its offerings to large financial services companies and allow the outsourcer to create banking processing platforms by integrating its products and process capabilities.

According to Anthony Miller of analysts TechMarketView, the deal will see Citi account for between seven and eight per cent of TCS' revenues.

"This is particularly attractive deal, given that CGSL was already running at 20 per cent Ebit [earnings before interest and taxes] margin and TCS management feels confident there's more to come," a research note from the company said.

While the analysts remain unconvinced as to how far TCS will be able to use the acquisition to its cross-selling benefit, the deal looks set to prove a boon to TCS.

"Nonetheless, CGSL is a cracking win especially in these troubled times and TCS management deserve to feel pretty pleased with themselves," the note concluded.