Tata sets sights on Citi Global Services...

Tata Consultancy Services (TCS), India’s top software exporter, is considering making a bid for Citigroup’s back-office unit, people close to the IT group said.

TCS’ interest in Citigroup Global Services, which is valued at about $500m, highlights the Indian group’s growing thirst to expand their outsourcing operations in spite of the US downturn.

US economic woes are providing Indian companies with new takeover opportunities as valuations for US outsourcing groups become more attractive, said Anurag Purohit, associate vice-president of Religare Securities.

“It’s a good time for Indian companies who want to acquire US [business process outsourcing groups] . . . as valuations have corrected significantly,” said Mr Purohit.

This month, Essar’s Aegis business process outsourcing arm (BPO) acquired People-Support, the US outsourcing provider, for $250m. ITC, an Indian conglomerate, took over US-based Pyxis Solutions for $25m.

“The market is witnessing increased merger and acquisition activity, as providers are looking to build scale and acquire new capabilities rapidly, particularly to in-crease geographic reach and acquire key service segment capabilities,” said Nasscom, India’s IT industry lobby, in its 2008 report on business processing outsourcers.

India’s $29bn BPO industry has been growing at more than 35 per cent a year over the past three years, with export revenues reaching nearly $11bn in the last decade and is expected to increase up to $50bn by 2013, according to Nasscom.

Demand for Indian outsourcing services remains strong, as Wall Street banks have been hit by the credit crisis and are relocating jobs to the subcontinent as a measure to cut costs.

Citigroup Global Services, which has over 600,000 sq ft of combined facilities in India, currently offers BPO services in various financial segments, such as mortgages, retail banking and capital markets, for its more than 60m customers in Asia, Europe, Africa and North America.

If Tata Consultancy Services manages to take over Citigroup Global Services it would add more than 11,000 people to its already existing 8,000-strong BPO team.

Spokesmen at Citi in India and TCS both declined to comment.