BPO company SourceHOV put on block with $1.2bn price tag

MUMBAI: A little-known BSE-listed company HOV Services is set for a killing as the next billion dollar acquisition in business process outsourcing kicks off. SourceHOV, jointly owned by Citigroup Venture Capital International and HOV Services, has appointed investment bank Morgan Stanley for a sale. SourceHOV, with a large India back office story, has an asking valuation of $1.2 billion, said people directly aware of the matter. The company reported $525 million revenue and about $150 million operating profit last fiscal.

Low-profile tech entrepreneur Parvinder Chadha-controlled HOV Services, which owns a 27.2% stake in the BPO firm, has a market capitalization of just Rs 40 crore, or about $7 million. Its stake in SourceHOV, which also carries half of the boardroom voting rights, could be valued at about $300 million.

Pune-based HOV Services shares closed at Rs 32.50, up 1.72%, in Mumbai trade on Friday. One banking source cautioned that there might be intermediary structures between the two companies, and it may not be fair to assume that sale proceeds (of an indirect investment) to would flow into the listed HOV Services.



CVCI owns 65% with operational and financial control of the privately held SourceHOV employing 13,000 staff spread across India, Philippines, China and Mexico. SourceHOV was formed when India-based BPO unit of HOV Services acquired US-headquartered SourceCorp in 2010.

Chadha, with a track record of 80 M&A deals over the past three decades, emerged on the scene with OSICOM Technologies, an innovator in the transition from mainframe-based to server-based networking technologies. This company went public in the US in the '80s and had a peak market value of $1.5 billion, said Chadha's profile on the HOV Services website.

In 2000, Chadha started HandsOn Ventures (HOV), a private equity group building a portfolio of synergistic services, including a large BPO play. Buyout private equity firms, large sovereign wealth funds and big Indian outsourcing companies have shown early interest in the SourceHOV deal, said a source cited earlier in the report. This could be the largest M&A transaction in BPO industry after Bain Capital picked up 30% stake in Genpact for $1 billion. Danielle Romero-Apsilos, MD of Global Public Affairs, at Citigroup's Institutional Clients Group, declined to comment. An emailed query to HOV Services remained unanswered at the time of going to press.