Nasdaq-listed BPO services company EXLService Holdings Inc. has struck a deal to acquire Outsource Partners International (OPI) that is into finance and accounting outsourcing services, for an enterprise valuation of $91 million (Rs 400 crore).
EXL will use the existing cash and a working capital revolver to fund the transaction which is expected to close by June 1, 2011, the company has stated on Wednesday.
OPI has around 80 clients and closed the last calendar year with revenues of $76 million. It has clocked ‘organic long-term revenue growth’ in excess of 15 per cent.
EXL has upped its revenue guidance for 2011 calendar year by around 15 per cent, from $295-$305 million to that between $347 and $355 million, after factoring in current exchange rates and assuming that the OPI acquisition closes as per schedule. It has said that the OPI acquisition is expected to be accretive to GAAP EPS and adjusted EPS in 2011.
The company, however, maintains its outlook for adjusted operating margin (excluding the impact of stock-based compensation expense and amortisation of intangibles). Talking about the deal, CFO of EXL Vishal Chhibbar said, “The acquisition of OPI is attractive, both strategically and financially. We are maintaining our adjusted operating margin guidance of 13 per cent to 14 per cent, after having considered the OPI acquisition and the recent appreciation of the Indian rupee.”
Last year, EXL had acquired PDMA Inc., maker of an insurance policy administration platform, which is used by around 40 global insurers, for $14.1 million in cash (net of working capital adjustments) and expected annualised revenues are approximately $10 million, according to a company statement.
In March, 2010, it had also acquired Global Travel Service Center (GTSC), the back office India operations of American Express Business Travel. Five years ago, it had also acquired Inductis, a New Jersey-based consulting and analytics firm.
The latest deal comes even as some of the investors in EXL were reportedly in talks with L&T Infotech to sell their stake in the Nasdaq-listed firm. The reasoning goes that as BPO industry has matured, growth possibilities have shrunk compared to the past, especially as some global clients are keen to outsource to integrated IT services firms or software firms with BPO arms or divisions, instead of approaching pure BPO outfits.
Meanwhile, the company closed its first quarter on March 31, 2011, with revenues of $72.9 million, 33.8 per cent over Q1 2010, and the net income rose 48.7 per cent to $8.4 million. Outsourcing revenues totalled $56.8 million (up 36.7 per cent) and transformation revenues added another $16.1 million (up 24.6 per cent) with adjusted EBITDA for the company pegged at $14.6 million (up 28.4 per cent).
Sequentially, revenues rose 4.1 per cent over the fourth quarter of the last financial year ended December 31, 2010. Outsourcing services revenues increased 6.1 per cent and made up for the sequential quarter decline in transformation services revenues, from $16.6 million to $16.1 million. Net income rose marginally in Q1 2011, compared to Q4 of 2010.
But gross margin and operating margin, as well as adjusted operating margin, declined both sequentially and over the year-ago period.