GE sells Indian outsourcing arm

GE sells Indian outsourcing arm

Uttara Choudhary, Agence France-Presse, New Delhi

General Electric Co., a pioneer in business processing in India, said on Monday it has sold a majority stake in its Indian outsourcing arm, GE Capital Services, to two U.S. private equity investment firms for US$500 million.

The buyers are General Atlantic Partners and Oak Hill Capital Partners, two companies based in the United States.

"Upon closing, GE will retain a 40 percent stake in GECIS (GE Capital Services) and receive cash proceeds of approximately $500 million which it plans to use to fund growth initiated," GE India chairman Scott Bayman said at a news conference in New Delhi.

The transaction values GECIS at $800 million in total, he said, adding the parties aimed to complete the deal "sometime in the next six months."

Pramod Bhasin, who will remain president and chief executive officer of GECIS, said the move would "unleash a new entrepreneurial spirit" at GECIS.

He said the new partners, who are buying equal stakes, would help realize the company's potential to "become a top global outsourcing company."

"As a recapitalized standalone company, GECIS will no longer limit its cost savings, business support services to GE and GE customers. The new GECIS will offer these same services to companies all over the world, said Bayman.

At the same time, he said, "GE will continue to use and expand on the services GECIS provides it."

GE "is not leaving India," Bayman added. He said GE's strategy continued to be "to capitalize on the intellectual talent in India and grow the industrial and financial services business faster than the local markets."

GECIS, a division the parent company launched in 1993 in New Delhi as part of its GE Capital unit, is the largest outsourcing operation by a U.S. or European firm in India.

With 2003 revenues of $400 million, GCEIS employs 17,000 people, with 12,000 at four call centers in India and another 5,000 at its operations in Hungary, Mexico and China. The new standalone company will include all its operations in China, Hungary, India and Mexico.

GCEIS began handling insurance claims and answering calls from customers of GE's commercial and consumer lending units, and has moved into developing sophisticated software for analytics, data mining and business modelling.

GE was one of several multinational companies in the late 1990s that set up huge captive outsourcing operations to take advantage of India's vast pool of cheaper educated English- speaking workers.

"The market for process outsourcing continues to experience tremendous growth," said Mark S. Dzialga, partner at General Atlantic, one of the buyers.