Mumbai: Tata Consultancy Services (TCS), India's leading IT services, business solutions and outsourcing firm, has agreed to acquire all of Citi's interest in Citigroup Global Services Limited (CGSL), the India-based captive business processing outsourcing (BPO) arm of Citi for about $505 million in an all-cash deal.

In addition to the sale, Citi has signed an agreement for TCS to provide, through CGSL, process outsourcing services to Citi and its affiliates in an aggregate amount of $2.5 billion over a period of 9-1/2 years.

''This is a landmark acquisition for TCS, helping us not only acquire new capabilities in the banking domain but also underscoring the importance of our long-term, sustainable relationships with our large customers, including Citi,'' said  S Ramadorai, CEO and MD of TCS.

''This transaction will complement our domain expertise and bring new capabilities to TCS that will help drive growth going forward,'' he said

Citi and TCS already have an existing business relationship whereby TCS provides application development, infrastructure support, help desk and other process outsourcing services to Citi. The current agreement builds upon the existing relationship.

The acquisition will expand TCS's IT and BPO services portfolio in the global banking and financial services sector. TCS's enhanced scale and expertise will provide service improvements to Citi and Citi's customers.

CGSL is one of the largest providers of business processing outsourcing services in the banking and financial services sector, providing end-to-end process management across the BFS spectrum and a broad array of services to Citi's consumer, corporate and global wealth management businesses world wide.

It has over 12,000 employees in India and expects to generate revenues of approximately $278 million in 2008.

"TCS will offer CGSL stronger growth potential and superior continued services to Citi clients around the world," said Don Callahan, chief administrative officer of Citi. "This transaction is expected to help reduce operating expenses related to business processing and will allow us to focus on our core financial services competencies.''

According to  N Chandrasekaran, COO and executive director of TCS, the acquisition of CGSL has two immediate strategic benefits for TCS.  "It gives us the ability to offer a comprehensive end-to-end, domain-led solution for business operations of large financial services institutions. It also positions us well to create banking processing platforms by integrating our products and process capabilities,''  h explains.

''We welcome CGSL professionals into the TCS family, where they will be able to participate in the company's new growth endeavours,'' he added.

TCS has provided IT services to Citi since 1992 and is currently one of the largest IT services partners for Citi, delivering IT and business processing outsourcing services to Citi across its operations in North America, Europe, India, Japan, Singapore and the rest of Asia Pacific.

The acquisition is subject to relevant regulatory requirements and closing conditions and the parties expect to close the transaction in the fourth quarter of 2008. Merrill Lynch acted as advisors to TCS in this transaction.