IT firm Headstrong sold to Genpact for Rs2,475 cr

Genpact, India's largest business process outsourcing (BPO) firm, said on Wednesday it has signed an agreement to acquire Noida-based information technology and consulting services firm Headstrong Corporation, marking its entry into software services.

Headstrong is headed by former HCL co-founder Arjun Malhotra. Genpact will buy it for $550 million (Rs2,475 crore). Genpact will pay $300 million in cash and raise debt for the rest of the amount. The transaction is thus being funded by a combination of existing cash and acquisition financing. The deal is expected to be closed by 31 May, subject to regulatory and other conditions.

Genpact said it expects the transaction to be ''accretive to earnings per share on a GAAP basis'' in 2011. Headstrong has approximately 3,700 employees in seven countries - including offshore centres in India and Manila - and generates a significant amount of revenue from onsite employees with clients in the US, the UK and Japan.

''It generated revenues of approximately $217 million in 2010 and Genpact expects Headstrong's long-term growth rate to be in excess of 20 per cent per year,'' it said.

Genpact, which already has Wachovia, Wells Fargo and GE Capital as clients, will gain customers like Morgan Stanley and Goldman Sachs and turn into a full-fledged financial IT services provider with the buyout. Headstrong claims to have nine of the top 10 investment banks as its clients.

Genpact outbid IT majors like Capgemini, IBM and HP, which were believed to be in the race to acquire Headstrong.