Citi sells India unit, to cut US jobs
Mumbai, October 8, 2008
India's Tata Consultancy Services (TCS) said on Wednesday it would acquire Citigroup Inc's back-office unit in India for about $505 million in cash, as the US financial giant sheds assets outside its main businesses.
The transaction will give a slight boost to Citigroup's capital levels after it has recorded more than $60 billion in write-downs and credit losses amid the worldwide financial crisis.
The purchase will give TCS, India's top software services exporter, an outsourcing contract worth $2.5 billion over 9-1/2 years from Citi.
Citi shares fell 4.6 percent to $14.45 on the New York Stock Exchange.
"This transaction will complement our domain expertise and bring new capabilities to TCS that will help drive growth," chief executive S Ramadorai said.
Indian outsourcers have been expanding their markets and looking for acquisitions to grab bigger spending clients and add new service lines amid the US slowdown.
TCS said the deal, expected to close this quarter, will start contributing to revenues in the March 2009 quarter.
Citigroup Global Services, the Indian back-office unit, began as a business processing arm for Citi India in 1992 and expanded to serve Citi's global operations in 1998.
The unit, which employs 12,000 people, operates out of seven facilities and offers back-office services to Citi's consumer, corporate and global wealth management entities in 50 countries, according to its website.
"This deal ensures revenue visibility for TCS since Citi itself is a very big organisation, which is a big positive in these challenging times," said Tejas Doshi, head of research at brokerage Sushil Finance in Mumbai. "It's an opportunity for TCS to get new business at a decent price."
Citi, hit hard by the credit crisis, is selling some $400 billion in assets within three years. The bank is also shrinking some businesses, including its mortgage operations.
A Citi spokesman said Wednesday the bank was laying off 500 employees and slashing to 1,000 from 9,500 the outside mortgage brokers it works with. -Reuters