Wipro buys Citi Technology Services

Bangalore: Wipro Technologies acquires Citi Technology Services (CTSL), the India-based captive IT unit of Citigroup Inc for $127 million (Rs 615.8 crore) in an all cash deal.

Wipro and Citi will sign a master services agreement for delivery of technology infrastructure services and application development and maintenance (ADM) services for six years as part of the deal, under which the banking giant will source services worth at least half a billion dollar from the Indian vendor.

CTSL, with expected revenues of $80 million in 2008, has over 1,650 employees and 400 contractors spread across four development centres in Mumbai and Chennai serving 200 Citigroup clients in 32 global locations. The Citi unit has expertise in ADM for cards, capital markets and corporate banking and remote infrastructure services such as comprehensive server management, network management and systems engineering.

“Wipro plans to absorb all employees of CTSL,” said Mr Girish Paranjpe, Joint CEO of Wipro’s technology business. “The Citi unit is a very well-run business and I don’t see any reason to believe that it will have an impact on the margins,” Mr Paranjpe said. Revenues from the deal would start flowing from March quarter when the transaction is expected to be closed.

CTSL is the 13th acquisition by Wipro in recent years.

Wipro plans to use Citi as a strong reference customer in the technology infrastructure space from where it earns about a sixth of its revenues. “Any new infrastructure business that gets outsourced by Citi will come to Wipro on an exclusive basis,” said Mr Soumitra Ghosh, Senior Vice-President of Finance Solutions at Wipro.

Impacted by the credit crisis, Citigroup is restructuring its operations by exiting the non-core business, while trimming jobs worldwide to reduce losses.

The sale of CTSL to Wipro is the second such deal by Citi in India in recent months. In October, Citi sold off its captive BPO unit to TCS in a $505 million deal.

Declining to quantify the cost savings from such exits, Mr Jagadish Rao, Global Technology Head, Citigroup, said the sale of CTSL enabled the company to focus on core competencies while gaining from productivity improvement benefits.