MOSL: QUESS CORP (Neutral)-To acquire BPO firm Allsec Technologies
Quess Corp: To acquire BPO firm Allsec Technologies; In line with its aspiration to expand in higher-margin non-voice BPO business
(QUESS IN, Mkt Cap USD1.5b, CMP INR715, TP INR730, 2% Upside, Neutral)
Event: Acquisition of Allsec to add non-voice, international BPO revenues
- Quess Corp (QUESS) has announced the acquisition of Allsec Technologies under its BPO vertical, that will improve the profitability and cash generation profile of its Conneqt BPO business.
- Allsec is focused on Customer Life cycle management (~75%) and HR Operations (~25%). The acquisition will add ~3,500 seats and ~3,300-3,400 associates and revenue of ~INR2.3b (annualized).
- Quess has signed a definitive agreement to buy a total of 61.35% stake in Allsec Technologies. It has agreed to pay INR320/share for the promoters' stake of 35.35% and INR250/share for 26% owned by First Caryle Ventures.
- This would imply one-year forward EV/EBITDA multiple of ~5.8x (based on our expectation of ~15% growth). The EV/EBITDA of peers such as FSOL, Genpact and WNS ranges between 7x-13x for FY20E.
- If the company is able to acquire 26% additional shares through an open offer, the total consideration will amount to INR3.98b.
About Allsec Technologies
- Allsec is a Chennai-based BPO company operating across three verticals: [1] Customer Lifecycle Management (CLM), [2] HR - Outsourcing and Payroll (HRO) and [3] Anti-Money Laundering.
- As on date, the company has divested from the anti-money laundering vertical. Allsec is estimated to report revenue of ~INR2.3b for FY19 from CLM (75%) and HRO (25%) segments.
- Allsec has both domestic and international presence with delivery centers at five locations: Chennai, Bangalore, Noida, Manila (Philippines) and Dallas (US) with a total seating capacity of 3,300.
- CLM business is 52% voice and 48% non-voice, with 62% of revenue coming from international locations and 38% from domestic.
- HRO business is all non-voice, with majority of revenue derived from domestic clientele (77%).
Quess Corp Limited is engaged in the business of temporary staffing services, executive search, recruitment services, housekeeping and facility management services, including engineering services, food services and skill development. The Company's segments include People & Services (P&S), Global Technology Services (GTS), Integrated Facilities Management (IFM) and Industrial Asset Management (IAM). Its P&S segment provides specialized service offerings in search, recruitment and recruitment process outsourcing, general staffing, training and skill development, payroll and compliance and retail solutions. Its GTS segment focuses on three areas, including information technology (IT) staff augmentation, solution and products. Its IFM segment offers facility management services, including soft services, hard services, food and hospitality and pest control. Its IAM segment provides plant asset management and it offers solutions in industrial operations and maintenance and managed services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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