Global business process outsourcing firm Startek, which merged with Indian BPO firm Aegis two years ago, is now evaluating acquisition targets while also looking to grow its healthcare and tech support verticals, President Rajiv Ahuja told Moneycontrol.
Startek, which has been struggling with profitability over the last few years, does not seem to have turned its fortunes around since the merger with Aegis, though it did turn in a small profit in the latest quarter.
But Ahuja is looking ahead and charting out the company's plans for growth.
“Like every other company we keep our eyes and ears open for an asset that we feel could be a credit and could add value to the current asset that we have,” he said.
“So yes, we continue to examine quite a few prospects. As we speak we are doing that. It is a question of finding the right asset at the right price. Growing inorganically is not something we are ruling out. We are open to that idea,” he added.
However, he did not disclose details about the nature of the acquisitions the company is examining or the value. According to an earlier report by the Economic Times, the company was looking at digital acquisitions to accelerate growth after the tough merger with Aegis.
Startek-Aegis merger
Indian business process management firm Aegis merged with New York Stock Exchange-listed Startek in 2018. Revenues of the combined entity then were close to $700 million, with Lance Rosenzweig as its CEO.
Profitability of the firm has been a concern. The ET report quoting David Koning, an analyst with brokerage firm RW Baird, said the company has lacked profits since 2016 and has heavy client concentration which poses a risk.
In January 2020, Aparup Sengupta, former CEO of Aegis from 2005-12, was named the Global CEO. Ahuja , a former Aegis executive, was brought in from July 2019 to integrate and lead the company to the next level of growth.
September 2020 results
For the quarter ending September 2020, the company posted a net profit of $0.4 million, as against a net loss of $2.8 million in the year-ago quarter. For the quarter ending June 2020, the company reported a net loss of $5.2 million.
Startek’s revenue dipped 1.15 percent to $162.7 million for its third quarter ending September 2020. The decline, the company said, was on account of depreciation of the Indian rupee and the Argentine peso, and also due to the continued impact of the pandemic-induced lockdown.
Argentina accounts for about 6 percent of the company's revenues, while India contributes 13 percent.
Expanding its vertical footprint
After the contraction in demand witnessed on the back of Covid-19, it is bouncing back led by e-commerce and food delivery in India and healthcare in the US.
The company is now looking to expand its footprint in other verticals such as healthcare, where it can have a larger play. “Healthcare would be one where I think there is a tremendous amount of volume. It is a segment that we have not tapped into and we have not realised its full potential,"Ahuja said.
Tech support would be another vertical of focus, where the sales team is now trying to make more inroads, he added.
Currently, telecom accounts for about 35 percent of its revenue, followed by e-commerce and consumer at 16 percent. Healthcare and education account for about 7 percent, and technology and ITeS make up 3 percent.
Close to 51 percent of the company’s revenue comes from the top 10 clients. Though Ahuja did not respond directly to whether this high client concentration poses a risk, he said the company is looking to grow other verticals. The company has over 280 clients.
Hiring
As demand picks up, the company is also stepping up its global workforce. The company employs over 40,000 people of which 18,500 are in India, according to a report.
The company added two senior resources in the sales team recently, one in the US and one in the UK and is in the process of examining a few more senior level resources. “We are absolutely focused. We do want to be a growth company. If we are a growth company you need to have sales people knocking on doors,” Ahuja said.
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