StarTek looks at digital buys to tide over its Aegis trough

Industry:    January, 2020

Global business process outsourcing company StarTek will look at digital acquisitions to accelerate growth, its newly named CEO Aparup Sengupta has told ET.

The move is expected to help the New York Stock Exchange-listed company recover from its tough merger with Indian business process management company AegisNSE -1.36 %.

Private equity firm Capital Square Partners, which bought Aegis and merged it with StarTek in 2018, has gone underwater on the deal as it had bought StarTek shares at $12 apiece, and the stock is currently trading at less than $8. CSP owns approximately 55% of the firm.

“Now it is time to rev up the growth engine,” said Sengupta, CSP operating partner and StarTek chairman, who took over the dayto-day operations of the firm last week. “The track is not changing; we are just pressing down the accelerator. A part of this acceleration will be a focus on digital. This will be a combination of make and buy,” he told ET in an interview.

He declined to confirm if the company had created a budget for potential acquisitions, citing a strict disclosure policy due to its US listing. Sengupta has replaced Lance Rosenszweig who led the company as its global CEO since its merger with Aegis. The latter stepped down to pursue “other opportunities”, according to the company.

Analysts, though, said Sengupta’s appointment as CEO was a sign that the PE firm was not happy with the direction the company had taken. “We doubt a CEO appointed when PE entered at $12/share would leave if the turnaround was on track and there was a big opportunity ahead,” David Koning, senior research analyst with brokerage RW Baird, said in a note.

The first clean revenue comp (we have a full clean Q4-18 base) is coming when the company reports Q4, so it’s interesting timing.”

Koning said the firm’s debt load, lack of profits since 2016, and heavy client concentration were all risks. For the quarter ended September 30, StarTek had posted revenue of $164.6 million and a net loss of $2.8 million.

Sengupta has a long history with Aegis. He was previously CEO of the company from 2005 to 2012. He then became the CEO of Aditya Birla-owned BPO Minacs, which was acquired by US-listed Synnex.