General Atlantic may make $100m investment in PCS

By Dane Hamilton

NEW YORK: General Atlantic Partners, a $4 billion private equity fund, is considering making an investment of at least $100 million in India's Patni Computer Systems Ltd., according to executives familiar with the transaction.

The investment, which would be one of GA's largest to date, would give the Greenwich, Connecticut fund a stake in the fast-growing India information technology industry, where Bombay-based Patni is a leader. Officials from General Atlantic, a backer of companies including E*Trade and Priceline.com, declined comment on any transactions until they are completed. Officials from Patni could not be reached.

However, at a New York conference last week, Drew Pearson, a GA principal, told attendees that General Atlantic is considering a "$100 million-plus" investment in a Indian information technology company which he declined to name. A source familiar with the company's plans said privately held Patni is the target.

In recent years, India, which has an abundance of educated and English-speaking workers, has become a popular location for U.S. and European companies to purchase software and outsourcing services. A few, like Satyam Computer Services became large enough to list shares on U.S. markets.

Many Indian companies looking for capital to expand are finding the market for initial public offerings all but closed. So they're turning to private equity firms such as General Atlantic, GE Corp.'s GE Capital, Warburg Pincus and others for expansion capital.

With the economy slowing and corporations looking to cut costs, people are getting very interested in India, said Raj Dugar, director of Westbridge Capital Partners, a $140 million private equity fund based in Bombay that invests in Indian companies that do business in the West.

Dugar said major corporations increasingly use India for cheaper customer service "call centers," insurance transaction services and other, higher-end services such as customized software engineering. Call centers, he said, which handle millions of calls daily from credit card customers, can run a tenth of the cost of a center in the United States, he said.

General Atlantic, which Pearson said invests mainly on behalf of five wealthy families, focuses on information technology and communications businesses. Most of its investments range from $25 million to $50 million, it said. Last year insurance company AIG comitted $1 billion to GA to invest in private equity deals. GA made its presentation at a conference last week organized by Alpine Venture Associates, a New Jersey private equity firm.

(C) Reuters Limited 2001.