Sunday, January 17, 2010

Target Corporation to sell India Operations to Wipro

IT giant Wipro is all set to buy US-based Target Corporation’s India captive technology centre located in Bangalore. Sources close to the deal revealed that Wipro has finished the due diligence exercise and the deal is likely to be announced this week.

Wipro is believed to have agreed to pay $60 million (around Rs 275 crore) for the centre, sources disclosed. Target Corp, in turn, has agreed to a long-term contract of assured business for the next 5 years, and the value for the same is estimated at $500 million.

TCS and Infosys were the other two Indian IT companies in the race to takeover Target’s India operation.

Target India, known as Target Technology Services India, is a wholly owned subsidiary of Minneapolis, US-based Target Corporation. The $65 billion Target owns and runs 1,744 stores in the US and is the second largest general merchandiser in the country. Target is an upscale discounter that provides quality, on-trend merchandise at attractive prices.

In addition, Target operates an online business, Target.com. Target, which started its India operation in May 2005, currently operates from three places in Bangalore – two offices in Embassy Golf Links and one in Manyata Technology Park, and has 2,000 people on its pay roll.

As per the deal its entire operation including employees will be taken over by Wipro.

The plan to hive off India operation was initiated in the second half of 2009 when Target decided to divest non-core businesses to shore up its financials. As US went deep into recession from the beginning of 2009, Target’s revenue and profits suffered. In April-June 2009 quarter, for example, its revenue at $15 billion was 2.6 per cent lower than same quarter previous year.   

Target’s India centre works as a captive operation supporting various activities of the retail chain. It provides administrative support, business analytics, supply chain management, finance and accounting, HR, call centre, global sourcing & planning etc.

Industry observers believe that Target India will be a good win for Wipro. The knowledge base and the skills available in Target India will help Wipro to offer similar services to other big retail clients beyond Target. And with the global retail sales slowly picking up, Target Corp is possibly the right target for the fast growing Indian IT giant.

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