Spice-Spanco BPO merger falls through

BK Modi-led Spice Group’s plan to set up India’s largest domestic BPO unit by merging its BPO unit with that of Spanco Telesystems and Solutions has fallen through. The merger, announced in October 2008, was called off just a month later in November. This, however, remained under wraps and has come to light now. The three-way merger would have brought together Omnia BPO of Spice, Spanco’s BPO arm and Bharat BPO, the existing joint venture of Omnia and Spanco, which has got the call centre business of Indian Railways. It would have created India’s largest domestic BPO firm in terms of numbers, employing over 10,000 people. The MoU between Spice and Spanco fell through due to differences among the partners over the way the new entity should be managed, according to Kapil Puri, chairman of Spanco. Puri told FE that the two sides could not reach an agreement on how to work together. “Issues over operational management led to the failure. Differences such as appointments to the new board of directors could not be resolved,” he added. However, Dilip Modi, chairman of Omnia BPO Services, while speaking to FE, said that the merger had not fallen through. “We already have a partnership for Bharat BPO and discussions are on. We are taking it step by step. As opportunities present themselves, we will evaluate them,” said Modi. A source connected with the merger said, “Though the terms of the agreement provided for 50:50 management control of the new entity by the parent companies, the Spice group was not in favour of ceding management of the new company.” The disagreement between the two companies–Spice and Spanco–could also spell trouble for their joint-venture firm Bharat BPO. Puri, however, said that currently, there are no plans to go solo and the JV is on track. The unit handles around 20 million calls a day.
“The project is too mission-critical and large to not operate at all, but it could move one way or the other,” said a source in Spanco. Spice was recently in news for pursuing Satyam Computer Services, but later opted out of the race citing that the bidding process was not transparent.
Spice and Spanco had, in October 2008, announced that two companies would invest Rs 500 crore upwards in the new entity, which would be called Omnia till a new name was found for it. Clear expansion plans were announced, which involved increasing the number of seats from then 7,000 to 15,000 by March 2010. The number of employees would also be increased from 10,000 to 15,000 by March 2009, it was announced. Omnia and Spanco continue to operate as separate units now, with Spanco currently employing 6,000 people and having a run rate of Rs 100 crore. Incidentally, the then CEO of Omnia, Pravin Kumar, left the company soon after to join Spanco as its CEO, along with a few more employees of Omnia.