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August 15, 2006 The Economic Times

Baring pitches for PharmArc stake

PRIVATE equity (PE) majors are turning to Knowledge Process Outsourcing (KPO) now. Baring Private Equity Partners is investing $10 million for a significant minority stake in the two and a half year-old PharmArc Analytic Solutions, a marketing analytics and business consulting firm focused on the global pharmaceutical market.

This is probably the biggest PE action in the emerging KPO industry, and it marks Baring’s interest in this sector after highprofile BPO investments, including the recent $254 million exit from Mphasis BFL. PharmArc, promoted by Siraj Dhanani and Amit Sadana, has over 180 consultants working out of its Bangalore hub at the moment. The company, which boasts 11 out of the 20 top global pharma giants as clients, is expected to end the ongoing calendar year with $7 million in revenue.

“We expect to use the investments for enhancing our onsite service delivery and client management in US and Europe, and for establishing a presence in Asia-Pacific. Besides the investment, Baring also brings to the table a proven reputation in building companies,” Siraj Dhanani, CEO of PharmArc, told ET. The deal valuation was not available. Veda Corporate Advisors was the investment banker for PharmArc.

Baring’s interest in PharmArc is significant given that KPO sector is expected to touch $16 billion by 2010, with India accounting for bulk of the work. KPO is essentially upward migration in the BPO value chain � from process expertise to knowledge expertise. Mr Dhanani, a former top honcho of Strand Genomics, said the firm could also look at “selective acquisitions” to expand the portfolio of service offerings, and establish a presence in targeted niche segments. “Our goal is to emerge as a leading pharmaceutical industry KPO with a multifold increase in revenues over the next few years,” he added.

The company hopes to ramp up its manpower to 450/500 over the next two years. “We have multiple level engagement with our clients spanning from specific projects to multiyear contracts. We are focused on delivering value to the pharma industry by enabling better decisions in sales and marketing,” said Amit Sadana, president of PharmArc.

Baring currently has assets over $500 million under management in India, and was one of the first PE biggies to move into ITeS/ BPO sector about eight years ago. It must be mentioned that PE majors have made several successful, big-ticket BPO exits in recent times like Citigroup’s divestment from Progeon and that of Baring’s from Mphasis BFL being the prominent ones.