Startek, a multinational business process management company, said it has put $30 million into CSS Corp through a limited partnership managed by Capital Square Partners, its largest shareholder.
, CSS, an IT services and software support company, has both, an indirect beneficial interest of approximately 26 percent and a direct beneficial interest of approximately 26 percent will be acquired by Startek. Startek said in a statement that it had the option but not the obligation to buy a majority stake in CSS.
The investment was made possible by a new $185 million senior debt facility from CSP Alpha Holdings Pte. Ltd., Startek's wholly-owned subsidiary. A $165 million term loan and a $20 million revolving credit facility make up this debt refinancing. The term loan has a 21-month principal repayment moratorium and will amortise quarterly after that, starting in November 2022. Certain structured financial agreements apply to the loan. The proceeds of this loan were used to pay off the previous senior debt facility in full, as well as to make a strategic investment in CSS.
“As we moved forward into 2021, we reaffirmed our commitment to improving our platform's versatility. We completed a $185 million debt refinancing after the fourth quarter, allowing us to extend the maturity of our debt and improve our overall liquidity position. We can comprehensively finance our current operations while capitalising on strategic opportunities to accelerate long-term, accretive growth with this strengthened balance sheet," said Aparup Sengupta, Startek's Executive Chairman and Global CEO.
He went on to say that the CSS investment is an example of an accretive opportunity that will also aid Startek's digital initiatives. "CSS is a well-established IT services firm that offers mission-critical AI, automation, analytics, cloud, and digital solutions to a rising list of technology clients on five continents. Given the success of our Startek Cloud omnichannel platform in 2020, we believe our digital services will continue to be a key long-term driver of potential revenue growth and margin expansion. Our investment in CSS accelerates our digitization efforts and signals a turning point for Startek", Sengupta explained.
In India, Startek employs over 18,000 people in BPM centres, and 40,000 people in 13 countries. Startek also released its fourth-quarter financial results for the year ending December 31, 2020. The company's net revenue for the quarter was $174.5 million, up 4.7 % year over year, thanks to increased demand and seasonal intensity from its current client base.
In the December quarter, Startek shareholders suffered a $7.6 million net loss, compared to a $5.3 million loss the year before. Covid-19-related forecasted declines in the company's market in India, South Africa, and Australia, as well as in Argentina, due to the depreciation of the local currency, resulted in a net loss of approximately $13.2 million in the fourth quarter of 2020.
On an annual basis, gross profit increased by 11.7 % to $30.9 million in the fourth quarter. As compared to the same quarter, a year earlier, gross margin rose 160 basis points to 17.7%. The increased margins were due to the company's existing customer base, as well as a higher sales mix of high-margin digital services. In addition, $2.7 million in additional grants raised in the fourth quarter helped the margin growth.