Wipro is acquiring Citi Technology Services, an IT services and software development subsidiary in India of Citigroup for about US$127 million in cash.

As part of the transaction, Wipro and Citigroup will sign a master services agreement for the delivery to Citigroup of technology infrastructure and application development and maintenance services for a period of six years, Wipro said in a filing on Tuesday to the Bombay Stock Exchange.

Wipro, India's third largest outsourcer, stands to earn at least $500 million [m] in services revenue from the agreement during the duration of the contract, it said.

Citigroup announced in October an agreement to sell to Tata Consultancy Services its interest in Citigroup Global Services, its business process outsourcing (BPO) arm in India, for about $505 million in cash.

A number of multinational companies like General Electric have hived off their back office subsidiaries to focus on their core business. Running subsidiary BPO and IT services operations in India is more costly and cumbersome than outsourcing those activities to local outsourcing companies, according to research by Forrester Research and other analyst firms.

With operations in Mumbai and Chennai, Citi Technology Services provides IT services to Citigroup and its affiliates around the world. It has 1,650 employees trained in Citigroup processes and technologies, servicing Citigroup businesses in over 32 countries.

The transaction is expected to close by March, subject to customary closing conditions and regulatory approvals, Wipro said.

The IDG News Service is a Network World affiliate.