Friday, 6 November 2009

Indian BPOs – a tale of two continents

(By Philip Carnelley, 6 Nov 09, 08:00) BPO trends are very different either side of the "Pond". Major India-based BPO firm and GE spin-off Genpact has reported third-quarter revenues up 5% year on year, to $284m, and adjusted operating income up 9%: adjusted margins are now 19%. Revenues from its #1 client, GE, declined from 46% to 39% of revenues, principally due to disposals by GE, though adjusted for this they still fell 4% as GE continues to drive down costs. Revenue from other clients was up 17% to more than compensate. Genpact, which is seeing “encouraging signs in the market,” predicts growth of 6–9% this year.

Meanwhile its close rival, WNS, reported Q2 revenues up 2% to $153m. But after deducting auto-repair pass-through payments, (its auto-insurance BPO business pays repair bills, then reclaims from its clients) its net revenues were down 8% to $100m.

With its UK heritage, WNS is much more exposed to the British market (57% of total revenue) which is undoubtedly weaker than the US. Its UK business suffered from the falling pound and lower second-year fees from its landmark deal with Aviva Global Services (WNS wins mega 8 year $1b BPO contract with Aviva) which were not compensated for by other business wins. Consequently, UK revenues fell 13% in dollar terms, to $57m. Its European business (just 6% of revenue) also fell, by 19%.

That said, adjusted operating margin remained a healthy 19% as it cut costs. The company is now expecting to beat its earlier profit and revenue estimates for FY10 – it forecast a flat year – saying that bookings and pipelines in the US are “strong.” The UK (& Europe) “could strengthen” in the next two quarters. We discussed back in September whether there would be a bid for Warburg Pincus’s controlling stake in the company (WNS – in play or not?); but WNS commented in its report that it has received no fresh expressions of interest since that time.

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