Subscribe to our Feed

Genpact, Wipro, HCL Seeking Stronger Presence In Niche Verticals

Posted on Friday, May 20th 2011

Everest Group’s Market Vista report for Q1 2011 estimates the first quarter global transaction volumes for outsourcing contracts at an annual contract value of $3 billion. The number of contracts signed during the year by the business process outsourcing (BPO) segment grew 25% sequentially driven by significant growth across all sectors including the BFSI, manufacturing, distribution and retail and healthcare verticals. However, IT outsourcing (ITO) transactions fell 17% over the previous quarter. Overall outsourcing transactions fell 5% over the quarter but grew 14% over the year.

Genpact’s Financials
Genpact (NYSE:G), a leading BPO player, saw Q1 revenues grow 15% over the year to $330.6 million, exceeding the market’s expectations of $325.6 million. EPS of $0.18 was also ahead of the Street’s target of $0.16. During the quarter, Genpact’s revenues from clients other than GE grew 23.6% over the year and contributed 66% of its overall revenues.

The company ended the quarter with more than 45,500 employees compared with 41,300 employees reported a year ago. Genpact’s attrition rate for the quarter stood at 29%, compared with 23% last year and 31% a quarter ago.

Genpact Expands Through Acquisitions
Recently Genpact announced a $550 million acquisition of Headstrong Corporation, a leading provider of information technology outsourcing and consulting services which focuses on capital markets and the health care segment. Headstrong was founded in 1981 and has delivery centers in India and Manila. Its revenues last year were estimated to be $217 million. The company boasts of having nine of the world’s top 10 investment banks as clients and will help to strengthen Genpact’s presence in this vertical. Headstrong also has strong onsite presence and claims that 66% of its revenues last year came from resources stationed onsite.

Genpact also acquired Akritiv Technologies, a California-based provider of cloud-based order-to-cash (OTC) technology solutions. Through the acquisition, Genpact will own Akritiv Technologies’ proprietary technology platform and be able to deliver software as a service (SaaS) solutions for OTC functions such as credit and accounts receivable management. Further, Genpact will be able to provide end-to-end solutions to customers for receiving and processing customer sales.

Genpact’s stock is trading at $16.75 with a market capitalization of $3.7 billion. It touched a 52-week high of $18.71 in October of last year.

Wipro’s Financials
The third-largest Indian IT player, Wipro (NYSE:WIT), announced its final quarter results for the year. Q4 IT services revenues of $1.4 billion grew 20% over the year. EBIT for the segment grew 9% over the year to $0.31 billion. Wipro ended the year with IT revenues growing 19% over the year to 5.22 billion and EBIT increasing 12% over the year to $1.20 billion. For the current quarter, the company projects IT services revenues to range from $1.39 billion-$1.42 billion.

Wipro’s Rising Costs
Like its peers, Wipro is facing rising cost pressures. India’s labor cost arbitrage continues to wane as outsourcing companies shell out double-digit annual increments. During the year, Wipro plans to increase salaries for its India-based employees by 12%-15% over the year. Salaries for onsite resources are expected to grow by 3%-4% over the year. These growth rates are similar to those announced by other Indian players.

Wipro’s Acquisitions
Wipro announced the acquisition of the global oil and gas information technology business unit of SAIC Inc. to bolster its energy segment. SAIC’s assets include significant domain capabilities in digital oil field, petro-technical data management, and petroleum application services. Through the acquisition, Wipro will not only be able to gain stronger presence in the U.S. market, it will also be able to address the niche $19 billion market in the country for upstream information technology solutions.

The stock is trading at $14.05 with a market cap of $34.48 billion after having touched a 52-week high of $16.81 in October of last year.

HCL’s Financials
Where most Indian IT players have been worried about the declining dollar and increasing costs, HCL Technologies Limited (NSE:HCLTECH) seemed confident about what the future holds based on its quarterly performance dicsussion. For Q3, the fourth-largest player in the country saw revenues grow 32% over the year to $915 million with earnings increasing 34% over the year to $103 million.

HCL’s Acquisitions
HCL announced the acquisition of certain software assets from Citibank International Plc. The acquired assets were being used to provide securities and fund services such as securities lending, clearing and settlement, securities market interfaces, securities front end service and tax and claims management to capital market players. The $26 million acquisition will help HCL strengthen its position in the financial services vertical. As part of the deal, HCL will get assured revenue of $135 million spread over 10 years to assist Citi in enhancing and supporting Citi platforms.

HCL’s International Expansion
Additionally, HCL recently opened a delivery center in Mexico as part of its geographic growth plans. It also expanded its presence in Singapore and opened a Global Enterprise Mobility Lab in the city. The lab will leverage HCL’s product engineering capabilities and will cross-reference its experience in microverticals to deliver superior consumer experience–oriented IPs, applications and solutions.

The stock is trading at Rs 507 (~$11.29) after having touched a 52-week high of Rs 528.00 (~$11.75) in April 2010.

Hacker News
() Comments

Featured Videos