‘Organic growth is the way for us’

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: The rupee appreciation against the dollar is reason enough to depreciate the spirits of anyone connected with the Indian BPO industry. For Rohit Kapoor, co-founder and chief operating officer of New York-based EXL Service, it is a big worry. However, Kapoor is working on a contingency plan. In an interview with Surabhi Agarwal, the IIT/IIM alumnus shares his current fears and future plans. Excerpts:

How much has the rupee appreciation hurt you?

It certainly impacts all our costs because we have close to 65% of our costs in rupees. Obviously, it becomes a lot more expensive. But, apart from the dollar-rupee movement, how sterling pound and other currencies move against the US dollar and the rupee is also important to us. Almost 50% of our revenues are denominated in pound sterling and the balance 50% is in US dollars. This year, the rupee has appreciated close to 10% against the dollar but pound hasn’t appreciated that much. So we are somewhat protected. The other element is that some of our contracts are on a currency neutral basis.

How should one deal with the rupee appreciation?

The way we think about dealing with it is by focussing on three or four key measures. First, we will change our customer contracts in such a manner that we protect ourselves from the currency appreciation and pass on some of these foreign exchange adverse rate movements to our customers through a price increase.

Secondly, we diversify our cost structure. For example, we are looking at expanding into the Philippines, Eastern Europe and getting into other regions so that it is not only the rupee appreciation against the dollar, but also the movement of the European currency against the dollar. The third way for us is to hedge the foreign exchange risk and we are looking at longer-term foreign exchange hedges, which are being put into place.

Currently, we take a hedge anywhere between six to 12 months of our revenues, but we are looking at increasing that from 12- 20 months. That will provide us with some further protection. The fourth way is to get into business lines that have less of a currency exposure. Doing some domestic BPO work will not involve any currency exposure.

Are you entering the domestic BPO market?