The health of India?s $17-billion business process outsourcing (BPO) sector has deteriorated further. The ailing segment put out dismal financial results in the last quarter, with profits falling up to 50%. The turmoil in its largest markets, a rupee in free fall and poor hedging strategies are adding to woes, apart from a mounting foreign currency convertible bonds (FCCB) crisis in some cases.

Grim numbers have just come in from the biggest BPO players. Firstsource Solutions reported a 39.7% year-on-year decline in profit to R23.1 crore. Outsourcing major WNS also posted a 50% drop in profit to $4.4 million. The Hinduja Group?s outsourcing arm Hinduja Global Solutions has posted a flat growth in profit at R31.07 crore.

3i Infotech reported a consolidated net loss of R293.81 crore for the March quarter compared with a net profit of R63.11 crore in the same period a year ago. Its revenue decreased by 45.71% to R354 crore for the quarter from R652 crore in the year-ago period.

Even Wipro, the $7-billion IT biggie, has stated that overall business was dragged down by its BPO operations during the quarter. The Hewlett-Packard-owned MphasiS, which is yet to report results for the March quarter, had registered a 24.65% year-on-year drop in net profit in the previous quarter.

?BPO firms are still struggling for a transition. The voice-based BPO is history but now, it is a challenge to go from the transaction-based deals to platform-based deals, since the largest markets of the US, and even Europe to an extent, are not in a position to push volumes to the necessary levels,? says Sanjeev Hota, assistant vice-president, research (IT) at brokerage firm Sharekhan.

The effects of the currency situation on outsourcing firms was quantified last week by Firstsource Solutions when its management announced that for every Re 1 fall against the dollar, the company’s FCCB loan burden would shoot up by $3 million. The company has outstanding convertible bonds of $237 million.

?Firms like 3i Infotech and Firstsource, are reeling under huge debts and forex losses thanks to a volatile currency situation,? says Jagannadham Thunuguntla, strategist and head of research, SMC Global Securities. Only a few firms like Genpact and EXL have managed to meet market expectations.

In the past two months, the rupee has fallen from Rs 50.70 to the dollar to a historic low of Rs 56.40, increasing the rupee repayment burden for firms that have issued dollar convertible bonds. Compared with the last quarter, the rupee has depreciated by over 10%, and experts say it may even breach the 58 mark in the near future. Firms with outstanding FCCBs will have to restate their loans at the increased rate at the end of the current quarter with higher provisions, which will impact their profit and loss statements.

The BPO sector’s poor performance is reflected even in its manpower figures. As business processes move out ? some due to near-shoring and some due to a failure to renew old businesses ? the once-popular industry is witnessing a slowdown in hiring.

?The BPO industry today is no more a mass recruiter. Gone are the days when BPOs used to hire 3,000-4,000 people. There has been reduced tempo in fresh hiring. Companies are also not replacing and are cautious in adding people,? says E Balaji, managing director and CEO of HR services firm Randstad India.

For Firstsource, as of March 2012, employee strength was down to 30,086 versus 30,121 in the December quarter. In the last quarter IT major Wipro’s headcount reduced by 814 when its BPO unit restructured business on account of a process moving offshore. The said process had a total employee count of 2,200.

According to the Monster Employment Index released recently, the BPO/ITes (information technology-enabled services) sector was among the lowest growth industries, with the BPO/ITes index declining by 4% in April 2012 compared to last year. Low to mid-single-digit hikes and rollbacks of the lavish perks BPO employees are used to have not improved the mood in the sector.

Says Ronesh Puri, managing director of HR firm Executive Access, ?In its glory days, this sector was spoilt for choice. BPO employees are used to extra benefits, perks and foreign travels, which have drastically come down. Companies are now devising desperate measures to cut costs. It is going to be a challenging time for HR in the BPO industry.?