India?s largest business process outsourcing (BPO) company Genpact exited the fourth quarter of 2010 with a 33% rise in net income and 15% increase in revenues. However, the company expects a 10-13% growth in 2011 revenues which is similar to that of 2010. In an interview with FE?s Kirtika Suneja, Genpact?s COO N V Tyagarajan explained that growth is taking longer to come back.
What was the reason behind the increase in revenue and net income?
Global clients drove growth in the quarter with global client business process management (BPM) revenues increasing 23% in the fourth quarter and 19% for the full year. We had 44 clients contributing $5 million or more of annual revenues in 2010, up from 35 in 2009. Also, a big piece of the growth came from smart decision services related to re-engineering and risk management.
So, why is the revenue guidance not up to the Street?s expectations and a little disappointing?
In BPO, the cycle relationships are longer and so is the payback. We have long term annuity projects and hence, it takes longer for the growth to come back. The decisions in BPO are less mature and requires efforts from both sides ? clients and vendors. So, even if the discretionary expenditure comes back, clients are not adding that cost but instead outsourcing it.
How will this be reflected in the deals that are coming up?
The deals are small pieced with shorter paybacks. In these smaller deals, the clients get the full benefits in a period of six months unlike large deals when the benefits accrue in more than a year. Hence, these deals could be $1 million for a period of one year.
What about large deals and how healthy does the deal pipeline look?
Large deals for us are between $25-50 million of total contract value but now we are seeing more of small deals coming in. The deal pipeline is 15% higher than that of the last quarter and is nicely spread out. However, it should move fast and is not moving as fast as we would like it to.
How is the India to India business shaping?
It is growing at an outstanding pace and the range of customers is the same as global though telecom is an extra vertical. The deal sizes in this are almost half the average deal of a couple of millions in the developed economies. The business is less than 5% of out total revenues.
With almost $481 million of cash, what are the company?s inorganic growth plans?
The last two acquisitions we did were very well and we have identified a number of areas for which acquisitions have been lined up. There are a range of capabilities that we would like to add. A lot of them would be in the $50 million revenue range while a few will be in $200-300 million range but all around capabilities.
