India’s largest business process outsourcing (BPO) firm, Genpact Ltd, reported a 19.7% increase in net profit to $48 million in the three months ended 30 September and said it expects to beat its own revenue projection for the full year.
Revenue rose 33.6% to $429.6 million. Growth was aided by its $550-million acquisition of information technology services and consulting firm Headstrong Corp. in May. Growth excluding Headstrong was 13%.
Genpact corporate office in Gurgaon. Photo by Ramesh Pathania/Mint
“The integration of the Headstrong acquisition is going well and cross-sell continues to gain momentum as we won an additional six deals this quarter to go along with the five from last quarter,” said N.V. Tyagarajan, Genpact’s president and chief executive officer. The company added 27 new clients in the quarter.
Genpact is “confident of beating its own guidance” of 23-25% growth in full-year revenue, and 16-16.5% in adjusted income from operations margin, Tyagarajan said. “Our strong performance during the first nine months of the year reflects the diversity and resilience in our business model, and we now expect to finish the full year 2011 ahead of the high end of both of these ranges,” he said.
Genpact also benefited from favourable currency movements but some of the gains were offset by increased investments in sales and marketing in its new delivery centres in Brazil and Dubai, along with a one-time reserve of $3.9 million for its client MS Global Services, which filed for bankruptcy last week.
The company’s net income margin for the quarter dipped to 11.2%, from 12.5% in the same period of 2010, partly due to the one-time reserve and because of a higher tax rate due to the expiry of a 10-year tax holiday.
Tyagarajan said growth came from all “geographies and verticals”. The company’s pipeline of deals is stable with Europe and Asia-Pacific looking up, he said. “Only two segments have been troubled for us for many quarters now—US consumer-facing financial services and Japan.”
Genpact’s smaller rival ExlService Holdings Ltd on Thursday reported a 7.69% jump in profit to $8.4 million for the September quarter on the back of a 47.9% growth in revenue to $100 million.
Genpact had about $409.1 million in cash and cash equivalent as of 30 September, and revenue from clients other than its former parent GE Capital grew 53.6% over last year. Revenue from non-GE global clients now represents 71.3% of Genpact’s total revenue.
At end-September, Genpact had about 53,600 employees, up from about 43,300 a year earlier.
According to IT Consultancy firm Everest Group Research, transaction volumes for the BPO sector fell by 12% and contract value fell by 50% over the three months ended June. On a year-on-year basis, both were flat.
While this was a reflection of the overall macroeconomic situation, the huge drop in the latest quarter was because of an unprecedented activity seen in the preceding three months, said Amneet Singh, vice-president, global sourcing, Everest Group. “Several deals were struck as a result of pent-up demand in the June quarter,” he said.