BackGenpact’s profit increases 6.7%; firm says outlook positive
Genpact’s profit increases 6.7%; firm says outlook positive
PremiumGrowth target: Genpact chief executive N.V. Tyagarajan said the firm’s current outlook for the year is revenue of $1.86-1.90 billion. By Aniruddha Chowdhury/Mint
New Delhi: In line with the commentary of some of India’s top information technology (IT) firms of a recovery in global markets, Genpact Ltd said there was increasing interest from clients in long-term, transformative projects.
Genpact’s first quarter profit rose 6.7% from a year earlier to $38.5 million. Sales rose 31.7% to $435.5 million.
Last month, the Indian IT industry’s bellwether Infosys Ltd shocked the market with gloomy growth estimates as it was witnessing slower decision-making and even “ramp-downs" by clients. But rivals Tata Consultancy Services Ltd and HCL Technologies Ltd dispelled some of those fears with a more positive reading of the business environment.
Tyagarajan said “clients’ decision cycle remains stable and deal flow healthy". The company registered growth across services and geographies.
After it bought IT and consulting firm Headstrong Corp. for $550 million last year, Genpact’s revenue from IT services increased to 24.2% in the quarter ended 31 March, from 12.8% last year. Headstrong’s growth, though, was flat quarter-on-quarter due to a weak capital market industry, it said.
Tyagarajan said a couple of capital market firms—one a client of Headstrong—had gone bankrupt. “This industry is far more focused on discretionary spends unlike the business process outsourcing business, which is far more sticky and annuity-driven."
Erin Hichman, analyst, professional services practice, at Technology Business Research Inc., said the increase in Genpact’s revenue growth contradicted the deceleration at other top firms. “Top-line growth was supported by triple-digit growth (about 148%) in its IT services business segment as integration of Headstrong continues," Hichman said.
Genpact increased its revenue forecast for 2012, factoring in revenue from Accounting Plaza, a provider of enterprise resource planning-based solutions that it bought in April.
“We continue to expect Genpact’s full-year revenue of $1.84-1.88 billion, before the addition of at least $24 million from the Accounting Plaza acquisition. As a result, our current outlook for the year is revenue of $1.86-1.90 billion, and adjusted operating income margin of 16-16.5%," Tyagarajan said.
“We believe Genpact will achieve growth above 15% in 2Q12 (the second quarter) as the firm expands wallet-share through cross-selling to clients of acquired companies and higher-value services portfolio expansion," Hichman said.
Net income margin for the first quarter narrowed by almost two percentage points to 8.9% from a year earlier.
Tyagarajan blamed a higher tax rate due to end of the 10-year tax holiday and lower interest on investments. “But our business is not driven quarter-on-quarter as it is a long-cycle business," he said, adding that the first quarter was historically soft in terms of margins.
Genpact generated $4.9 million of cash from operations in the first quarter, compared with $21.1 million in the same year-ago period. The decline reflects increased working capital requirement and cash tax payments, the company said in a statement.
Genpact had about $412 million in cash, cash equivalents and short-term deposits as of 31 March.
Revenue from global clients (excluding General Electric Co., or GE, its former parent) represented 73.4% of Genpact’s total revenue in the March quarter. The remaining 26.6% came from GE.
As of 31 March, Genpact had about 56,500 employees worldwide. Its attrition rate during the quarter was 23%, measured from Day 1 of employment, down from 29% for the same period in 2011.
surabhi.a@livemint.com
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