Top three Indian Business news this week

By Vipin Agnihotri

After giving you Top 3 Indian Business Personalities in the News, now it’s time to give you top three Indian business news this week.

Indian BPO industry reeling under US subprime crisis

In my opinion, the tremors caused by the US subprime crisis have hit Indian shores, buffeting sections of the Indian BPO industry. It is worth mentioning in this regard that WNS, a big player in this space, recently announced that one of its clients, First Magnus, a US mortgage firm, had filed for Chapter 11 (bankruptcy protection).

Another BPO player, iGate Global Solutions, which derives 10 per cent of its revenues from GreenPoint mortgage, has also declared itself bankrupt last month. IGate Global Solutions has redeployed 100 employees to other services.

Scooter market in India seeing a revival

After going through a terminal decline, with sales falling to under 600,000 units in 2000-01, the Indian scooter market is seeing a revival, primarily thanks to one company, Honda Motorcycle and Scooter India. In my opinion, leading the charge is the Honda Activa, it’s best selling model.

Point to be noted here is that in the first four months of the current financial year, domestic sales of scooters and scooterettes have increased 17.15 per cent to 344,000 units.

According to sources, Honda Motorcycle and Scooter India is looking to gradually increase capacity to 800,000 units per annum for scooters as well as increase its dealer network from 400 to 600 within three years.

CCI to get more power

It has come into the notice of The India Street that the yet to be functional Competition Commission of India (CCI) is set to get more power. It is worth pointing that the new Competition (Amendment) Bill, 2007, awaiting the Parliament’s nod, makes it mandatory for companies involved in mergers and acquisitions to inform the CCI within month if the combination results in assets of more than Rs 1,000 crore or a turnover of Rs 3,000 crore or higher.

The best part about this Bill is that it proposes a two-way coordination between the number of statutory regulators and the CCI. The bill, if passed, will make CCI a market regulator for preventing anti-competitive practices and will give it statutory powers with the main objective of substituting the Monopolies and Restrictive Trade Practices Commission.

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Genpact IPO Good Bet Long Term but May have a Shaky Start

Genpact IPO – The India Street Analysis

Introduction:

Genpact Limited, a business process outsourcing company (BPO) based in India plans to raise about USD 700 million through its IPO (initial public offering) at the New York Stock Exchange. The company had filed a registration statement with the Securities and Exchange Commission (similar to SEBI) in US on May 11 this year. The company has proposed a price band of USD 16 – 18 and the issue size is 35.29 million shares. It has requested for the ticker ‘G’ previously used by Gillette a few years ago before it was taken over by Proctor & Gamble. Morgan Stanley, Citi and JPMorgan are the co-lead underwriters.

“Business Process Outsourcing” means relocating entire business functions to either self-owned or third party service providers, typically in low cost locations like India. Two Indian BPO’s have been listed in US so far; WNS Holdings (NYSE) and EXL Service (NASDAQ).

Genpact is registered in the Caribbean island of Bermuda and has operations in China, Hungary, India, Mexico, The Netherlands, Philippines, Romania, Spain, United Kingdom and United States.

The company was formerly known as GE Capital International Services. It was founded in 1997 at Gurgaon, India. General Atlantic and Oak Hill Capital Partners acquired a 62.63% stake in Genpact from General Electric in 2005.

Genpact has 5 sites in India at Gurgaon, Hyderabad, Bengaluru, Jaipur and Kolkata. As of 2007, it has an employee strength of 30,000 globally.

Business Overview:

Genpact serves the following industries: Banking and Finance, Insurance, Manufacturing, Transportation and Automotive.

Banking and Finance:

Genpact has more than 650 associates and 3,500 full time employees serving businesses across USA, Europe, Australia and Asia from its global locations in India, China, USA, Mexico and Hungary. A range of customer end financial products including private label credit cards, dual cards (PLCC with credit card functionality), retail finance, auto finance, personal loans and mortgage are supported. The services include finance and accounting, sales / marketing analytics, customer services and financial services collections / operations.

Insurance:

More than 1,800 employees serve the insurance operations. Life insurance, health insurance, annuities and pensions, mortage insurance, liability insurance and property / casualty insurance are the key areas covered. These services fall into 4 categories viz. insurance policy set up and maintenance, agent support, billing / collections, risk assessment / marketing and IT services.

Manufacturing:

The company serves high end manufacturing industries like power systems, transportation etc. Services include online support, payment collections, procurement assistance and execution, vendor co-ordination, production planning / control and sales / marketing.

Transportation:

Genpact provides customer relationship and trade support, business operations support, finance and accounting, employee services and marketing support to global airlines, travel agencies, logistics service providers, car rental firms etc.

Automotive:

Genpact's service solutions comprise of supporting clients across component and sourcing execution, manufacturing forecasting and planning, financing, after sales and dealer support. It helps its clients gain control over their supply chain costs by providing transactional procurement functions remotely, while also providing inventory management planning through analytical techniques unique to the offshore industry.

Genpact has direct fibre optic connectivity to US, Europe and Australia, thus enabling redundancy for links and equipment. It has more than 500 servers and 10,000 desktops to perform the operations.

The proceeds of the IPO is proposed to be used for repayment of debts outstanding under credit facilities and for working capital and general corporate purposes, including potential acquisitions.

Financial performance in the past:

Description	2004	2005	2006
Income	165.50	187.90	252.20
Expenditure	83.60	171.00	209.00
Net income	81.90	16.90	43.20
Profit before tax	90.20	10.70	33.90
Income tax	6.70	-6.40	-5.90
Net profit	83.40	17.10	39.80

1. All figures are in million USD.

2. The financial year is considered as January – December.

3. It is to be noted that the general, selling and administrative expenses for 2004, 2005 and 2006 were 76.3, 117.5, 159.2 million USD, the main reason for drop in net profits.

Indian companies listed at NYSE:

11 Indian companies are listed at NYSE, out of which 9 are constituents of Nifty. Patni computer systems is a constituent of Nifty Junior index. The full list is as follows: Dr.Reddy’s Laboratories, HDFC Bank, ICICI Bank, MTNL, Patni Computer Systems, Satyam Computer Services, Sterlite Industries, Tata Motors, VSNL, Wipro and WNS Holdings.

WNS Holdings got listed on July 26, 2006. EXL Service got listed at NASDAQ on October 20, 2006. Let us analyze the daily charts of these two stocks, since these are Indian BPO companies listed in US.

We can see the “double top” formation in both the charts between mid November 2006 and mid February 2007. This is a bearish sign. As a result, both the stocks had almost fallen back to their opening price on listing, which is a key support level. In both cases watch the “upward gap” or the “rising window” nearly a month after listing; a “downward gap” or “falling window” just after the first peak in case of EXLS and after the second peak in case of WNS. These indicate nearly identical demand supply gap scenario for both the stocks. EXLS is still bearish; WNS has just begun an upmove and currently in second wave.

EXL Service

http://groups.google.com/group/theindiastreet/web/EXLS.JPG

WNS Holdings

http://groups.google.com/group/theindiastreet/web/WNS.JPG

Charts courtesy: Yahoo! Finance

Conclusion:

As of now, the IPO details are being scrutinized by the SEC. Given the technical scenario of both EXLS and WNS, Genpact may be a shaky starter at NYSE. Another factor to be considered is the exchange rate. An appreciating Indian Rupee, for example, may fetch lower revenues in Indian currency; but the local expenditures, overheads and other expenses may have to be met in local currency. This gives a distinct disadvantage. However, going by the fundamentals, business model, infrastructure, personnel and support services, Genpact is likely to perform well in the long term.

SUNDARAMURTHY VADIVELU

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Destination India: Perfect for FDI

By Dhruva Jyoti Chowdhury

Kolkata, India: If you are an Investor in India, not just the mushrooming IT, companies InfoTech, healthcare services telecom, BPO or the real estate, you can put your hard earned money on almost everything to get better gains and good returns. Recently, a study conducted by the University of Tennessee, School of Information Services, USA, A more definite edge for the Indian techie lies in the conference room has been confirmed. Indian workers tend to have shorter meetings with fewer people than their US counterparts, says a study. The average US tech professional meeting lasted 55 minutes, compared to 47 minutes in India. More telling, and the real time-waster, was that US meetings averaged eight people compared to five in India. “Anecdotally, it seemed Indians were more focused. US firms tend to try involving everyone in the hope this would spur an innovative thought,” said Assistant Professor Suzie Allard associated with the study. Not only that, even the intra-office communication also showed slight differences. US workers were much more likely to use emails and less likely to communicate verbally. Allard said this difference needed more investigation. US researchers did note how many Western-educated Indians spoke of returning home or, if their children were studying overseas, their offspring indicating an intention to return because the “lifestyle tradeoff” was increasingly tilted in favour of India. The study also suggests that the Indian workers are trained to sleep only on national holidays but US workers spend half their day in meetings and are more likely to take work home. The study covered the work practices of over 100 engineers and tech professionals in six firms in India and the US that dealt in InfoTech, healthcare services and telecom sectors. The study, overseen by Professor Carol Tenopir, focused on innovators in cutting-edge fields. US workers were more than twice as likely to be doing something else during such meetings – reading emails, surfing the net. Another was that US workers often complained they needed to take their work home. “Indian workers rarely said anything about that. They seemed to get a lot more done at office,” said Allard. “US workers seemed to spend a lot of time doing other things and find it hard to get continuous work time.” Indian meetings tend to be lead by one individual. “Everyone got to speak, but there was a big leader culture,” said a researcher. “There was more variety in US meetings with leadership often being diffused across several people.” Indian workers also used information resources in their office more than their US counterparts. “Indian engineers were more likely to talk about using such resources than Americans,” says Allard. She suspects this is a function of corporate culture, with Indian firms more interested in training workers on how to use such resources.