Offshore BPO pure play Exl Service has brought down its guidance for FY13 due to a sharp depreciation in the Indian rupee (which fell 10% against the US Dollar in Q2) and slower project spending and business ramp ups in the first half.
FY13 revenue guidance has now been brought down to between $475m and $483m (of which $6m is due to the rupee depreciation), and adjusted diluted EPS to between $1.71 and $1.79 (vs. $1.77 to $1.85 previously). FY13 expectations were previously between $495m and $505m.
This downgrade follows a slowing growth path for Exl in recent quarters. For Q2 ended 30 June, revenue was up 7.4% to $116m, although flat q-o-q. This is against 11% growth in Q1. Exl’s operating margin also fell 220 basis points to 11.1%, albeit up from 10.4% in the previous quarter.
Headline growth was driven by outsourcing, which was up 10%. However, transformation services declined 2%, due to delays in project-based spending, particularly in process reengineering consulting and finance transformation. Nonetheless, Decision Analytics (business process analytics) division grew 5% q-o-q, thanks to new clients in healthcare and growth in banking and financial services relationships. Exl expects the transformation business to ramp up in the second half, coupled with strong growth in its operational management and its platform businesses.
Exl has been losing out in the growth stakes to much larger rival Genpact in recent quarters (see Genpact Q1 growth tops smaller rival Exl).Genpact reports its Q2 on 6 August. It will be interesting to see how its performance compares.