Warburg Pincus, the largest shareholder in offshore BPO pure play WNS, is seeking ‘an orderly exit’ from the company, according to WNS’ CEO Keshav Murugesh on its Q2 conference call, damping down news reports that it was planning a quick sale of the business. Warburg owns 21.4m shares or c48% of WNS’ stock, and it will look to sell these ‘in one or more offerings’, but only once WNS’ planned $50m capital raising exercise is given the go-ahead. Last week, WNS filed a shelf registration with the US Securities and Exchange (SEC) requesting to sell up to $50m worth of ordinary shares, although this hasn’t yet become effective.
Meanwhile, WNS’ Q2 numbers for the three months to 30 September show its recent progress continuing (see WNS delivers solid Q1). Revenue less repair payments, which is the barometer to measure WNS’ underlying business, grew 7.6% to $100.2m, and was up 2.4% sequentially. This y-o-y growth was apparently across most of WNS’ activities, and helped by a stronger British pound. However the adjusted net margin (before amortization and share-based compensation) declined 3.6 points to 12% (although up from 10.2% in Q1), due primarily to wage increases during the quarter.
The UK, which is WNS’ largest market, grew 7% to $53.5m (although up just 3% in constant currency), helped by growth in the insurance sector, notably a pilot project for WNS’ new home insurance claims platform Home Flow, which is being delivered from WNS’ UK service centre in Mansfield. Murugesh sees platforms as key to helping WNS win new accounts (he pointed to a growing pipeline as evidence of this) expand existing relationships, and rapidly improve productivity and margins. Certainly moving clients on to a standard business process platform should greatly increase the automation of certain activities and lower the cost of delivery for the provider.
Warburg’s 'orderly exit' is of course the ‘elephant in the room’ for WNS. Although a quick sale now seems unlikely, questions over WNS’ future ownership are now bound to continue. This will all add to uncertainty in the near term.