India-based BPO pure plays Genpact and EXL Service both performed extremely well in their third quarters ended 30 September, driven by organic growth and recent acquisitions. Smaller of the two, EXL, grew 15% organically (48% headline) to break the $100m per quarter mark, meanwhile Genpact’s headline growth hit 34% to reach $429.6m. Genpact’s recent acquisitions of high growth BFSI player Headstrong (see Genpact takes Headstrong move to grow BFSI business), and of Akritiv were the main drivers behind this, adding we estimate c$55m in new revenue in the quarter. Based on this, we think Genpact still achieved very respectable double digit organic growth.
On the margin front, things are also getting better. In Q3, EXL’s pre-tax operating margins were 12.6% (vs. 12% last year), meanwhile Genpact’s were 16.5%, up from 15.4% last year. Both companies also upped their FY guidance for both revenue and profitability in the light of the improving picture. In Genpact’s case that even took into account a $3.9m reserve to cover a receivable from now bankrupt client MF Global.
Both EXL and Genpact have also continued their acquisition drives to further develop their platform-based BPS credentials. EXL recently acquired P&C insurance BPO player Trumbull Services, providing it with a business process platform called SubroSource as well as proprietary technologies and methodologies for the sector. Genpact, meanwhile, acquired High Performance Partners (HPP) in the mortgage BPO space, and with it a loan origination software platform called Quantum, which it is going to use to support a mortgage Business Process-as-a-Service (BPaaS) offering.
Not to be outdone, we met up with Vinay Firake, Wipro’s GM and head of BPO in Europe yesterday. He claims that Wipro generates BPO margins double that of their competitors. Now, Wipro BPO, like many of their direct peer group, does not publish its BPO profitability. Of those that do, in their latest quarters, HCL BPO made an EBIT margin -7.3% (i.e. loss), Infosys BPO a net margin 14.0% (i.e. EBIT margin would almost certainly be higher), and WNS made a net margin of 12% (see here). Not discounting EXL and Genpact, it is difficult to pinpoint exactly where Wipro BPO sits. We do note that Wipro BPO’s revenues in Q2 (to 30th Sept) were $130m, down 1% qoq, and only 4% higher yoy.
There is plenty more to cover on Wipro BPO and its performance and plans among the India-based BPOs, which I will discuss in a research note for our BusinessProcessViews subscribers.