US slowdown to hit new deals: Genpact
SOURCE: Business Standard
DATE: May 5th, 2008
Mohit Soapbox:
I found the genpact earnings call this quarter quiet interesting. Pramod is an extremely smart CEO and has gotten Genpact to a great place with close to 34,000 employees over the world ( primarily still in India) with potentially lowering of attrition rate in the firm this quarter and continuing to grow the revenues of the firm. I feel though a lack of clarity in the conference calls. Seems like statements are made and then contradicted. The overall message though seems to be that GE and existing client base still driving genpact’s growth. New business is going slow or going cold as Pramod said in the call. People are putting new investment decisions on hold or scaling back. There are a # of factors which could potentially slow down Genpact’s growth - the macro environment market conditions are not conducive to growth, GE may decide to slow down their offshoring to genpact. An interesting comment made by one of the analyst which Genpact did not want to talk about was that fact that GE business functions no longer have a mandate/requirement to offshore work to genpact. Will be interesting to see the impact of that on genpact’s growth although the guidance from genpact is low to mid single digit growth in GE businesses. Genpact is also in an interesting position as a pure play BPO service provider if it is feeling that an IT offering ( it does offer packaged implementation services) is needed for them to grow the business. There is also an emphasis on re engineering/six sigma type of work although seems like the contribution of that to the revenue stream is still minimal and may continue to be minimal. I wonder if Genpact is better positioned than an Infosys or Wipro to leverage the process consulting work and translate that into offshore work.
|
“We continue to watch the business environment carefully. We are witnessing some postponement of contracts in the IT as well as BPO business. The cycle-time for deals has certainly increased from three to six months to nine to twelve months, especially for firms outsourcing for the first time,” Pramod Bhasin, president and CEO, Genpact, told analysts during a conference call. However, he said the company has witnessed increased and faster ramp-ups from existing clients. “There is a greater demand for re-engineering, faster hiring impact and demand for transition work. In fact, we have seen faster ramp ups from some of the key BFSI clients,” said Bhasin. The company posted robust numbers for the first quarter ended March 31, 2007 with net income nearly 11 times up and revenues up 33 per cent. GE, one of Genpact’s largest clients, might also spend less going forward due to the hit that it has taken because of the recent market turmoil. “GE will cut costs. I think we may see less spending from GE. However, there are other areas within the company that give us enough scope to generate business, such as infrastructure and healthcare.” The company is also planning to increase business from India and China. It already has two clients in India and won a BFSI client in China. Unlike several Indian IT firms, Genpact posted forex gains of $22.4 million. Of this, nearly $15.7 million were linked to the company’s long term hedging strategy. The company will utilise 10 per cent of its revenue for capital expenditure. |
No relate
You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Leave a Reply