Loss-making Genworth won’t impact us, says Genpact CEO
SOURCE: EconomicTimes
DATE: Nov 10th, 2008
Mohit Soapbox:
Genpact released their earning last week and was one of the few bright spots in terms of their earnings and re affirmation of their full year guidance. They do have a few troubled clients or clients in transition including Wachovia and Genworth.
The CEO, Pramod Bhasin though seems confident that these two will not have an negative effect on their earnings and for Wachovia are looking for an upside with Wells Fargo. In their earning calls they did see that their IT services has remained flat and has seen cuts in discretionary spending. It will be interesting to see how their relationship with Wells pans out.
Wells has been very conservative, has been the recepient of $ 25 billion dollars of Fed money, management is very mid western conservative organization, have been very employee friendly in mergers and has an under utilized captive in
Hyderabad. These factors don’t make Wells eager to jump on or expand the Genpact offshoring bandwagon but will be interesting to see how Wells handles it when the time is right. There is also the ownership in Genpact by Wachovia which complicates the deal. GE had to take a writedown in their Genpact holding this quarter earnings and the stock has not done too well – though it did rise after the earnings.
Genpact does seem to have toned down their conversation on growth of their re-engineering services using six sigma resources and has seen delays in some of these discretionary projects. Last couple of quarters – Genpact management was very gung ho on these services. Supposedly the services have continued to grow but contribute a small blip for the organization.
ARTICLE
After Wachovia’s purchase by Wells Fargo, BPO major Genpact is now facing another troubled client. Genworth Financial, one of Genpact’s
top 10 clients, has not only reported quarterly losses but is also mulling asset sale and raising capital. Genpact president & CEO Pramod Bhasin said the BPO won’t be impacted by the cash-strapped insurer’s troubles.
Genpact earns revenues worth $24 million every year from Genworth under an agreement that continues through 2009 and guarantees a minimum volume of work to the service provider. The BPO firm has been working with the insurer since 1997 and does finance and accounting, risk advisory and analytics work for it.
“We are very strongly placed with them (Genworth) and our work with them continues. We are, in many respects, mission critical to what they do, as we probably have the greatest level of penetration into Genworth than any other company that we work with,” Mr Bhasin said.
Genpact recently saw Wachovia, with which it had a seven-year, $1-billion outsourcing deal, being bought by leading American bank Wells Fargo. Mr Bhasin said the acquisition won’t impact its deal with Wachovia and would, in fact, represent a larger opportunity to cater to the merged organisation.
“There are no issues at all with Wachovia. We are setting up meetings to engage with (Wells Fargo) management and to have them visit us. There will be a period of time before the really fruitful discussions happen. They have a small captive which does mainly IT work and that is really very small. So, we believe this could represent an opportunity,” he said.
Analysts say outsourcing vendors could find new opportunities as companies get bought and sold, leading to vendor consolidation after the acquisition. “Some outsourcing vendors have seen their clients disappear, but there are opportunities in such a market too. Most companies continue to outsource and I don’t see anything big put on hold,” said sourcing advisory Everest Group principal Nikhil Rajpal.
Genpact, which follows the January-December financial year, on Friday said that its 2008 revenues are likely to be closer to the low end of a previous guidance of a 26-28% revenue growth or closer to $1.03 billion.
The BPO firm said it’s eyeing the Middle East market as well as expansion in new locations such as Morocco. “Middle East is a market where companies are doing well and there is a lot of money. Morocco has great French capabilities, which could help us target Europe,” Mr Bhasin said.
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