Come June and Genpact becomes the third Indian BPO to get listed in the US. The company plans to raise $600 million from the IPO and will file an application to list its common shares under the symbol "G" on the NYSE. This will be the biggest Indian BPO listing overseas.

WNS and EXL Service are the other two Indian BPOs listed on NYSE and NASDAQ respectively, while ETelecare Global Solutions is the first Filipino BPO to list on NASDAQ.

From a captive outfit, Genpact has transformed itself into a leading third party service provider (WNS was also a captive unit of British Airways) employing more than 28,000 people (as on December 2006) with FY06 revenues reported at $613 million. While the company is positioned very strongly for growth, the key challenges will be managing growth across destinations and reducing its dependence on the single key client GE (Genpact depends on GE for around 74% of its revenues).

Genpact plans to use the proceeds from its IPO towards debt repayment (Genpact has around $230 million of long-term and short-term debts), general corporate and working capital expenses and funding potential acquisitions.

The listing on foreign bourses is attracting large Indian BPO players. Other Indian BPOs exploring the listing route are 24/7 Customer, HCL BPO and Hexaware.

Why the foreign listing?

While a listing in an exchange abroad is an easier way of raising capital, it also provides a comfort level for the investors and clients on the vendor companies.

• Since most of the vendors cater to the US or European market, an international listing serves to build brand via greater visibility and credibility. This provides the vendors with a good marketing presence too.
• Most funding agencies (venture capitalists or private equity firms) are comfortable with international or US listings. The listing signifies higher liquidity, lower perceived risks and better corporate governance norms.
• Increasing investor interests in the fast-growing Indian outsourcing story have made foreign bourses highly attractive for the promoters and private equity players to offload their stake. BPO companies getting listed in these bourses have market capitalization multiple times (3 -5 times) their earnings.
• Impressive investor response to the previous BPO issues has raised the comfort level of the aspiring BPO firms. Both the EXL and WNS stocks are currently trading at premium, with their current P/E ratios hovering at 30 and 40 plus marks respectively.

Going Forward…

While the larger BPOs are racing towards listing on NASDAQ / NYSE, several other vendors are eyeing acquisitions in the US and UK. These acquisitions are primarily to acquire the marketing front-end as well as add to their clientele.

For instance Apollo Health Street, a healthcare BPO acquired a medical billing company in the US to complement its capabilities. Aptara acquired US based Whitmont Legal Technologies, a leading litigation support and eDiscovery services company. Infomedia bought a 100% stake in UK-based publishing BPO Keyword Group.

Either way, the BPO space is likely to witness more action, much to the delight of international investors and funding agencies. But this also marks an opportunity-lost for the general Indian investors and the stock exchanges.

Related Items:

1. Genpact IPO: G for top Gear?
2. Global BPO: threat or extended opportunity?
3. The Captive Vendor Model Shift: Stake Offloading by Financial Services Firm
4. Niche focus BPOs: Burgeoning significance
5. Genpact to join the listed league