Kimberly Clark (NYSE: KMB), Novartis (NYSE:NVS), Glaxosmithkline  (NYSE: GSK) and Delphi have been the latest additions to its client list in 2007; and Genpact, India’s largest BPO vendor, has big plans this year.

Genpact will provide finance and accounting (F&A) services to Glaxosmithkline and Delphi, and also provide procurement assistance services besides F&A to Kimberly Clark and Novartis. Although financial details of the deals are not known, the deals are expected to be significant and range from 2 years to more than 7 years. Delphi, the newest company to outsourcing, will transfer close to 650 global positions to Genpact for the next 88 months, and expects to save $150 million. Finance and accounting (or F&A) is Genpact’s largest service offering, with more than 7000 employees in this area.

Aggressive plans for 2007
Genpact started out as the captive unit of General Electric (GE) and was called GE Capital International Services (GECIS). The company became a third party service provider in 2004 when GE sold 60 percent stake to private equity firms Oak Hill Capital Partners and General Atlantic, and was renamed Genpact.

With its strong lineage and six-sigma orientation, the company has become the largest BPO vendor in India in terms of revenue. Revenues in FY2006 were $493 million, while FY2007 revenues are expected to reach $625 million via organic growth. Acquisitions are expected to take this figure higher. In July 2006, Genpact acquired MoneyLine Lending Services, a US-based provider of outsourced mortgage services to small and med-sized banks in the US. In March 2007, Genpact acquired ICE Enterprise Solutions, a SAP service company in Netherlands to add to its technological capabilities.

The company has also been on an expansion spree since 2004, adding locations and capacities around the world. Genpact is a 27,000 strong organization, with close to a third of the employees located in centers outside India. It operates from ten sites in India, four in Europe, four in the Americas and three other centers in Asia besides India. Its proposed special economic zone (SEZ) near Hyderabad in India, on an area of about 50 acres plans to house another 5,000 employees.

The company intends to touch $1 billion in revenues in 2007-08. It is also planning a stock listing in the US during 2007 through an initial public offer, which is expected to raise around $600 million and value the company at close to $4 billion.

Challenges ahead
GE continues to remain a large client, and contributes bulk of the revenues of Genpact. In 2006-07, GE’s contribution is around 75 percent, but this is expected to come down to 5-60 percent in the current fiscal. While the company has already added a few global names to its client list in 2007, the need to diversify revenues is bound to impose a cost on margins in the medium term.

The primary threat however comes from the increasingly global competitive landscape. WNS and EXL Service have listed on the NYSE and NASDAQ respectively last year. Both organizations are also targeting to integrate BPO and KPO offerings to strengthen the service line. EXL Service acquired Inductis, an analytics company in 2006, while WNS has acquired Marketics, another KPO, in 2007. Genpact, on the other hand, has started to build an in-house analytics practice, and is also looking at introducing new service lines such as engineering services and supply chain.

Others like EDS (which bought Mphasis in India), IBM Daksh, Accenture (which is expanding aggressively in India), Wipro BPO and several others are following the same set of policies - adding employees, introducing new service lines, acquiring niche companies and expanding into other locations around the world. There are now several players with significant scale, and competition for the top spot is likely to be intense.

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