Business Process Outsourcing (BPOs) listed on Indian bourses are performing better than those listed on international bourses. Nasdaq-listed ExlService Holdings and NYSE-listed Genpact and WNS have operating margins in the range of 9-12%.

While BPOs listed on the BSE such as Firstsource, Wipro BPO, HCL BPO (as part of subsidiaries of IT companies) show double the margins — in the range of 22-25%. Genpact, the country’s largest BPO firm, reported an operating margin of 11.8% in the quarter ended September 2007, compared to EXL’s 10% and WNS’ 6%. Firstsource and HCL BPO’s margins stand in the range of 24-26%, almost double of their foreign counterparts for the same quarter.

While Firstsource benefits from a chunk of domestic business (therefore less rupee impact), HCL and Wipro BPO benefit due to integrated business and relationships from parent companies. Operating margin, calculated by dividing EBIT (earnings before interest and tax) by revenues, is a better comparison of profitability as taxes and interest rates differ over countries. Some of these BPOs like EXL, Genpact and WNS are headquartered overseas, while Firstsource, HCL BPO and Wipro BPO are India headquartered. BPOs like EXL and WNS witnessed a decline in operating margins due to the impact of the fringe benefit tax (FBT) and rupee appreciation. WNS reported a net loss of $10.5 million in the July-September quarter, impacted by loss of a major client, First Magnus, that went bankrupt.

WNS chief executive Neeraj Bhargava said: “We continue to minimize the impact due to the loss of First Magnus.” Nasdaq-listed EXL saw its operating margins improve sequentially from 6 to 10% in the July-September quarter but on a year-on-year basis, it dipped from 11.6% in the same period last year. “Apart from rupee appreciation and FBT, a statutory bonus impacted our margins this quarter,” said Rohit Kapoor, EXL president and COO. Its net margins, however, score better than its US-listed peers at 13.3%, compared to Genpact’s 7.5% and WNS’ 9.1% in the quarter ended September 2007. Firstsource scores over WNS, Genpact and EXL by having the highest net profit margin of 15.4%. Firstsource’s EBIDTA margins stand at 24.9% in the quarter ended September 2007 compared to 23.90% in the previous quarter this year.

Firstsource’s CEO Ananda Mukerji said: “The hype about rupee is overdone. We have a natural hedge by having revenues from three currencies — rupee, dollar and pound. Nevertheless, a 1% increase in rupee reduces our margins by 10 basis points. But we have been able to outperform by increasing efficiency.” Other India-listed BPOs like Wipro BPO have been able to maintain margins. “Our EBIDTA margins stand at 22.50% in the July-September quarter, a bit low than 22.90% in the previous quarter. We have been able to maintain margins despite a weakening dollar due to better efficiency,” says Manish Duggal, CFO, Wipro BPO. HCL BPOs’ gross margins increased from 25.7% in June quarter to 26% in the September quarter, despite an increase in rupee against the dollar and impact of FBT. Net profit margins of Wipro BPO and HCL BPO were not known as these are subsidiaries of parent companies - Wipro and HCL Technologies. Revenue wise, however, Genpact is still the big brother with $214.6 million followed by WNS ($114.6 million) and Firstsource ($74.1 million). Source: ET