Jack Welch‘s visit to India almost two decades ago c. 1989, resulted in the formation of GE Capital International Services (GECIS) – a business process services operation of the global conglomerate General Electric (GE). With this, the then CEO of GE, Welch, capitalised on the huge potential of the Indian intellectual pool and the cost advantage the country had to offer. The captive outsourcing hub, over time, provided services to a number of GE’s global financial-services and manufacturing businesses. However, nearly eight years after its inception, in 2004, GE in a strategic move divested 60 percent of its share in GECIS to private equity investors General Atlantic and Oak Hill Capital. Moving out of the parent company’s shadow, in 2005, GECIS was renamed to Genpact Limited and later got listed on the NYSE in 2007. Since the change in ownership, the independent company under the leadership of Pramod Bhasin mapped out a strategy of winning external clients to foster its growth in the dynamic Indian ITES-BPO sector.
Genpact’s revenue has grown at a CAGR of nearly 21 percent; from USD 491 million in 2005 to a whopping USD 1.04 billion in 2008. The company’s growth juggernaut has continued in the current financial year as well (Jan – Dec 2009). On 5th May, 2009, Genpact declared its first quarter results (Jan – Mar 2009); the revenue for the quarter increased by 13 percent year-on-year to USD 265.8 million from USD 234.6 million and net income grew by 52 percent to USD 30 million from USD 19.7 million in the corresponding previous year quarter. For the quarter, the company earned 83 percent of its revenue from BPO services and the remaining – 17 percent from Information Technology Services (ITS). Genpact has given a guidance of an annual revenue growth of almost 10-15 percent in the current financial year; this is in contrast to the subdued guidance provided by domestic IT companies such as Infosys Technologies, TCS etc.
IQ Analysts have attempted to unearth the reason for the company’s optimism and success. Based on the data available on Genpact’s website, IQ Analysts have concluded that one of the reasons for the firm’s growth train taking a fast-track has been the divestment of its parent company GE which allowed it to capture external clients in the burgeoning Indian ITES-BPO sector. Besides this, a mention of Pramod Bhasin, President & CEO Genpact is necessary. Bhasin has played a pivotal role in the company’s independent journey. Some of his strategies, such as global expansion and implementation of innovative hiring policies (eg: hiring above 50s for BPOs) have fostered the company’s growth.
Since its “independence”, the company’s success has been reflected in an annual comparison of the previous three years (Refer Table 1). The number of clients has jumped from seven in FY06 to 29 in FY08. The inclusion of new clients has boosted the net revenue from Global Clients - from 26 percent in FY06 to 53 percent in FY08; the book order of the Global Clients has increased from USD 158,282 million in FY06 to USD 550,639 million in FY08.
Comparison of the results on a quarter-on-quarter basis (Q1- Table 2) also revealed that the revenue share from global clients has increased from 31 percent in FY07 to 58 percent in FY09. The book order of global clients has increased from USD 54,310 million in FY07 to USD 153,810 million in FY09. In contrast, GE’s revenue as a percentage of total revenue has reduced from 69 percent (FY07) to less than half of 42 percent (FY09).
Based on the above data, we conclude that GE’s strategy of off-loading its investment was to Genpact’s advantage. The introduction of business from clients other than GE has facilitated its growth from being GE’s captive unit to India’s largest BPO firm.
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