Genpact net dips 6.2% on forex, Europe

Genpact, India’s largest business process outsourcing (BPO) company, said its second quarter net profit declined by over 6% as foreign exchange volatility, pressures in the European market and certain investments impacted its margins.

But the company is looking to meet its annual targets.
Revenues in the reporting quarter stood at $307.6 million, up 12.7% from $272.9 million posted in the April-June quarter of 2009 and up 6.7% from the first quarter of 2010. The revenue rise was driven by business process management growth of 21.1% from global clients and 8.7% from GE.

Net profit was $27.8 million, down 6.2% from $29.7 million in the second quarter of 2009. However, the company is expecting the margins to improve in the last 2 quarters.

“Our investments for growth, such as for business development, Smart Enterprise Processes (SEPs) and our India business, as well as the ramping up of new engagements and some foreign exchange volatility, are reflected in our margins. The costs we are bearing now are a positive reflection of our future growth,” Genpact’s chief executive Pramod Bhasin said.

Genpact reaffirmed its outlook and continues to expect revenue growth in 2010 of 14-17% and adjusted income from operations margin of 17-18%. It is on track to hire 10,000 employees in 2010.

“We expect margins to improve in the second half of the year as more transition revenues get converted to production. Our pipeline remains healthy…for new deals, the conversion rate has not started accelerating according to our expectations…but this would impact 2011 and not 2010,” Bhasin said in an analyst call.

Genpact has about $351.8 million in cash and cash equivalents and short-term investments and the company is looking at some small acquisitions. The employee attrition rate for the 6 months ended June 30, measured from day one of employment was 26%, up from 22% for the same period in 2009.            

On acquisitions, Bhasin said, “There is some interesting stuff available in the BFSI, healthcare, mortgage and insurance sectors. We are more focused in small pieces and we are hopeful to close some of them in this year or early next year.”