BPO companies show the sector has been quite resilient

The latest quarterly results of the BPO companies show the sector has been quite resilient in the face of multiple challenges: strengthening rupee, subprime problems and a possible demand slowdown in the US. However, high attrition rates, in excess of 50% in some cases, continue to be a serious concern for the industry. The listed BPOs that are delivering services primarily from India — Genpact, WNS, EXL and Firstsource — have notched up good sequential and year-on-year growth in revenue.

The bottom line, too, has grown well except in the case of WNS, which has taken a one-time hit due to its client mortgage lender First Magnus Financial Corporation going bankrupt. The BPO companies have managed to contain the currency risks largely through hedging. Genpact, for instance, is substantially hedged for its rupee costs for 2008 and 2009.

Geographical diversification has helped as well. Firstsource now has a better revenue split with the share of the US and UK coming down to 45% and 42% respectively, and that of India going up sharply to 13.2%. Most companies in the sector have even managed to improve operating margins.