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The speed at which the ITeS-BPO sector is maturing in India is really astonishing. The industry (hardly a decade old) has seen many waves of consolidation and cross border mergers. The sector has also seen within its short life an increasing focus on particular domains and moving up the value chain in terms of providing high-end outsourcing services. Unlike its older sibling, the software services sector, the BPO sector didnt get too much time to grow into a mature industry.

Of course, maturity has come with solid growth. According to NASSCOM, the ITES-BPO industry has grown to $10.9 bn in FY 07 from $8.4 bn last year, clocking a healthy 30% growth. The domestic sector also contributed a reasonable 13% to the overall sector revenues. Given the size of the global BPO market (at around $150 bn), the scope of growth for the sector remains buoyant notwithstanding country-level competition from other third and second world countries.

There are only a few publicly listed BPO companies in India at this point of time though, given the number of large BPO companies already in India, this could improve in the medium to long term. The two well-known companies listed on Indian markets include Firstsource and Allsec Technologies.

Allsec Technologies: In The Red
Chennai-based Allsec Technologies, established in 1998, is a pure play, third-party BPO company offering both voice and non-voice services. The company provides BFSI, tech support, quality assurance, and HR processing service.

The company currently has around 3,000 employees on its payroll. The net sales for the quarter ended December 31, 2007 were Rs 23.01 crore as against Rs 27.23 crore for the quarter ended December 31, 2006, recording a marginal negative growth of 15%.

Net losses after taxes stood at Rs 6.76 crore as against Rs 6.86 crore, recording a downward movement of 197% on a q-o-q basis. Similarly, for the year ended March 31, 2007, Allsec clocked a net profit of Rs 28.13 crore as compared to Rs 20.25 crore for FY 06. Revenues stood at Rs 113.28 crore for FY 07 as compared to Rs 93.9 crore for the previous year.

During the quarter, Allsec entered into an agreement to acquire the 100% shareholding of Kingdom Builders, a company in Philippines engaged in BPO operations. The total cost of the acquisition would be around $1.5 mn. The 150-seater Filipino call center would add to the base for tapping markets within the Southeast Asian region, particularly Singapore. Allsec has scaled the capacity to 750 seats at this location.

During the quarter, Allsec announced that it was setting up a new 200-seater facility at Trichy in Tamil Nadu which is expected to become operational this year. The new facility will bring in additional manpower and will meet the growing demands of the existing customers. The stock currently trades at Rs 94.

Firstsource: Higher Sales, Lower Profits

Formerly known as ICICI One Source, Firstsource provides business process management to companies in banking and financial services, telecom and media, and healthcare industries. The company has over 14,000 people across twenty-four centers in India, Philippines, the UK, the US, and Argentina.

Firstsource reported a net revenue of Rs 378.92 crore for the third quarter ended December 31, 2007 as compared to Rs 214.53 crore for the corresponding quarter last year, a growth of 77%. Net profit after tax, on the other hand, stood at Rs 20.63 crore, down 31% as compared to Rs 30.21 crore the previous year. Net sales for 2006-07 stood at Rs 831.02 crore for the year ended March 31, 2007 as compared to Rs 548.75 crore the previous year. The net profit stood at Rs 97.25 crore for the year ended March 31, 2007 as compared to Rs 24.67 crore the previous year, a y-o-y growth of 294.2%

During this quarter, Firstsource signed a five-year outsourcing partnership agreement, worth $80 mn, with Barclays. Under the terms of the agreement, Firstsource will manage and operate Barclays operations center in Colorado Springs, and provide customer care and collections support to Barclays US cardholders.

Similarly, Firstsource successfully completed a $275 mn FCCB issue at zero coupon and at a 35% premium. The proceeds of the issue have been utilized to retire high-cost loan taken for the MedAssist acquisition, which would reduce interest burden.

Recently, the company commenced its operations in Salt Lake City, US. The stock currently trades at Rs 50.

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