Genpact: Act two

India's largest BPO player Genpact has finally thrown its hat in the ring. It's about to list on the New York Stock Exchange (NYSE) and has registered its IPO of 35.3 million shares at an estimated price of $16-18 per share. In a filing with the US Securities and Exchange Commission (sec), the Gurgaon-headquartered company said it would offer about 17.6 million shares while some other shareholders would offer the remaining stock.

Genpact expects to raise nearly $600 million through its offering and in the process would become the third major Indian BPO, after WNS and EXL Service Holdings, to list on the US markets. The primary reason for listing is to raise funds to fuel growth and secondly shore up its image globally by making itself visible on one of the world's most famous stock exchanges. Another reason is, of course, to offer partial exit to the private equity investors in the company-General Atlantic (GA) and Oak Hill Capital (OHC) Partners-that acquired 62.63 per cent in the company in 2005 for $500 million. It's a windfall by any measure-GA and OHC's investment is now worth more than $2 billion.

Genpact, whose market cap at $18 a share may touch $4.23 billion, has already said that it would use the proceeds from the issue to retire debt and scout for potential acquisitions, particularly in markets such as the US and the UK. However, Genpact is no stranger to the M&A game. In 2005, it had announced acquisition of Creditek Corporation, a leader in Order-to-Cash Cycle and Enterprise Receivables Management, based in Parsippany, New Jersey. Then in 2006, Genpact announced its plans to acquire us-based MoneyLine Lending Services, a specialised provider of end-to-end mortgage origination and fulfilment services. The IPO gives it a potent currency (its stock) to do some big-ticket buyouts. "It's time now to build our depth and expertise, (since) we have lost deals that we would not have liked to," Pramod Bhasin, CEO, Genpact, told BT some weeks ago. Adds Mohit Rana, Principal, at Kearney: "Most of the large clients look for multi-delivery locations from their vendors for reasons ranging from the nature of work or language or to just hedge their risks."

Genpact's man of the moment, Bhasin is clear what Genpact's Act Two would mean. "We will stay focussed on strategic customers and continue to expand in the existing domains. It's like expanding an existing area of work," he told BT. The BPO has focussed on segments such as finance and accounting, sales and marketing analytics, customer services, financial services collections, supply chain and information technology. "We don't want a massive number of customers but just work with the key ones and concentrate on process excellence," Bhasin had told BT.

Genpact is not the only BPO to look at the acquisition route to acquire scale and capabilities. WNS is another one. In the last four years, it has made five acquisitions and three of those have been abroad-Town & Country Assistance, a UK-based insurance claims management company (in 2002), Arizona-based mortgage BPO firm Trinity partners (in 2005) and business assets of Utah based PRG-Schultz International (in 2006). WNS is also planning to expand to Eastern Europe and Latin America. Points out Rana: "Most of the big vendors like Accenture and IBM have delivery centres around the globe for both onshore and offshore assignments. And as India also becomes a higher cost destination, it makes sense for the BPOs here to build a presence in markets like China, the Philippines and Eastern Europe."

No doubt, the IPO is a step in that direction.

(With Amit Mukherjee)