Genpact scales down yearly forecast

Reports lower-than-expected revenues for Sept quarter

Despite reporting a higher set of figures for the September quarter over the same period last year, Genpact, the country’s largest business process outsourcing services firm, said it was reducing its forecast for the full year.

The reported financials for the three months ended September 2013 which fell short of its own expectations following which the firm reduced its full-year revenue outlook. This comes even as on Genpact's larger and smaller software rivals have been reporting robust financials for the quarter, signaling a recovery for the country’s outsourcing industry. Genpact said on Thursday its net profit stood at $70.3 million, up 179.1 per cent from the year-ago period; its revenues grew 8.9 per cent from $491.2 million to $534.9 million.

On a sequential basis, the company’s profits expanded 10.02 per cent and revenue growth was flat. The jump in net profit on a year-on-year (y-o-y) basis is because in the September quarter of 2012, the company had suffered a foreign exchange re-measurement loss as well as some other expenses including the special cash dividend and sale of shares by Genpact’s original sponsors.Genpact's president and CEO N V Tyagarajan said even though the company’s revenues, adjusted operating income, adjusted operating income margin and cash flows from operations increased y-o-y, revenue growth was below expectations. “The three main drivers behind our lower-than-expected revenues were: foreign exchange headwinds impacting our non-US dollar revenues significantly more than anticipated; continued reduction in our mortgage originations business related to softness in refinancing volumes in the US, and an increase in the value and proportion of large deals in our pipeline.”

“Although conversion to revenue in large and transformative deals takes significantly longer, these engagements are where we want to be,” Tyagarajan added. Net income margin for the third quarter of 2013 was 13.1 per cent, up from 5.1 per cent in the third quarter of 2012. Tyagarajan added that for 2013, the company is reducing its revenue guidance and increasing its margin guidance in the light of the lower-than-expected revenues and improved margins. For full-year 2013, the company now expect revenues to be in a range of $2.12-2.13 billion compared to the previously stated $2.15-2.20 billion and adjusted operating income margin at 16.5-16.8 per cent.

“Looking ahead, we continue to believe our addressable market is large and under-penetrated,” said Tyagarajan.

The company said in a statement that revenues from global clients represented around 77.9 per cent of Genpact's total revenues, with 22.1 per cent, or $118.0 million, coming from GE - Genpact's erstwhile parent and its largest customer.