Genpact to spend $45 mn on strategic investments in 2014

Genpact will spend $45 million this year on strategic investments and client-facing teams to add capabilities to help accelerate long-term growth of the US-based outsourcing services major.

During the January-March 2014 period, Genpact's capital expenditure stood at about 2.2% of the quarter's revenues ($528.2 million).

"We are positioning Genpact for accelerated long-term growth in the best way possible and we are making strategic investments through the four pillars of our strategy. These investments are expected to be approximately $45 million, or 2%, of revenue in 2014," Genpact President and CEO N V Tyagarajan said in an analyst conference call.

He added that approximately two-thirds of this is expected to be spent on client-facing teams, representing an increase from 4.7% of revenue in 2013 to about 6% in 2014.

Tyagarajan said the four pillars of the firm's strategy are to concentrate Genpact's investments on specific market leadership opportunities, to enhance its domain expertise, to further differentiate its solutions and to deepen its client relationships.

"We are investing the remainder to bring key service line of capabilities. We expect these investments to ramp over the course of the year. We are funding a portion of these investments through productivity and cost discipline," he said.

Tyagarajan said these investments would continue through 2016 with diminishing impact on margins as revenue growth accelerates.

"We firmly believe these investments are the key to best position us for long-term accelerated growth. Thus, we continue to expect 2014 to be a pivotal year for Genpact," he added.

The company has guided its revenue for 2014 to be between $2.22 billion to $2.26 billion.

"Based on the opportunity in our attractive and under penetrated markets, we believe this focus growth and investment strategy will position Genpact for accelerated Global Clients revenue growth in the years ahead," Tyagarajan said.

Genpact was founded in 1997 as a business unit within GE and later spun off as a separate firm. The company refers to non-GE business as global clients, which represented 79.1% of the quarter's revenues.

"When we look out beyond 2015, we believe global clients revenue will return to a mid-tens rate and as our investments begin to payoff to deliver more normal margins beyond that horizon," Tyagarajan said.