'We are getting to an end-to-end market in India'

Q&A: N V Tyagarajan, COO, Genpact

India’s largest business process outsourcing (BPO) company, Genpact, posted a six per cent fall in its net income for the first quarter ended March 31, besides a foreign exchange loss of $0.7 million (Rs 3.1 crore). N V Tyagarajan, COO, however, tells Kirtika Suneja there is no cause for concern. Edited excerpts:

Your quarterly revenue was up eight per cent but net income fell 6.3 per cent.
The decline in net income was driven by higher taxes, as our centres in Hyderabad and Gurgaon came out of the Software Technology Parks of India (STPI) scheme, because of which tax rates increased by almost 20 per cent. Second, we invested in business development and sales and marketing, that increased our selling, general and administrative expenses. Third, we saw growth in bench (staffers without projects), hiring and training of our resources.

What are your capex plans for this year?
The initial capex in 2010 was 5.9 per cent of the revenue because of growth and ramp-ups. Going ahead, we expect the capex to be 5-5.5 per cent of revenue by the end of this year.

How healthy is the deal pipeline?
Strong and at an all-time high. It is 20 per cent higher than the trailing quarter and 60 per cent more than the corresponding quarter in the last financial year in terms of the total contract value. We are getting widely distributed clients across geographies and sectors. In fact, the European and Indian pipelines are higher than the average.

How will the $340 million (Rs 1,513 crore) of cash and cash equivalents be used?
We are always on the lookout for the right acquisition. Our real objective is to add value to our clients and capabilities to our delivery.

How will business get affected with GE offloading half its stake?
There is zero connection between GE’s stock ownership and GE as a client. While their investment in Genpact fell, the revenue increased, thanks to the extension of our contract. Their investment in us is independent of them as a customer. Both these things are divorced from each other. In fact, our revenue from GE is far above the minimum revenue commitment of $360 million (Rs 1,600 crore). Our client concentration with GE is about 40 per cent but is expected to be around 35 per cent in 2010.

How is the domestic business shaping?
The domestic business is growing at 100 per cent and we have a strong pipeline, with an interesting range of customers. India, China and Brazil are growing from a GDP perspective and these are good markets that can grow at 25-30 per cent. We are already getting to an end-to-end market in India.