WNS feels sub-prime pinch

Mumbai-based WNS (Holdings) has become the first business process outsourcing (BPO) firm to report that the US sub-prime lending crisis would have a "material adverse impact" on its financial performance. WNS is India's second-largest BPO, according to Nasscom.

Its US-based client, First Magnus Financial Corporation (in the mortgage business), orally advised the New York Stock Exchange-listed firm that it expects to stop all work WNS does for them.

It was expected to account for around 5 per cent of WNS's revenue less repair payments for the period between July 1, 2007 and March 31, 2008 "" a hit of around $12 million.

Since the company wholly sub-contracts the repairs from its auto claims division to the repair centres, it evaluates its financial performance based on revenue less repair payments to third-party repair centres (a non-generally accepted accounting principles measure).

In its guidance, the firm said its revenue would be $302-307 million for financial year 2008, and net income $41-43 million. However, it will be revising the same. The company generates about 47 per cent of its revenue from work in the banking, financial services and insurance sectors.

JP Morgan has downgraded WNS Holdings to neutral from overweight, citing the company's uncertain revenue and margin outlook and potential near-term credibility issues.

Meanwhile, for the first quarter ended June 30, 2007, WNS's net income grew 83.8 per cent to Rs 35 crore ($8.4 million, at a conversion rate of Rs 41.57) compared with the same quarter's figure last fiscal. Its revenue of Rs 467.6 crore ($112.5 million) for the first quarter increased by 112.2 per cent from the corresponding quarter's figure the previous financial year.

Due to the rupee appreciation, the company took a hit of 5.6 per cent in its net income sequentially "" from Rs 37 crore ($8.9 million) reported for the quarter ended March 31, 2007.

Its revenue, though, increased marginally by 1.6 per cent from Rs 460 crore ($110.7 million) last quarter.