Private equity (PE) players in the business process outsourcing (BPO) companies might have hit on a trend of selling a part of their holdings in the public market. This, experts say, is due to a paucity of strategic exits i.e to other companies or to financial investors.

So far, the BPO sector saw two such exit announcements. US-based PE major Warburg Pincus, which has investments in WNS, has chosen to sell its stake to public investors. PE player Oak Hill Capital Partners also took the open market route to exit from Nasdaq-listed BPO firm ExlService.

WNS, in a recent Securities and Exchange Commission (SEC) filing, said Warburg Pincus would sell 5.25 million American depository shares (ADS) with an option to sell another 1.57 million shares in case of over-allotment. This accounts for 15 per cent of Warburg’s stake in the company.

Warburg Pincus holds 21.3 million shares or 48 per cent holding in the company. At the current price of $9 per share of WNS, the 5.25 million shares would fetch Warburg $47.25 million. Warburg’s entire stake would be valued at $192.4 million (around Rs 942 crore). The company is yet to decide on the price at which the issue would be sold.

Warburg had invested in WNS in 2002 by acquiring a majority stake in the firm from British Airways. While the amount invested by the PE players is not disclosed, in 2006 when the firm was listed on New York Stock Exchange, Warburg had sold part of its stake at $20 per share.

In recent times, PE players in the domestic market, too, chose the public route for exit. Some of these happened as the companies saw a rally of stock prices in domestic markets, allowing these exits.

For instance, in the latest round, Warburg Pincus sold its stake in Kotak Mahindra Bank for Rs 857 crore (around 2.3 -2.4 per cent stake). In total, Warburg has sold stake worth Rs 2,000 crore in the bank over several transactions.

ExlService, too, announced last December it was making a public offering of two million shares of common stock by certain stockholders affiliated with Oak Hill Capital Partners.

On December 6, 2011, the company through a press statement announced the closing of the previously announced public offering. According to the SEC filings, Oak Hill Capital Partners have sold two million shares at $25 per share in the open market gaining $50 million.

According to the company’s Nasdaq filings, it seems Oak Hill Capital Partners too has exited. In three separate transactions on December 6 it sold two million shares.

“In both cases, the investors have been with the company for 9 to 10 years. They would have evaluated all offers in the market and only then opted for the current route. Perhaps, they think that rolling out their stake in the market is a better option,” said the head of a private equity firm on condition of anonymity.

Separately, WNS has also proposed to sell newly issued 5.25 million ADS to raise funds of $50 million (around Rs 245 crore).

The fund raised would be used for general corporate purposes, which may include capital expenditures, acquisitions, refinancing of indebtedness and working capital. At present, the company management is conducting road shows in the US for both the sales.

Source:http://business-standard.com/india/news/pe-firms-exit-bpos-via-us-public-floats/463710/

The Philippine government should not pin too much hope on call centers and other business process outsourcing (BPO) companies as a means of boosting local employment and the economy, warned the independent think tank Ibon Foundation.

Ibon, which advocates nationalist industrialization, said United States President Barack Obama’s recent statements calling outsourced jobs back to the US highlighted the risk of relying on BPOs.

Ibon warned of this and other adverse trends facing the BPO sector, adding that the money that the government intends to spend to promote it would be better used to support Filipino industry and science and technology.

The Philippines is a popular location for call centers and other outsourced services, and has edged out India as the world’s leading BPO center. Some government leaders have even gone so far as to suggest that education be geared toward providing the manpower for BPOs.

In a statement, Ibon Foundation noted the government had set aside P575 million in subsidies for private foreign BPO investors, with the money going to training, curriculum and teacher development, career marketing and scholarships.

It could think of better ways to spend the money, Ibon said.

“These funds are more productively spent supporting Filipino industry, science and technology than for a sector that is such a small part of the economy and by its nature will never give much added value,” it said.

“The BPO sector is barely integrated into the local economy outside of its relatively few jobs and so does not stimulate or encourage domestic production,” it added.

According to Ibon, Obama’s move to bring outsourced jobs back to the US underscores the dangers of relying on BPOs and foreign economies for jobs for Filipinos.

“Even if it is still unclear if President Obama’s proposed ‘insourcing’ legislation will pass, the vulnerability of the sector and the government’s misplaced attention to this is increasingly apparent,” it said.

The Business Processing Association of the Philippines (BPAP) said, however, that it was not alarmed and noted that outsourcing had allowed US companies to survive and grow amid the global financial crisis.

Ibon countered that even if Obama’s “insourcing” plan —which some dismiss as an election ploy—does not come to pass, the BPO industry is nevertheless facing setbacks.

“(Obama’s) initiative is just another example of adverse trends facing the sector and more of this are likely to emerge as the crisis in the US and the rest of the world worsens in the coming years,” it said.

The BPO sector has been growing, but the group said this had slowed slightly. It said the 21.9-percent growth in BPAP-related jobs in 2011 was slightly slower than the 24.1-percent growth in 2010. The 22.5-percent growth in revenues was also slower than the 25.3-percent growth in 2010.

It also said that government and industry estimates for the BPO industry at 1.3 million jobs and $25 billion in revenues in 2016 was too optimistic. It noted that an earlier plan to generate one million jobs and $12 billion in revenue in 2010 fell short of the target. Only 525,000 jobs and $8.9 billion in revenue materialized, it said.

Ibon further said that the slowing global and US economy appeared to have affected the BPO industry, despite reports that the Philippines had overtaken India as the world’s leading BPO center.

“Developments in the US economy are particularly relevant because the latest Bangko Sentral ng Pilipinas data notes that the US accounts for 72 percent of foreign investment and 80 percent of BPO service exports,” it said.

It also noted that the deployment trend of Filipino nurses in the US dropped between 2008 and 2010, and Obama had campaigned for prioritizing American nurses over migrants. The US congress has already approved a bill that would reduce the number of visas allowed for temporary registered nurses.

Source:http://business.inquirer.net/41981/ph-should-not-pin-hopes-on-bpo-says-think-tank