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

Lorelie Cadiz, Aegis PeopleSupport Inc. senior marketing manager, said the Anti-Outsourcing Bill pending in the United States congress will not affect the firm’s global operations.

“Philippine industry leaders, however, expect a slowdown in US-based companies,” said Cadiz.

She said Aegis is focused on the overall outsourcing market rather than the off-shore market in the Philippines and the rest of their Asia Pacific operations as it serves local and international clients in the region.

“For the Philippines, some of the largest companies in the banking, telecommunications and travel industries, however, a large percentage of their revenues come from international clients, majority of which are US-based. How is this bill going to impact our Philippine operations and what contingencies do we have in place?” Cadiz asked.

BUSINESS MODEL

Cadiz cited the firm’s business model, which according to their managing director Aparup Sengupta, revolved around “citizens serving citizens.”

“This is true in our Philippine operations. In each geography in where we operate, Aegis serves local customers through local citizens. We have over 5,000 people in Argentina, over 2,000 in Australia, almost 2,000 in South Africa. We have local accounts and part of our growth plans this year is to grow our existing local accounts and acquire new business,” said Cadiz.

Cadiz, declined to give more details about their expansion plans in the local market.

She said that the firm would be more bullish here to slowly shift businesses toward areas projected as next growth economies in the world.

N-11 ECONOMIES

Recently, major investment bank Goldman Sachs dubbed the Philippines among the N-11 or Next 11 economies that will contribute greatly to global growth within the decade and will likely advance to “growth countries” accounting for at least 1 percent of global gross domestic product (GDP).

Aside from the Philippines, other countries such as Mexico, Korea, Indonesia, Turkey, Iran, Egypt, Nigeria, Bangladesh, Pakistan and Vietnam are among the N-11 countries.

The nine economies from the N-11, along with Brazil, Russia, India and China (BRICs) are expected to contribute the most to global growth from 2011 to 2020.

WITHOUT A FIGHT

US House Bill 3596 or the Call Center and Consumer Protection Act recently caused a stir among many stakeholders not only in the Philippines but other countries, like India, which have booming outsourcing industries.

Executives and business group leaders in Cebu, however, said they believe that the bill won’t prosper because American companies that outsource their operations won’t just agree without a fight.

“It’s the means to global competitiveness. They cannot just say yes to that (bill),” said Cebu Investments and Promotions Center managing director Joel Mari Yu.

Nevertheless, Cadiz said that it is always important to look for new opportunities in other areas and diversify the business so as not to be dependent on a single large market.

Source:http://newsinfo.inquirer.net/131269/bpo-firm%E2%80%99s-answer-to-us-insourcing-tap-local-market

According to Ronald Rittenmeyer, NCO president and chief executive officer, the new building will have capacity of 1,200 seats. Since hiring for the Sta. Mesa site began in October, 850 seats have already been filled as of yesterday, he added.

“It’s not just the price or that it’s cheaper [to operate] here in the Philippines,” Mr. Rittenmeyer explained of NCO Group’s decision to expand. “We come here because of the quality of work our employees here do — which is excellent.”

NCO operates four other sites in the Philippines located in: Quezon city (with 2,151 seats); Clark, Pampanga (1,213 seats); Fort Bonifacio, Taguig City (893 seats); and Marikina City (641 seats).

While declining to give growth forecasts, Mr. Rittenmeyer said the firm will employ “as many as the business demands.”

When asked about concerns regarding the pending US bill that might prevent BPO firms to put up sites outside the US, Mr. Rittenmeyer declined to comment. “We’ll wait and see what kinds of laws will be taken [by the US government] and we will abide by those laws… but at this stage, it would be inappropriate for me to speculate,” Mr. Rittenmeyer said.

NCO has a pending merger with APAC Customer Services, Inc., announced in July last year.

Mr. Rittenmeyer said while the merger hasn’t been finalized yet, the two firms have started synergies such designating people in management positions.

“The merger would bring the number employees in the Philippines to total 13,000, composed of 8,000 from NCO and 5,000 from APAC,” Mr. Rittenmeyer said.

NCO offers BPO solutions such as accounts receivable management, customer management services, and back office services. The firm operates in 11 countries worldwide, employing over 34,000 people.

Source:http://www.bworldonline.com/content.php?section=Corporate&title=US-based-BPO-firm-opens-5th-site-in-Manila&id=45192