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May 04, 2013 11:41 AM IST | Source:

Deal pipeline strong going into FY14: Hinduja Global

Hinduja Global Solutions says deal pipeline remains strong, and it is expecting strong growth ahead, since it has addressed issues in the domestic market and in Philippines, which had hurt earnings last year. It will also continue to seek acquisitions.

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Nachiket Kelkar

Hinduja Global Solutions expects growth to pick up in the current financial year, helped by a strong deal pipeline and consolidation of its non-performing businesses, especially in the India domestic market, Srinivas Palakodeti, CFO of the business process outsourcing provider, told in an interview.

"Things are looking good. Pipeline continues to be strong. We had challenges in Philippines, as we had built certain capacity far ahead of the curve. (fixed costs go up), as we exited FY13, we see much better seat utilizations," he said.

Apart from the issues at Philippines, there were also issues in HGS' India domestic business, which contributes 8-10 percent to its total revenue. The company does a lot of work for telecom companies in India and the uncertainties in that business, hurt earnings.

For the first nine months of the year (April-Dec), the company's net profit declined 33 percent year-on-year to Rs 50 crore, even as net sales gained 33 percent to Rs 1,457 crore. HGS is yet to announce its fourth quarter results.

"We were doing a lot of work for telecom sector, which has been in a mess...Clients were not investing...they would give us a forecast, we would staff accordingly, volumes wouldn't come, we would wait for a couple of months and recalibrate...This was causing a lot of challenges. Over the last few months, we have had a hard look at the domestic business, and in the process have either exited the client, or are in the process of exiting the particular work we do for a client, or renegotiate the terms," Palakodeti said.

He says the company's headcount in India would have decreased by 2,000 employees over last one year, which also includes the normal attrition that happens each year. The company has not re-filled the vacant positions.

In Canada, where it has 4 clients, two of its fairly large telecom clients had some issues in the marketplace, which the companies have since addressed, and the Canadian business for HGS is now pretty much back on track, Palakodeti added.

HGS is also getting a boost from recent acquisitions. The company's US subsidiary, Hinduja Global Solutions Inc, had in September last year inked a deal with Deloitte Consulting to acquire healthcare revenue cycle outsourcing business EBOS (Extended Business Office Solutions).  That business is logging in close to USD 1 million per month now, he said.

"We (already) do claim processing, claim adjudication, testing kind of work. But we had very nominal presence in hospitals, nursing homes etc kind of space. What this acquisition brings is that we have now stronger presence in the provider space. We do revenue cycle management for providers. Our offering is more complete," noted Palakodeti.

The company has been focusing on the healthcare business to drive growth. It now accounts 26-27 percent of total revenue.

Including EBOS, HGS has acquired four companies since 2010, which include UK-based Careline Services (June 2010), Canadian On-Line Support Inc (Aug 2011) and payroll processing firm HCCA Business Services from 3i Infotech (Aug 2011).  All the firms have since been renamed and have a common branding under the Hinduja Global Services banner.

These acquisitions were done with the help of a treasury surplus it had and the company continues to look at more opportunities to acquire businesses.

"We have said in the past we had some treasury surplus, which we said was primarily for acquisitions. We continue to look for acquisitions in different segment, sizes," Palakodeti said.

The company still has over USD 70 million in treasury surplus, which, coupled with the internal accruals, will be used "judiciously" for new buys. HGS has no plan to raise fresh capital at present.

Meanwhile, the company's SEZ (special economic zone) in Hyderabad went operational in March. This facility will primarily service the EBOS business. It expects its third SEZ to go live in the next 3-4 months in Bangalore.

HGS shares were up 0.5 percent at Rs 264.85 on NSE in afternoon trade on Friday. As of Thursday's close, the stock is down 16 percent in the last one year.

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