Looking for organic growth: HOV Services

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS HOV Services IPO opens Sept 4, price band at Rs 200-240 Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

HOV Services, a BPO company's 40.5 lakh share issue will hit the markets on September 4. The company plans to raise Rs 81 crore to Rs 97 crore to part finance its capex as well as acquisition costs.

CMD of HOV Services, Parvinder Chadha says that they have plenty of growth within their current client base and they are building capacity.

He adds that they will spend Rs 21 crore to expand their capacity and people, which will allow them to add about 1500 more employees to a base of 785 that they have as on April 30.

He also states that they are looking for a lot of organic growth.

Excerpts from CNBC - TV18's exclusive interview with Parvinder Chadha:

Q: Out of this Rs 81 crore to Rs 97 crore, Rs 65 crore will be invested in your subsidiary, which is HOV Services, LLC, what are your plans with this subsidiary and could you also throw some light on the kind of acquisitions, which are there on the anvil?

A: We have done six acquisitions between 2002 and 2005. Traditionally, companies raise money to do acquisitions, so there is money and then they do the acquisitions.

We have sort-of done it the other way round. We have done the acquisitions. Rs 65 crore that you mentioned, we are going to transfer that money to pay for the acquisitions that have already been successfully integrated into HOV Services Limited. In the near-term we have no acquisitions on the horizon.

We have plenty of growth within our current client base so we are building capacity. We will spend Rs 21 crore to expand our capacity and people, which will allow us to add about 1500 more employees to a base of 785 that we have as on April 30. We are looking for a lot of organic growth.

Q: Within that organic growth, give us a break up as it stands currently between voice and non-voice in terms of revenues, and what is the area that you are going to be focusing on going ahead?

A: One of the very important difference between us, which we chose intentionally is that we manage financial assets. Financial assets are entrusted to us by our clients, who are big banks, telecom companies, healthcare companies and so on. A lot of work we do has to do with the domain knowledge, which has to do with experience and analysis and so on.

Although we do have some voice component especially in the accounts receivable management, our employees are not segmented by voice. But they are segmented by the type of expertise they have.

If one looks at the three areas of insurance, tax, enterprise management and accounts receivable management, we have about 45% of our revenue historically coming out of accounts receivable management, 42% out of insurance and tax services and then, about 13% out of our enterprise tool's management that these clients are using for carrying on or managing or overseeing the financial assets.

Q: Top ten of your clients account for about 70% of your revenues. How many clients do you have at this point of time, and how do you propose to resolve this issue?

A: The number of clients we have in total exceeds over 200 clients and many of our clients are large. They are some of the biggest companies in United States.