Indian BPO-ARM IPO Finds Some Success on US Exchange

In early August, a former GE unit specializing in IT, BPO, and collections/customer service outsourcing went public on the New York Stock Exchange giving American investors an opportunity to cash in on the growth of offshore outsourcing in India.

Genpact Limited (NYSE: G), India’s largest pure-play BPO provider, made its official debut on the NYSE on August 1 with an initial offering price of $14 per share, below the company’s anticipated offering range of $16-18. The stock was trading at $14.95 early today.

The IPO raised more than $490 million, with half going to Genpact’s existing shareholders–GE and private equity investors General Atlantic and Oak Hill Capital Partners–and the other half going to the firm. Genpact plans to acquire companies with the money, according to a story last week in Business Line, an Indian newspaper. Genpact’s CEO Pramod Bhasin told the paper that it is seeking captive BPO firms with revenues in the $100 million to $200 million range and that it plans to look beyond India for acquisitions.

Genpact began in 1997 as GE Capital International Services, commonly referred to as GECIS. GE had experimented with outsourcing software services to Indian workers in 1995 and the project went so well, the company decided to expand the services it would send to India, including finance and accounting. GECIS started as an in house provider of back-office and call center services to other GE businesses.

The lower labor costs in India made GECIS a success, leading other major U.S. and European companies to start their own BPO units or to outsource to firms like GECIS. In late 2004, GE sold a 60 percent stake in the unit to private equity firms General Atlantic and Oak Hill Capital, each taking a 30 percent stake. The new standalone company was rebranded as Genpact.

Genpact’s Collections and Customer Relations division is integral to the company. In July 2005, Genpact acquired Creditek, a New Jersey-based ARM firm that recorded revenues of $20.4 million the previous year with about 300 employees in three U.S. call centers. Genpact says its Collections and Customer Relations division now employs 5,000 people that cater to clients in banking, consumer & commercial finance, healthcare, and auto finance.

GE remains the largest source of revenue for Genpact though the firm is seeking to expand its work for external clients. In 2006, GE accounted for 74 percent of Genpact’s $613 million in revenue with external firms generating 26 percent. In the first quarter of 2007, external clients generated 31 percent of Genpact’s $175.1 million in revenues.