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One more step was taken by the Indian BPO industry recently as the first India-based business process-outsourcing (BPO) firm was listed on New York Stock Exchange (NYSE). On July 26, Neeraj Bhargava, group CEO of WNS Global Services launched the trading of the WNS scrip on NYSE, ushering in a new era for the Indian BPO industry.
The shares sold represented 28% of the total capital base. At $20 a share, the company's market cap is estimated at $880 million. The fact that the scrip closed at $24.50 on the opening day of trading (against the price of $20, which itself was at the top end of the pricing band of $18-20) is a positive indicative trend, says a Mumbai-based analyst.
This shows strong investor interest in the offshore outsourcing sector despite generally tough trading sentiment on Wall Street.
"The highly successful listing," says Prasad Baji, senior vice-president of Edelweiss Capital, "reaffirms the India story and, even more, the WNS story." It's a clear sign of encouragement to other companies wanting to tap the market.
There has been talk for some time now that Genpact, a former GE subsidiary, could go for a listing abroad.
Noida-based EXL Services Holdings indicated an intention to list on NYSE in December, 2004, but hasn't followed through on it yet.
The fact that WNS could command the kind of multiples it did --- 22 times historic EBIDTA (earnings before interest, depreciation, tax and amortisation) and a price-earnings multiple of 38 --- makes outsources ecstatic.
When WNS went to the market with these numbers, in was initially thought to be too high. "There was always an appetite in the market for business process outsourcing offerings, but that had to be satiated with a particular level of maturity. The WNS team has come to that level of maturity," exults Raman Roy, chairman and managing director of Quattro and a BPO pioneer himself.
The Indian market also offers similar opportunities. "The market understands the sector and it offers a lot of promise," says Roy. However, there aren't many proposals in the pipeline, with the market talking only about ICICI OneSource, which was also being tipped for an NYSE listing earlier. Till now, only two new BPO companies - Datamatics Technologies and Allsec Technologies - have listed on the Bombay Stock Exchange. While, at around Rs 44, Datamatics is trading way below its 2004 issue price of Rs 110, Allsec is trading at around Rs 227 against an issue price in 2005 of Rs 135.
Analysts say the successful WNS listing has three key messages: scale matters, a sharp focus on verticals is necessary and acquisitions are critical for larger players.
Both the listing and the net proceeds of the IPO ($73.9 million is what WNS gets, while the rest of the shares were offered for sale by other owners) are expected to help WNS make its mark on the American BPO landscape, which currently accounts for around 20% of its business. Bhargava told mediapersons that the NYSE listing was part of the company's move to win more business in the United States, apart from the prestige and the liquidity that the exchange offered. The fact that even India's second largest BPO firm needs an NYSE stamp to woo more business in the United States is, says an analyst, not a reflection on the India BPO story. "With competition from firms like EDS, IBM and Accenture," he says, "a NYSE listing will provide more comfort level to potential clients."
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