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Macroeconomic Analysis

After a promising start to the decade in 2010-11 with achievement like GDP growth of 8.4 per cent, bringing down fiscal deficit to 4.7 per cent from 6.4 of GDP in 2009-10, as well as containing current account deficit to 2.6 per cent from 2.8 per cent in 2009-10. GDP growth decelerated sharply to a nine year low of 6.5 per cent during 2011-12. The slowdown was reflected in all sectors of the economy but the industrial sector suffered the sharpest deceleration which decelerated to 2.9 per cent during 2011-12 from 8.2 per cent in 2010-11. The centre’s finances for 2011-12 experienced considerable slippages as key deficit indicators turned out to be much higher than budgeted due to shortfall in tax revenues and overshooting of expenditure. The gross fiscal deficit (GFD)-GDP ratio moved up to 5.8 per cent in 2011-12 compared to the budgeted ratio of 4.6 per cent. The substantial increase in subsidies during 2011-12 on account of high crude oil prices further impacted the deficit of the Government.

GDP Growth Profile: According to the first advance estimates of national income for the year 2012-13 of the Central Statistics Office (CSO), the Indian economy is expected to grow at its slowest pace in a decade at a mere 5 per cent in 2012-13, on the back of dismal performance by the farm, manufacturing and services sectors, The estimate is lower than the 6.2 per cent growth clocked in 2011-12 and is the lowest since 2002-03,when the economy grew by 4 per cent only.Services sector, including finance, insurance, real estate and business services are likely to grow by 8.6 per cent during this fiscal, against 11.7 per cent in the last fiscal. GDP Estimates for 2013-2014
Credit Suisse Credit Suisse lowered India’s GDP growth forecast for 2013-14 to 6.9 percent from its earlier forecast of 7.2 percent in December 2012. Their reason, according to a note from the bank, is the delayed response from the RBI in cutting key interest rates to boost economic growth. The bank also acknowledges the fact that this revised forecast is still above other forecasts for 201314. Reserve Bank of India According to the results of the 22nd round of the Survey of Professional Forecasters published by the RBI in January 2013, the projected growth rate for 2013-14 was revised down to 6.5 per cent from 6.6 per cent in the 21st round. Morgan Stanley On the other hand, Morgan Stanley lowered its growth forecast for India from 6.2 percent to 6 percent in March 2013. Its reasons for the revision were a lower-than-expected growth in the previous financial year at 5 percent and continuing challenges in the domestic and external environment.

12% compared to a build-up rate of 2. the merchandise trade deficit in the first half of 201213 has remained at the same level compared to the first half of 2011-12 as fall in exports due to sluggish global demands almost equally matched by import contraction mainly reflecting slowdown in domestic economic activity. stood at 5. .79% (provisional) for the month of July. showed some improvement in the first half of 2012-13. based on monthly WPI. Inflation The annual rate of inflation. Trade Balance With imports growth turning positive from September 2012 and export growth remaining subdues. 2011-12. 2012-13 was estimated at US $ 147.86% (provisional) for the previous month and 7.3 billion during April -December. Build up inflation rate in the financial year so far was 3.External Sector India’s balance of payments which have deteriorated sharply in 2011-12.52% during the corresponding month of the previous year.2% higher than the deficit of US $ 137.98% in the corresponding period of the previous year.2 billion which was 7. concerns regarding a deteriorating trade deficit have been reinforced.December. The trade deficit for April . 2012) as compared to 4. 2013 (over July.

8769 < The New Zealand Dollar/Indian Rupee Exchange Rate is currently in the region of: 50. As a result foreign investors are withdrawing their funds out of India and other places such as South Africa. The Rupee’s dramatic decline has been caused by speculation that the US Federal Reserve is getting closer to reducing the stimulus measures that had bolstered demand for emerging-market assets.9121 < .9 billion leaving the Rupee vulnerable to the nation’s record current-account deficit.Exchange Rate Analysis The Indian Rupee has plunged to yet another new record low in a week that has seen the currency make its worst performance in twenty years. Indonesia and Brazil.9472 < The US Dollar/Indian Rupee Exchange Rate is currently in the region of: 64. Current Rupee (INR) Exchange Rates: The Pound Sterling/ Indian Rupee Exchange Rate is currently in the region of: 100. Since Federal Reserve Chairman Ben Bernanke first announced plans to begin reducing the Central Bank’s stimulus measures. global funds have cut holdings of Indian debt by $9.4528 < The Euro/Indian Rupee Exchange Rate is currently in the region of: 85.1619 < The Canadian Dollar/Indian Rupee Exchange Rate is currently in the region of: 60.3269 < The Australian Dollar/Indian Rupee Exchange Rate is currently in the region of: 57.

going forward the euro area risks remains significant. four years after the eruption of the global financial crisis. growth of the world economy has weakened further.Global Economic Situation and Prospects As per The United Nation’s World Economic Situation and Prospects (WESP).2 per cent in 2014. .4 per cent in 2013 and 3. as the region’s growth engines. While a significant deceleration in exports has been a key factor behind the slowdown. Prospects for Indian Economy in 2013-2014 A slow recovery is likely to shape up in 2013-14 with progressive implementation of some of the reforms announced since mid-September 2012. the scope for policy stimulus in India and other South Asian countries is limited. it is imperative that reform measures continue to be executed efficiently and domestic inflation recedes further. Japan and the United States are spilling over to developing countries through weaker demand for their exports and heightened volatility in capital flows and commodity prices. However. The economic woes in Europe. both economies also face a number of structural challenges that hamper growth. liberalisation of FDI in multi-brand retail. These include.2 per cent in 2012. 2013 report. as key economies in the region are contracting. amendment of the Banking Regulation Act and the setting up of the Cabinet Committee on Investments chaired by the Prime Minister to expedite decisions on approvals/clearances for implementation of mega projects. at 2. The global economy is expected to grow at 2. inter alia. In this milieu. China and India.Economies in developing Asia have weakened considerably during 2012. During 2012. Given persistent inflationary pressures and large fiscal deficits. have shifted into lower gear. the global economy is still struggling to recover.Global risks may have temporarily reduced in terms of part resolution of the US fiscal cliff issues and financial fragility issues in the euro area. to support sustainable recovery in India.

In spite of the rising elements of cost. The industry also witnessed a high degree of M&A activity involving some of the key players in the sector. In spite of theconsolidation.000 trained IT professionals andapproximately 3 million other graduates are added each year Weaknesses  Recent months have seen a rise in the level of attrition rates among outsourcing workers who are quitting their jobs to pursue higher studies. increased profit margins and improvements in quality are some of the gains that companies have realized. Complementing the growth in ITES-BPO exports was the spurt in domestic demand for especially in the BFSI and telecom verticals.over 120. the share of the top 20 players remained relatively unchanged atapproximately 49 percent of the industry as the rest of the industry also witnessed impressive growth. wage arbitrage. Of late workers have shown a tendency not to pursue BPO as a full-time career.Industry Analysis (IT-BPO) The Global ITES-BPO ScenarioIndian ITES-BPO continues to grow from strength to strength. economies of scale. Indianoffshore operations provide cost savings of 40-50 per cent Delivery process enhancement and improvement Access to an abundant skill pool . Local infrastructure Political influence    . The cost of telecom and network infrastructure is much higher in India than in the US. process engineering and enhancements.India has the largest English speaking ITtalent pool in the world . witnessing high levels of activity – both onshore as well as offshore. Continuing pressure on cost bases at a time of growing competitiveness is driving companies to look at offshore outsourcing as a strategic alternative. Access to global talent. SWOT Analysis Some of the key drivers (strengths) of the Indian ITES-BPO industry include:        Competitive pressures on client organizations Ability of Indian vendors to ramp-up operations rapidly Widening breadth of services Shift towards high-value services Sustained cost advantage .

accounting for over two-third of the total ITES-BPO exports from India. 14. Language Competence: India has got good English speaking cluster of population and all the higher studies are being taught inEnglish. This includes training. India. administration and content development were the next three segments contribution 23 per cent. Missouri and Wisconsin. research indicates that 67-72% of costs to call centres operating in the US/UK is directly linked to manpower costs. primarily the UK.9 per cent and 15 per cent. accounting for 38 per cent of the sector’s employee base and a third of its revenues. Three more states in the United States are planning legislation against outsourcing Connecticut. a leading UK-based business information company. Western Europe.   Key markets: The US remains the key market. Other BPO destinations such as China. Finance. Market segmentation: Customer care and support services remain the largest segment. Workers in British Telecom have protested against outsourcing of work to Indian BPO companies. . Competitive Advantage of India in this Sector Cost savings: Data monitor. on the other hand spends only 33-40% of costs on man power. India can be branded as a quality outsourcing destination.Opportunities    To work closely with associations like Nasscom to portray India as the most favoured BPO destination in the world. Philippines and South Africa could have an edge on the cost factor. Threats  The anti-outsourcing legislation in the US state of New Jersey. accounts for approximately 20 percent. respectively to the revenues. $90 billion ITES business by 2014. benefits and other incentives for labour. Abundant Human resource: It has been identified that there is a large computer literate population is available in our Indian population composition through the recently conducted census survey.

1 20.3 12.41 1232. This suggests that the firms have to regularly upgrade themselves in technology and be competitive with respect to prices and services provided by it.41 shows that the top four firms have a good market share in this industry.9 0.06666 0.43 987.043091 0.121379 0.Concentration Ratio and Herfindahl Index Analysis BPO Caterpillar Ind Genpact India HSBC Electronic IBM Daksh Buzz.45 4368.19 880.033922 0. Q12013 Report for IT BPO sector in India Key Sector Data Market Cap (RsCrore) Market Cap (USD Million) P/E P/BV Debt/Equity ROA (%) ROE (%) EV/Sales EV/EBITDA 796847 132808 19.045888 0. TCS e-Serve Infosys BPO WNS Global Servi Aegis American Expre I Firstsour.034513 0.8 . Sales(cr) Sales % 28600.152735 0.1) shows that there is high competition in this industry with low concentration of top firms.49 2062.9 24.8 3.059(<0.058884   A concentration ratio of 0.64 1312.072124 0.1 970.412899 0.8 4.Solu.78 1906.3 3471.030797 Concentration Ratio(4 firms) Herfindahl Index(10 firms) 0. But the Herfindahl Index of 0.52 1791.062644 0.82 0.

8 21. a growth of 4. The IT spend in emerging markets like Asia-Pacific continues to grow at a faster pace than in mature geographies on account of investments by corporations to bring their IT infrastructure on par with global standards.8% over 2011. financial services & insurance (BFSI) and manufacturing remained the largest verticals in terms of total share in IT spending. continued to have the majority share of 58% of total IT spend.4 19. As a result.8 PAT Margin (%) 16. standing at USD 1 trillion.2 15. Investment in innovation has emerged as a differentiator in the market place. Investment in technology has been enabling companies to connect with customers and influence their purchase decisions on a real-time basis. government and utilities were the drivers of incremental growth in 2012.0 201103A 201203A 201303E 201403E   Across markets.1 PBT Margin (%) 19.9 14. While banking.6 14. Spend on IT. retail. spending on technology and related services grew at a rate faster than the GDP growth. The worldwide spending on technology and related services in 2012 was USD 1.9 trillion. technology and innovation are being seen as growth drivers.0 20.Period Sales % ChgYoY 20 23 25 24 Operating Profit 17 24 25 18 PBIDT% ChgYoY 18 26 26 20 Adjusted PAT % ChgYoY 18 18 20 16 OPM (%) 20. BPO and software products.4 19.9 20.   .0 21.9 23. emerging verticals such as healthcare.6 23.0 PBIDT Margin (%) 23.1 23.

This is expected to drive growth in the Indian BPO sector.   . those who have scale have demonstrated ability in garnering large value contracts.Market Analysis & Review Share of Segments India’s share in the global BPO spend is about 3. domestic GDP growth and increasing domestic IT spends will also fuel growth of the BPO sector in the domestic context. the ITES/BPO sector recorded about US $ 15 billion in revenues and has grown at a CAGR of 33% in BPO exports. As per industry estimates. In 2009. Increasing global spends on BPO sector: The global spend on BPO is expected to grow at a CAGR of 10% to 12% till 2012 from its current size of US $ 462 billion. As in the case of the IT Services Industry.000 persons in this area moving beyond simple voice and data services. the Indian industry can tap into an opportunity worth US $ 12 billion by 2010 employing 250.2%. Demand Drivers for ITES/BPO  KPO as a growth area: The growing area in this segment is what is called as Knowledge Process Outsourcing (KPO). Customer interaction. Leading players are Genpact. and Finance and Accounting services account for a significant portion of BPO revenues. WNS. and Wipro BPO. IBM Daksh. As indicated in the previous sections on IT. Most leading IT companies have BPO divisions/subsidiaries.

the industry is also prone to regulatory risks as a result of the need for outsourcing service providers to comply with various regulations such as GrammLeach-Bliley Act (GLBA). Demonstrate process compliance in aspects related to client confidentiality and information security. Data Protection Act of the UK. Ability to attract and retain talent. Ability to integrate with IT Service offerings through end-to-end solutions. Managing pricing pressures through adequate scale. Key Risk Factors In addition to risk factors mentioned under the section on IT Services industry. Additionally. data theft and information security present themselves as serious reputation risks for companies in the industry. Share of the Indian BPO industry in the global sourcing market Service offering by the Indian ITeS BPO companies . and Sarbanes-Oxley Act.Key Success Factors The key success factors for the Indian BPO industry are the following:      Ability to move up the value chain through KPO service offerings.

. energy efficiency and sustainable energy are fast emerging as growth drivers.Revenue of the Indian ITeS BPO industry during FY07-11E    F&A and knowledge services emerging as growth drivers for the Indian ITeS BPO companies. Demand from domestic market is also expected to grow further as Indian companies’ increase their technology adoption. The Indian ITeS BPO companies have steadily built up capabilities. add effectively add value to the customer value chain across diverse customer demography will be in focus.while offerings such as Remote Infrastructure Management (RIM) that are complex.3% during FY07-11 and stood at USD6. acquiring expertise and domain knowledgeacross verticals and service lines. healthcare. The industry’s growth story has traditionally been driven by low cost services across verticals such as manufacturing. However. mobile applications. The Way Forward The Indian ITeS BPO industry has evolved considerably over the past two decades with India capturing a sizeable chunk of the global market for technology sourcing and business services. Customer interaction services (CIS) remains the mostimportant service line. Traditional business strongholds are expected to make way for new geographies and customers. contributing to 42. Revenue from this service line postedan estimated CAGR of 14. telecom and BFSI among others.014mn in FY11.5% of export revenue in FY11E. over the past decade. new verticals such as climate change.

6 39. Current ratio for the industry has improved over the past four years.73 10.64 1.59 146.88 5.3 0.14 2.93 37.54 45.41 2.2 13183.31 29.9 0.75 0.17 0.29 2.56 23.52 64.46 11.46 31.18 29. given the volatile exchange rate environment.29 0.58 0.41 27.83 45. with the present current ratio as 4.1 0.98 238.25 26.37 0.Company Analysis No Of Companies Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Inventory Debtors Total Asset Turnover Ratio Interest Cover Ratio PBIDTM (%) PBITM (%) PBDTM (%) CPM (%) APATM (%) ROCE (%) Latest 85 2013 2 2012 2 2011 23 2010 59 0.37 0.84 0.94 1.12 85.76 18.67 23.98 1. Turnover ratio for the industry is declining which means inefficient use of inventory and asset.62 23.04 3.65 24.1 28.14 22.1 4.15 0.32 0.87 29.2     Debt-Equity-ratio for the industry is declining from 2010 to 2013 which signifies lower level of debt in the capital structure of companies.56 35.53 20.84.32 13.27 27.55 5.09 0.24 2.4 0.57 0.32 11.57 0.14 4.46 43.4 8.59 32. Lower debtor turnover ratio means that the industry should focus on improving its credit policies which could actually pose a threat on its receivables.59 15.28 3.06 20.14 111.38 17.14 2.15 15.98 38.28 41. .

94 11-Mar 0 0 4.25 13. Current ratio of the company has also improved along with industry standard with the present current ratio is 4.71 12.62 12.95 0 36.41 17.25 3.Key Ratios for American Express India Pvt.94.84 22. Therefore it is very necessary for the company to focus on improving its credit policies.47 24.16 10-Mar 0 0 3.93 0 21.77 16.03 0 22.82 16.82 17. Ltd.21 14.84 22.97 24.96 2.41 18. 12-Mar Key Ratios Debt-Equity Ratio Long Term Debt-Equity Ratio Current Ratio Turnover Ratios Fixed Assets Inventory Debtors Interest Cover Ratio PBIDTM (%) PBITM (%) PBDTM (%) CPM (%) APATM (%) ROCE (%) RONW (%) 3.11 9-Mar 0 0 2. The debtor turnover ratio of the company is declining over the years and the decline is quite measurable from 2010 to 2011.82 36.6 0 34.25 2.9 16.78 0 0 4.35 21.26 30. .15 33.65 21.68 20.92 0 22.1 0 17.41 0 17.84 0 40.52 45.9 18.26 29.88 Comparison of the company ratios with Industry ratios    The company has no debt component in the capital structure of the company.19 35.