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BPO Cos Shrug Off Global Slowdown Fears
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Infosys Ltd, India's second-largest software services exporter, expects revenue growth of 15 to 20 percent in its business process outsourcing (BPO) arm this fiscal year, while Wipro, the country's No.3, said it saw no near-term impact of a slowdown.
"(Global slowdown) shouldn't affect the BPO business. A downturn should in fact help the BPO business," Swami Swaminathan, chief executive of Infosys BPO, told Reuters in an interview on the sidelines of an industry conference.
"When people don't do well, they are obviously looking at opportunities to be more efficient. And that's when they reach out to us," he said.
Wipro does not expect to feel a major impact in the near term from the global crisis, Nithya Ramkumar, the company's business technology officer, told reporters on Tuesday.
The outsourcing industry lobby group National Association of Software and Services Companies (NASSCOM) on Tuesday maintained its forecast of export revenue growth of 16 to 18 per cent for the year to March 2012.
"Our discussions with our members as well as our discussions with our clients indicate that they are not cutting back at this point," Som Mittal, president of NASSCOM, told reporters.
"We haven't seen any slowdown in our business," added Matthew Vallance, chief executive of Firstsource Solutions Ltd, India's sixth-biggest back-office services firm.
Along with India's largest BPO firm, Tata Consultancy Services (TCS), Wipro and Infosys have driven India's $76-billion software and services sector to the centre of the country's economic rise.
But fears of a recession in the United States and Europe, which account for more than 70 percent of the industry's revenue, have dragged down their stock prices recently, and on Friday pulled India's IT index to its lowest level since November 2009.
US-based outsourcing companies are seen benefiting at the expense of their Indian rivals when American spending slows and firms come under domestic fire for sending business overseas.
Data last week showed factory activity in the U.S. Mid-Atlantic region slumped to a near 2-1/2 year low in August and home resales unexpectedly dropped last month, dampening hopes for a quick revival in the country's economic growth.
"Right now there is no impact, but we recognise that it is early days," said Pramod Bhasin, vice-chairman of Genpact, the India-based former BPO unit of GE Capital.
Last week BNP Paribas downgraded India's outsourcing sector to "deteriorating" from "neutral", following growth forecasts below market expectations from Wipro and TCS.
Bangalore-based Infosys posted a below-forecast rise of 15.4 percent in fiscal first quarter profit last month, and saw wage hikes hit margins amid intense competition from rivals such as IBM and Accenture.
At the time, the company forecast overall fiscal year dollar revenue growth of 18 to 20 percent.
Infosys said on Tuesday it was confident of continued growth and was eyeing acquisitions to add scale in regions such as Europe, Asia Pacific, Latin America and Africa, and complement the firm's strategy for both organic and inorganic growth.
"Last two years, we have been growing at about 20 percent," Swaminathan said, referring to the outsourcing unit.
"I think we would be growing anywhere between 15 to 20 percent (this fiscal year)," he said.
The firm expects to have net employee additions of 2,500 to 3,000 this fiscal year, he added.
India's outsourcing sector, which employs close to 835,000 people and accounts for more than a third of the global back-office market, generated export revenue of $14.1 billion in the last fiscal year, according to NASSCOM.
TCS shares jumped nearly 7 percent to close at 981.60 rupees ($21.50) and Infosys shares closed up 3.8 percent at 2,276.95 rupees ($49.86) against a 1.0 percent rise in India's benchmark index. Wipro shares closed up 0.6 percent at 332.95 rupees ($7.29).