Genpact firms up IPO plans

One of India's largest BPOs, Genpact, has registered its initial public offering of 35.3 million shares at an estimated price of 16-18 dollar a share.

According to a filing with the US Securities and Exchange Commission (SEC) on Tuesday, the Gurgaon-based third party outsourcing service provider said it would offer about 17.6 million shares in the listing on the New York Stock Exchange (NYSE), while some stockholders would offer the remaining shares.

Genpact hopes to raise nearly 600 million dollars through its IPO, and looks to become the third Indian BPO firm to list in the US after rivals WNS Holdings and EXL Service Holdings, which have been trading there since last year.

According to the amendment filed by the company with the SEC, GE Capital will see its stake fall to 23.2 per cent from 28.5 per cent following the IPO, while the combined holdings of General Atlantic and Oak Hill will drop to 51.8 per cent.

There is a Greenshoe option to sell an additional 5.29 million new shares, which could increase the maximum deal size by 15 per cent to 730.6 million dollars. The company, which is incorporated in Hamilton, Bermuda, and operates in cities including Hyderabad and Bangalore, had said it would use the proceeds of the share sale to repay debt and for general corporate purposes, including potential acquisitions.

Genpact is believed to be the front-runner in the race for acquiring Citigroup's BPO.
The IPO values Genpact between 29 and 32 times its next year’s earnings, says a London-based analyst, which is 8.5 times for WNS and 25.5 times for EXL. ''This premium is seen warranted, however, as Genpact is the market leader and has much greater scale,'' he said.

Based on the mid-point of the range, Genpact would have a market capitalisation of about 3.9 billion dollars, compared with 1.1 billion dollars for WNS and 522 million dollars for EXL, he adds. As on Tuesday, its close peers WNS Holdings and ExlService Holdings were currently trading at a price to earnings (P/E) of 43.92 and 27.74 respectively.

Last week the company was ranked as India's largest provider of BPO and ITeS in terms of revenues for the second year in a row by the National Association of Software and Service Companies. The company began in 1997 as an India-based unit that assisted GE’s finance division.

Later, GE sold 60 per cent of the unit, formerly known as GE Capital International Services, for 500 million dollars to buyout firms General Atlantic Partners and Oak Hill Capital Partners in 2004. Fairfield, Connecticut-based GE, the world’s second-biggest company by market value, owns about a third of Genpact and accounted for almost three quarters of the company's 613 million dollars in 2006 sales.

As far as the company’s numbers are concerned, the topline of Genpact has been growing at a compounded annual growth rate (CAGR) of 15.8 per cent. In 2006, it grossed 613 million dollars in revenue clocking a growth of 24.6 per cent over the previous year's revenue.

One of the highlights of its topline performance is its growing revenue stream from clients other than General Electric. In 2006, more than a quarter of its revenue came from other clients compared to that of 5 per cent in 2004. Its net profit more than doubled to 39.8 million dollars.

Morgan Stanley, Citigroup Global Markets and JP Morgan Securities are serving as lead underwriters for the offering, while Wachovia Capital Markets, Merrill Lynch, Banc of America Securities, Credit Suisse Securities, Deutsche Bank Securities and UBS Securities are also listed as underwriters. The company plans to list its shares on the NYSE under the symbol 'G'.