Subprime crash costs Infy a client

Yet another casualty of the US subprime crash in the Indian BPO sector is the Bangalore-based Infosys BPO, which has lost a prime client, Green-Point Mortgage. GreenPoint Mortgage, a mortgage arm of Capital One (a financial services company) declared its bankruptcy on August 20 in the US. This will eliminate about 1,900 jobs across the US alone.

In India, over 100 people were working at Infosys BPO on this process. Infosys BPO, however, says that the impact on it will be minimal as it plans to redeploy people working on the processes of the lost client.

In a statement, Infosys BPO’s CEO and MD Amitabh Chaudhry said: “Infosys BPO has exposure in larger mortgage firms that have the capacity to tide over the subprime crisis and we have been working proactively with them to address the issue. As such we expect minimal impact on account of the same.”

This is second such incidence in the Indian BPO sector in the wake of the subprime mortgage market crash in the US. Earlier this month, the US-based First Magnus pulled out of WNS just hours after its gave its earnings guidance. The company revised its guidance after its client declared bankruptcy. “We were informed on August 17 by First Magnus Financial Corporation that they will stop all work with us in light of the economic trends in the credit market.

The loss of the First Magnus Financial Corporation and other mortgage businesses is expected to result in our revenue being lower by $20m per annum and the net income before tax being lower by approximately $4m per annum,” said WNS CEO Neeraj Bhargava.

GreenPoint Mortgage was a client of both Infosys BPO and i-Gate Global Solutions . Both companies expect the impact due to the loss of GreenPoint Mortgage to be minimal. According to sources, GreenPoint had also opened a captive unit in Bangalore to do backoffice tasks.

Infosys BPO, previously called Progeon, had signed a $30million deal with GreenPoint Mortgage in 2002. The company used to provide customer services, investor and financial reporting from its India centre. Capital One had bought Green-Point last year for close to $13.2 billion.

Experts say that the US subprime crash will have a short-term impact on Indian BPOs as many mortgage processes will be wiped out. In the last few days, many USbased mortgage companies have reported financial loss due to the meltdown.

Some of them are Thornburg Mortgage Inc, Luminent Mortgage Capital, Countrywide Financial Corp, Headlands Mortgage. “In the long-term , as the industry recovers from the meltdown, more and more mortgage jobs are expected to be outsourced to India,” said BFSI vertical at WNS’ CEO Arjun Singh.