HGS bets on banking, HR segments as demand from domestic telecom slips

Owing to a churn in India's telecom sector, the company's share of domestic business dropped to 27% in Q1FY20 as compared to 31% a year earlier

Business process management (BPM) services firm Hinduja Global Solutions (HGS), after being hit by a slowdown in its domestic business owing to a dip in revenues from its telecom vertical, is slowly increasing its exposure to the banking and financial services (BFS) and human resourc outsourcing (HRO) segments in the country to de-risk its balance sheet. The Bengaluru-headquartered company has already signed few marquee clients in the BFS space and is expanding its delivery capabilities to service them.  

"The challenge used to be in our customer relationship management (CRM) business because it was heavily focussed on telecom. In the telecom segment, we have seen shrinkage in volume, but we are growing in BFS (to offset the shrinkage)," said Srinivas Palakodeti, chief financial officer (CFO) at Hinduja Global Solutions.

Owing to a churn in India's telecom sector, the company's share of domestic business dropped to 27 per cent in Q1FY20 as compared to 31 per cent a year earlier. While the domestic business contributes 9 per cent to HGS's total revenue, the international accounts for 18 per cent.

"Essentially, we are doing a portfolio spin off under which we are moving away from lower-end of services to high-end ones, where the volatility in the volume is much lesser and price point is a lot better," Palakodeti said.

This strategic shift was also evident in the hiring numbers in the June quarter, which saw a marginal uptick after four consecutive quarters of decline. During the last quarter, the BPM services firm added 520 employees in India to take its headcount to 24,420 in the country. Globally, its headcount stood at 42,371, a rise of 181 employees over the preceding quarter.

In January this year, HGS had shut down a BPO centre in Siliguri, West Bengal, owing to a demand crunch from the telecom segment. Of the 250 employees working at its Siliguri centre, some have been accommodated in other centres, the company said.

On the demand environment in the US, Palakodeti said that it remains strong in most verticals. "We continue to see strong demand from the US, whether it is healthcare or consumer and retail. All these segments continue to do well." While healthcare & insurance accounts for around 50 per cent of the company's total revenue, technology and telecom accounts for 15 per cent.  

HGS' net profit remained flat at Rs 40.4 crore for the quarter ended June 30, 2019, while its revenue from operations grew 17.2 per cent to Rs 1,290.5 crore.