ExlService Holdings, the back office services provider, was recently in the news for being an acquisition target, but surprised the market by acquiring Outsource Partners International (OPI), another pure-play BPO firm, for $91 million. Rohit Kapoor, president and CEO, tells Piyali Mandal why the deal is beneficial. Edited excerpts:
Why is it you are so positive about the OPI acquisition?
OPI is a pure-play finance and accounting (F&A) firm which will give us a leg-up in domain expertise. It is expected to add $50 million to our revenues in the June-December period. With the transaction, we expect our F&A division to contribute $125 mn to our overall revenues by December, about 35 per cent of our business. At present, the division gives us revenues to the tune of $50 mn, about 20 per cent of our overall revenues. The acquisition will also help us bag new clients in the F&A.
How will this help in expanding the footprints?
OPI will also give us foothold in newer geographies and locations. It will give us entry in Malaysia and Bulgaria in Eastern Europe. It has centr4s in Philippines, the Czech Republic and Romania. In the domestic market, OPI will add two new centres, in Bangalore and Kochi, to EXL’s existing centres in Noida, Gurgaon and Jaipur.
Will you integrate OPI into EXL or will it remain an independent entity within EXL?
We will merge our F&A business with OPI. The new division would be known as the F&A centre of excellence. The integration process will start from June. We expect to complete it by December this year.
What about the OPI workforce?
OPI has about 3,700 employees, who will become a part of EXL after the integration. The combined workforce will reach 17,500. We will offer an equity retention package to some of OPI’s senior employees. Two of the founders of OPI — Clarence Schmitz and Kishore Mirchandani — will join the management of EXL after closure of the transaction. They will lead the F&A centre of excellence. Mirchandani would be the global head and Schmitz the executive sponsor of the division.
You had an excellent first quarter. What went in your favour?
We have been seeing strong growth momentum from last year, which continues this year. In Q1, we added two new clients in the insurance space, which helped us to ramp up revenues in the outsourcing business.
On the transformational business — analytics, operation, process engineering, risk and financial management — we are seeing strong demand. It contributed 23 per cent to overall revenues.
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Do you expect the growth momentum to continue?
Yes. We raised our annual revenue guidance from $305 million to $355 mn. This represents an annual growth of 37.3-40.5 per cent.
Why are you so upbeat at a time when the industry still talks about microeconomic challenges?
We are quite positive about the business environment because of our better than expected results in the first quarter.
Second, our acquisition of OPI is likely to strengthen our domain expertise and add to revenues.
Will you hire more employees?
Yes, definitely. On an average, we expect to hire 600 employees a month. We will increase our headcount by around 4,000-4,200 by December.
How do you see the BPO space shaping up?
BPO will continue to grow faster than the IT (information technology) sector. BPO is a much larger market and it is not that well-penetrated. So, the long-term road ahead is clear.