'Tax benefits are a critical issue for BPOs'

By revising its guidance upwards after an initial downgrade, WNS Global Services has managed to survive the big bang of the sub-prime crisis. However Neeraj Bhargava, CEO, WNS Group, is focused on the work at hand and issues that are on the horizon like the tax benefits. In a chat with Leslie D'Monte and Shivani Shinde, he asserts he has absolutely no hesitation in taking the existing business to other low-cost countries like Vietnam, Sri Lanka and the Philippines if the tax benefits for software technology parks are not extended by the government. Excerpts:

Your company was quick to revise the guidance after the initial loss of your client, Magnus. What's the strategy going forward?

I think after the initial setback, we hastily gave a downward guidance. If you look at the quarter that ended June 2007, we added 1,700 people, which meant that demand was robust.

Our view is that the mortgage industry is going through a bad patch. However, the fact is that people will buy houses and will continue to take loans. We have good skills in processing and servicing loans, and we do not want to lose that opportunity.

Mortgage is four per cent of our business after the hit. Some of our mortgage clients continue to give us business. We will adapt to the market.

What is the de-risking strategy with regard to the rising rupee and the sub-prime crisis?

The UK and Europe are our biggest markets, accounting for 50-55 per cent of our revenues. The US and North America comprise the rest. We intend to keep the ratio at about 50:50.

We see a positive trend in pricing. Besides, we have been able to ramp up business from existing and new customers pretty fast. As for margins, the sub-prime crisis had two effects.

One was on the banking and the mortgage market itself. While the mortgage industry was an important growth area, it was not a sizeable part for many companies. So they will take this in their stride.

The larger problem being discussed is on a wider credit crunch developing which would constrain growth in other industries.

As far as the rupee is concerned, the problem is not the strengthening of the rupee, but that this is happening very fast. On the positive side, though, we are booking contracts at higher rates.

What are the company's growth plans?

This year our annual capital expenditure is about $25-35 million, a bulk of which comes to India. We clearly want to go beyond the UK and into continental Europe.

We have a centre in Romania that gives language capability. We are excited about providing both India and Romania-based work to customers in continental Europe.

Besides, we have had very good growth in finance and accounting and analytics.