From the BPO Stables

The booming BPO sector aroused the interest of corporates across diverse
sectors. Right from the engineering sector players like the Hero Group and
Kalyani Group to banking sector players like HDFC and ICICI, everyone wanted to
be in BPO. The software sector, which had arguably a number of similarities this
sector also had a number of players entering this field and has seen a high
proportion of success.

The entry of the software majors into the BPO sector during 2002 was largely
driven by realization of the potential growth in the sector especially at a time
when their own sector was in midst of the tech meltdown. Some of them like Wipro
decided the M&A route to quickly get into the revenue stream, while Satyam
and Infosys decided to set up their own units funded by private venture capital
funds.

Today these companies, have reached sizable revenues and while profits are
still some time away, we believe that with the potential exploitation of
synergies between software services and BPO, these units will, over a period of
time, become major players in this sector and also enjoy better margins than
vanilla BPO companies.

Progeon

Progeon is a leading BPO company in India providing business process management
services and focusing on end-to-end process outsourcing for customers across
industries with centers in Bangalore and Pune. Incorporated on April 3, 2002 as
a majority owned and controlled subsidiary of Infosys Technologies, its business
focus is in banking, insurance, securities, finance and accounts and telecom
segments.

The company witnessed a strong revenue growth of 275% amounting to Rs 78.1
crore in fiscal 2004 as compared to Rs 20.9 crore in fiscal 2003. 17% of the
revenues earned during the fiscal year were from voice based operations. Progeon
reported a loss of Rs 0.6 crore as compared to that of Rs 3.2 crore in the
previous year.

During the year, Infosys invested funds in Progeon amounting to Rs 12.3 crore
in return for equity shares in addition to Rs 12.3 crore invested in fiscal 2003
making a total investment of Rs 24.5 crore. Citicorp International Finance
Corporation (CIFC), USA also invested Rs 87.5 crore in return for cumulative,
convertible, redeemable preferred shares.

In February 2004, Progeon formed a wholly owned subsidiary called Progeon SRO
at Brno, Czech Republic with an investment outlay of$1.1 mn.

For the first quarter of the new financial year ended June 2004, Progeon's
revenues stood at Rs 32.5 crore whereas the net loss amounted to Rs 3.2 crore.
The employee strength of the company at the end of the first quarter of fiscal
2005 stood at 2269, an addition of 391 employees over the last quarter. The
company signed contracts with two new clients during the quarter, one in the
finance and accounting space and the other in mortgaging space and seems to have
a strong pipeline with the total number of customer contracts totaling to
sixteen.

Recently, Progeon formed a strategic partnership with Aceva Technologies
Incorporated, a provider of enterprise software applications for optimizing
working capital to address the business needs of clients outsourcing. Going
ahead, Progeon and Infosys are working together on developing collaborative
client servicing models to integrate the IT and BPO offering satisfying their
client's interests.

Msource

Msource, one of the early movers in the BPO space in India is the IT enabled
services arm of the Mpahsis Group engaged in the business of call centers and
business process outsourcing. Based in NewYork, with operation centers in
Bangalore, Pune and Tijuana (Mexico), the company provides remote services in
the contact center and BPO space across service verticals like retail banking,
logistics and transportation, utility, credit cards and insurance.

The company is now a 100% subsidiary of Mphasis after the latter acquired the
minority 25.26% stake in the company in early 2004 valued at Rs 652.5 crore
paying Rs 165 crore in a combination of stock and cash. The BPO services
recorded a robust revenue growth of 100% for the financial year ended March
2004, by earning revenues of Rs 187.0 crore as against Rs 93.7 crore earned in
the previous fiscal. The net profit for the same period stood at Rs 18.3 crore
as compared to a loss of Rs 3.6 crore last year.

The revenues for the quarter ended June 2004 stood at Rs 64.7 crore as
compared to Rs 56.2 crore in the immediately preceding quarter registering a
healthy growth of 15% and 72% y-o-y. The net profit for the same period stood at
Rs 8.8 crore, up 11% as against Rs 7.9 crore sequentially and as compared to a
loss of Rs 0.8 crore in the same quarter last year. 457 employees were recruited
during the quarter taking the total strength of the BPO to 4743 with an active
client base of 20.

Msource recently announced that it was expanding its operations
geographically, by scaling up its BPO operations from three locations to about
eight in the next three to five years. Joining Pune, Bangalore and Mexico, the
company is planning to set up a new facility in either Mangalore or Chennai.
Msource is also planning to set up a facility in Mauritius with French language
capability.

Nipuna

Nipuna Services is Satyam's 100% subsidiary established in June 2002 at
Secunderabad and is engaged in providing BPO services covering HR, finance and
accounting, customer contact, which includes communication by voice, mail and
chat. In addition, the company offers industry specific BPO services for
verticals that include insurance and healthcare, banking and financial services,
telecom and media, energy and utilities, manufacturing, automotive,
transportation and tourism and retail.

For the financial year ended March 2004, Nipuna's revenues amounted to Rs
10.9 crore as compared to only one crore earned in the previous fiscal which was
the first year of operations. The net loss stood at Rs 21.0 crore. During fiscal
2004 Olympus Capital Holdings Asia and Intel Capital Corporation invested $10 mn
in Nipuna, making a total investment of $20 mn. In addition to this, the parent
company also invested 17.3 crore and as a result of these investments it is
expected that Nipuna would gain substantial momentum.

Nipuna entered into partnership with Applied Gravity, a character building
and visual effects facilities serving the film, television and advertising
industries to explore the animation industry together. Applied Gravity would
front end the animation division of Nipuna Services and this venture is expected
to generate revenues of $20 mn in the next two years.

Satyam's BPO subsidiary recorded revenues of Rs 7.0 crore for the quarter
ended June 2004

Net loss for the same period was Rs 7.7 crore. Nipuna services 14 global
clients out of its centers in Hyderabad, Bangalore and New Jersey, USA and
during the quarter doubled its manpower to 1060. Out of the 14 active customers
of Nipuna, 12 are existing customers of Satyam, which is an indicator of
potential cross-selling of services across the entire customer base.