The Rising Sun

Indian

BPO  sector continues to grow-from

just $0.6 bn in FY 1999—2000, to $5.1 bn in FY 2004—2005. The players in the

Indian ITeS-BPO industry are broadly classified into captive units and

independent third-party services providers. The captive units continue to

dominate the segment, accounting for over 65% of the value of work off shored to

the country. While the independent/third-party ITeS-BPO vendors outnumber the

captive units, the scale of work undertaken by each unit in the latter category

is significantly higher. While there are a number of software services companies

that have their own BPO arms and are listed, a majority of pure-play BPO

companies are still in the private domain and have no public participation.

Among the few listed Indian BPO players are Datamatics Technology

and Tricom India. Over time of course we shall have more such companies

in the public domain with venture funds wanting to exit the companies as they

achieve a critical mass required for public markets.

Datamatic Technology



Lalit Kanodia, who is widely acknowledged as one of the founders of the Indian
IT industry, setup Datamatics Technologies in 1975. Datamatics is a third party

non-voice based BPO and KPO solutions company that specializes in accounting,

claims, payroll, tax services, legal BPO, content management, abstracting and

indexing, document and workflow management, data warehousing, and business

intelligence solutions. The company is engaged in the business of providing

complete data center, data conversion, data processing services on block time or

shared time, self service or operator assisted basis, technical and management

consultancy services in all areas of computers, computer-oriented systems,

computer programming, facilities management, telecommunications, software

publishing and information technology for business, industrial, and general

purpose requirement.

The company built a

de-risked business model. BPO services require significant investment in

processes and infrastructure; customer ramp-downs can have an adverse impact. It

has tried to create a business model of variable costs using knowledge

associates, qualified housewives, retired people, and people willing to work for

shorter hours on part-time basis. The company pays the knowledge associates on a

per unit of work basis, that is, per page edited/formatted or per claim

processed or per tax return processed.

To expand its marketing

reach, Datamatics acquired CorPay, a US-based accounts payable processing

company. In the same year, it also increased its stake to 100% in Saztec

International, a US-based diversified information processing company. Datamatics

has set up subsidiaries in the US, UK, and Germany. Its client portfolio

includes world leaders such as LexisNexis, Computer Sciences Corporation,

Unisys, CCH, Ford Motors Bearing Point,and Daimler Chrysler. 

For the three-month

period ended September 2005, Datamatics Technologies revenue went down by 11.3%

to Rs 32.7 crore, as against Rs 36.8 crore for the same period in the previous

year. EBITDA for the quarter was 13.8%, as against

20.2%, in the same quarter last year . The firm's net profit fell by

52.7% to Rs 3 crore,  as compared to

Rs 6.4 crore in  the year-ago

quarter. The top  five clients of

the company contributed 39% of the revenues, while the top ten clients

contributed 54% of the revenues during the quarter under review. The largest

client contributed 15% of the revenues.

Datamatics came out with its IPO in May 2004 at a price of

Rs110. The issue was oversubscribed 27 times. The stock has significantly under

performed in the market since it got listed. It remains to be seen how

Datamatics emerges from its current problems and builds a robust growth model.

Tricom

India

Tricom India

is a non-voice ITeS and IT enabled products company operating in the

document management space. The company provides services in over 40 countries

spanning clients in private enterprises, healthcare institutions, counties/

government enterprises, financial and banking institutions, and pharmacy

companies overseas.   Tricom

specializes in litigation coding, electronic data discovery and mortgage

documentations and title plant maintenance. Tricom is now an established data

capture company specializing in major service groups of indexing, health claim

processing, litigation coding, mortgage documents/title plant maintenance, and

electronic data discovery (EDD). The company has a wholly owned subsidiary in

the US called Tricom Document Management(TDM), and has offices in Fremont, Los

Angeles, Henderson, and New York.

Tricom has bagged a

contract for indexing services worth more than $10 mn spread over the next 4-5

years from one of the record management companies in the US Tricom has also

signed an MoU with one more company for title insurance for creating back plant

for 25 counties in a state in the US. The above project, pegged at $1.5 mn, is

required to be completed within 18 months. Tricom has executed a lease agreement

for expanding its office premises in Mumbai. The expansion will

help the company cater to larger orders in the future.

During the year 2004-2005 the company have

recorded a consolidated turnover of Rs 14.5 crore with a consolidated net

profit of Rs 4.3 crore. During the quarter ended September 30, 2005, Tricom's

performance was encouraging. While revenues grew 119.2% to Rs 6.6 crore, the net

profit went up 192% to touch Rs 2.49 crore. The share of Tricom India

is currently trading at Rs 200.