Aviva defers taking back BOT contracts
WNS Global Services and EXLService Holdings, got a breather as their client Aviva has deferred by three months a possible move to take back its build-operate-transfer (BOT) outsourcing contracts with them.
By N Shivapriya, TNN |
MUMBAI: Two leading India-based business process outsourcing firms, WNS Global Services and EXLService Holdings, got a breather as their client Aviva has deferred by three months a possible move to take back its build-operate-transfer (BOT) outsourcing contracts with them. Such a transfer typically leads to a sharp fall in revenues for the service providers. But with Aviva extending the date for exercising its transfer option, the earliest the shift can take place is only in April 2008, a source said.
An Aviva Global Services spokesperson confirmed the development but did not cite any reasons for the extension. “The process of transfer has been deferred by three months. There are no other changes,” the spokesperson said. Between them, EXL and WNS have about 2,900 employees in Pune working on general insurance and life insurance transactions for Aviva.
Under BOT contracts, outsourcing firms build teams and competencies to handle the business functions of their clients, which eventually take over those operations. Had Aviva exercised the transfer under the earlier deadline of January 2008, it would have dealt a severe blow to both WNS and EXL.
The firms have already taken a hit on their profitability in the June 2007 quarter because of the steep appreciation in the rupee against the US dollar. Unlike their software counterparts that have a natural hedge in terms of their onsite presence abroad involving higher revenues and dollar expenditure, BPO firms incur most of their expenses in rupees.
WNS has also been hit by the loss of its one of top mortgage clients, First Magnus Financial Corp, that was expected to contribute about 5% to it revenues. Sources said a transfer of Aviva business could have hit its revenues by another 5%. For April-June 2007 quarter, WNS showed a 1.6% sequential growth in revenues to $112 million and a marginal drop in net income to $8.4 million.
An Aviva Global Services spokesperson confirmed the development but did not cite any reasons for the extension. “The process of transfer has been deferred by three months. There are no other changes,” the spokesperson said. Between them, EXL and WNS have about 2,900 employees in Pune working on general insurance and life insurance transactions for Aviva.
Under BOT contracts, outsourcing firms build teams and competencies to handle the business functions of their clients, which eventually take over those operations. Had Aviva exercised the transfer under the earlier deadline of January 2008, it would have dealt a severe blow to both WNS and EXL.
The firms have already taken a hit on their profitability in the June 2007 quarter because of the steep appreciation in the rupee against the US dollar. Unlike their software counterparts that have a natural hedge in terms of their onsite presence abroad involving higher revenues and dollar expenditure, BPO firms incur most of their expenses in rupees.
WNS has also been hit by the loss of its one of top mortgage clients, First Magnus Financial Corp, that was expected to contribute about 5% to it revenues. Sources said a transfer of Aviva business could have hit its revenues by another 5%. For April-June 2007 quarter, WNS showed a 1.6% sequential growth in revenues to $112 million and a marginal drop in net income to $8.4 million.
ADVERTISEMENT
For EXL, Aviva is one of its largest clients, accounting for about 30% of revenues. However, only about half of the outsourced work is under the Build-Operate-Transfer model. This is being done out of Pune, while the other outsourcing contracts are being done from Noida. Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
