What has driven the growth of WNS into a leading player in the offshoring space with fiscal 2007 revenues of $352 million and net income of $26 million?
Our success has been because of a winning strategy of providing industry solutions to move core processes outside. We are flexible in our approach and are willing to start small. We enjoy being first in an area, which is a competitive strength û for example, when everyone was call centre focused we went after transaction processing.
What made you decide you were ready to IPO?
When we started WNS we set ourselves some internal metrics regarding how big the company should be in terms of profitability and revenues before we list. We decided that when revenue of $200 million is visible we will seek a listing. In fiscal 2005-06 we closed around $150 million of revenue and started preparing for our listing.
Why did you choose an NYSE listing rather then a domestic listing in India?
There were a number of reasons for this. Comparables in the US traded significantly higher than in India or the UK. The giants in the industry who we compete with for business are US listed. The listing provides us with credibility in a country where many of our key customers are. Finally, having shares listed in the US gives us a universal currency for acquisitions.
How much of the work WNS undertakes would you describe as knowledge intensive?
As per the definition commonly used IÆd say that today the knowledge process outsourcing (KPO) market is very broadly 10-12% of the combined business process outsourcing (BPO) and KPO market. Our revenue split in general mirrors this. But if I was to look at the business we do which is knowledge intensive it could be as much as 40-50% of the overall. Also, KPO is growing much faster than BPO today in the overall pie and over time I anticipate this will change.
Any key clients whose names you can share for whom you do knowledge intensive work?
We are bound by client confidentiality but client names I can disclose are Cantar (WPP market research subsidiary) and Glaxo SmithKline. For example for GSK we provide a range of work on pricing and product market and competitive intelligence.
What is your geographical diversification strategy?
This is driven by the need to service customers in other languages for example the primary reason for us to launch in Europe was to service our customers in European languages. Another reason might be to develop an alternative to India for our customers as over time our clients may demand this. Our primary focus in the foreseeable future remains our clients in North America and Europe.
What drives the make or buy decision for WNS?
Broadly our focus is to grow organically with acquisitions providing us with a platform û a new avenue to continue to grow organically. Thus growth is our overriding criteria for an acquisition û we must see potential to significantly grow the business.
Given the fact that this is a very hot market and acquisitions are expensive, we look at acquisitions for which we have the machinery and capabilities to quickly grow the business of the target. The strategy underlying our acquisitions is to buy businesses complementary to our existing business in niche segments û we aim to acquire competencies or marquee customers.
What drove the valuation of Marketics, an analytics company you acquired earlier this year for which you will pay up to $65 million?
Marketics had revenues of $6.7 million for the last financial year ended March, 2007 on which it earned a profit of $1.7 million. It has grown very rapidly since it was set up in 2002 to reach $6.7 million and done this with a very healthy profit margin.
We agreed to pay $30 million upfront and an additional payment calculated at 15 times 2007-08 earnings but capped at $35 million. IÆd note that we trade at a multiple higher then 15 so the acquisition was immediately accretive to us.
What did you acquire via Marketics?
We acquired people, processes, technology and skills which are very scaleable and which also provide us with an immediate opportunity to cross-sell into our existing clients. Marketics has an incredible track record of winning clients. We acquired an outstanding company that is a global industry leader in its respective segments. This provides us with an entry to sell our other products.
The acquisition gave us an early mover advantage in an exponential growth area within KPO itself as the market research, insights and analytics area is well-positioned to benefit from offshoring. The Marketics acquisition was not about substituting people rather via the deal we augmented our capabilities.
Do you anticipate doing further acquisitions to augment your knowledge intensive business?
Within KPO we see a number of markets which are interesting û we are already in a number of the areas we have identified. We have to see significant value addition to acquire. We may selectively pursue small acquisitions.
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