Investor Presentation March 20, 2015
Disclaimer Certain statements in this presentation concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in the BPM industry including those factors which may affect our cost advantage, wage increases, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-timeframe contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the Companies in which Hinduja Global has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Hinduja Global may, from time to time, make additional written and oral forward-looking statements, including our reports to shareholders. The company does not undertake to update any forwardlooking statement that may be made from time to time by or on behalf of the company. 2 HGS Confidential www.teamhgs.com March 20, 2015
HGS Overview
About us HISTORY Part of the Hinduja Group, in the BPM business since 2000 Erstwhile HTMT, IT & BPM business demerged October 1, 2006 Rebranded as HGS in 2008 SNAPSHOT VALUE PROPOSITION FY 14 Revenues - US $412 mn FY14 EBITDA - US $53 mn Presence in 11 countries 28,000 + employees 140 active clients for the BPM business (excluding payroll clients) CAGR of greater than 25% over last 5 years, increasingly non-linear Improving margins y-o-y, with a TTM EBITDA growth rate of 32% Strong balance sheet with low Debt/Equity ratio of 0.42x Track record of consistent dividends 4 HGS Confidential www.teamhgs.com March 20, 2015
Who we are Best Mid-Sized Contact Centre (Outsourced) by Contact Centre World Awards November 2013 Best Contact Center award in FY 14 (second consecutive year) at Contact Center World EMEA finals Best Outsourced Provider Runner Up Call Center Week July 2013 Global Services 100 Survey - Top 2 Call Center Companies globally: Neo-IT & Global Services Magazine Best Under A Billion Forbes Asia 5 HGS Confidential www.teamhgs.com March 20, 2015
Who we are HGS is recognized as one of the leading players in Contact Center Outsourcing space by the analyst and advisor community In the past quarter, HGS have been featured in a number of high profile reports that showcase our vertical expertise and extensive capabilities to potential future buyers Nelson Hall recognized HGS as a Leader in the Customer Management Services for telecommunications, cable and satellite Everest Group included HGS as a Major Contender in their Peak Landscape for banking, financial services and insurance Everest Group included HGS in their Healthcare Contact Center Outsourcing Peak Landscape Gartner included HGS in the Magic Quadrant for Customer Management Contact Center BPO HfS Research included HGS in their Telecom Operations assessment Blueprint HfS Research included HGS in their Marketing Operations and Digital Engagement Management Blueprint Nelson Hall has published a profile of HGS Healthcare Provider capabilities 6 HGS Confidential www.teamhgs.com March 20, 2015
Who we are Analytics Customer Experience Management Digital Enablement Marketing and Digital Enablement Services Voice Solutions Social Media Engagement Digital Assist chat, email, video Digital Marketing Social Care Mailroom Solutions Analytics & Insight Transaction Servicing Business Solutions Business Services Consumer Interaction Services Interaction Transformation Innovation 7 HGS Confidential www.teamhgs.com March 20, 2015
What we do Almost all HGS day to day activities relate to consumer transactions and interactions Healthcare/ Insurance Financial Services Telecommunications Consumer Products 58 Million transactions, 10 Million calls, 2.7 Million emails per annum Annual claim payout of $11.5 billion USD and $1.3 billion USD recoveries initiated for 4 of the Top 10 healthcare payers and several large hospitals/health systems in the US Only credit card issuer to win the J.D. Power Award for customer experience 6 consecutive years driven by HGS s best in class NPS customer service - supporting all aspects of consumer financial transactions Providing extensive consumer support for land lines, wireless, satellite, IPTV, hi-speed internet from supporting the consumer from the point of purchase to end of service HGS provides the best service across all partners and internal centers consistently; while another clients operation recently won best mid sized call center worldwide National technical support organization for industry leading tablets and smartphones Supporting many consumer electronics manufacturers and distributors from purchase support to post warranty servicing Support over 3000 consumer branded products for 8 European countries for client enquires include telephone, paper, email and social media 8 HGS Confidential www.teamhgs.com March 20, 2015
What we handled in FY 2014 $11.5 Billion Claims Payout in Healthcare Insurance Responded to More Than 7.1 Million E-mails Handled Over 2.6 Million Web Chats Processed over 2.8 Million Pay-slips More than 58 Million Transactions in Healthcare Insurance Attended to Over 441 Million Calls 9 HGS Confidential www.teamhgs.com March 20, 2015
What We Do Industry Sectors 5.8% Media 2.5% Chemicals & Biotech 7.8% BFS 33.8% Health Insurance, Pharma & Healthcare Continued Growth in the Healthcare Sector * Based on YTD Dec 14 Financials 7.5% Others 28.9% Telecom & Technology 13.7% Consumer Elec, Products, Svcs & Retail Healthcare/ Insurance (FY 2014) 58 million transactions, 10 million calls, 2.7 million emails for 4 of the top 10 healthcare payers and several large hospitals and health systems Financial Services Best in class NPS customer service - supporting all aspects of consumer financial transactions Telecommunications Provides consumer support for land lines, wireless, satellite, IPTV, hi-speed internet supporting the consumer from the point of purchase to end of service Won best mid sized call center worldwide for one of the clients Consumer Products Tech-support for industry leading tablets and smartphones and many consumer electronics manufacturers from purchase to post warranty servicing 10 HGS Confidential www.teamhgs.com March 20, 2015
What we do Our Service offering Mix and delivery model 21% Transaction Processing 4% CRM Non Voice 37% Offshore 75% CRM Voice 63% Onshore Pure play BPO companies have 30-40% offshore revenues IT services have around 70% offshore revenues 11 HGS Confidential www.teamhgs.com March 20, 2015
Milestones in our growth story Launch of HTMT brand First International Insurance customer with 23 seats Acquisition of Philippines center: C-Cubed / Source 1 Asia Acquisition of Source One Acquisition of Affina in US Strategic foray into National Markets UK entry Growth Entry into Canada Entry into Healthcare provider market space Entry into HRO space Expansion in Jamaica and Middle East Global Footprint / One HGS A Start Enter New Geos 2006-2010 2011-2014 2001-2005 2000 12 HGS Confidential www.teamhgs.com March 20, 2015
Our USP Operational Excellence Only company in the world to have escm SP 4 certification across 3 geo s simultaneously 1 Domain Expertise Technology / Media / Telecom Healthcare, Insurance, BFS Consumer Electronics & Packaged Goods Other Verticals: Government, Publishing, Energy & Utilities, Transportation & Logistics Significant client tenure; with some clients of more than 3 decades! CSAT scores amongst the best in class. 4 Success at HGS has 4 distinct cornerstones 2 Easy to do Business The hallmark of our success has always been the flexibility and agility with which we approach our customer s dynamic needs, designing solutions to create long-term value Classified as a major contender in the BPM space by Everest Group 1 Globally Local Presence in India, USA, Canada, UK, Europe, Philippines, and Jamaica 3 Philosophy of Right Sourcing : Getting the onshore-offshore mix right for round-the-clock productivity, shorter lead-times, faster response times and cost benefits to clients 1 As per Everest Group s PEAK Matrix 2014 classification model 13 HGS Confidential www.teamhgs.com March 20, 2015
The Marketplace and Demand Outlook Marketplace Dynamics Demand Environment Total BPM market is over $160 billion In-house BPM 4 times the size of the outsourced BPM market Next 5 year CAGR for BPM expected to be 5.9% (Gartner Q1, 2013 forecast) Billion Dollar Plus players in this are still only a handful, who grew between 5% to 20% Essentially a large, fragmented but growing market, enough for everybody to play in Strong U.S recovery driving organic volume growth, both onshore and offshore Canada is an under-penetrated market for both outsourcing and offshoring UK and Europe subdued; first signs of recovery visible, growth expected to pick up with a lag of 6-9 months Offshoring momentum strong India domestic business environment continues to be challenging, wait and watch approach, portfolio rationalization complete Source: Gartner 14 HGS Confidential www.teamhgs.com March 20, 2015
Pillars of our Strategy Investments in Growth M&A for new markets and competencies Innovation and New Product Development Robust Talent Management Revenue CAGR of over 25% in the last 5 years when the world went through deep recession Significant Investments in sales and marketing Impressive track record of mining and growing tenured client relationships Entry into Philippines, US, UK and Canada through acquisitions to achieve speed of market entry Entry in Healthcare Provider Market through EBOS and Payroll through HCCA Emerging interest in Latin America and Middle East. Developing offerings in New Age Customer Interaction Management Services like self-service, web, social media and analytics In-house IT teams deliver proprietary workflow and process automation platforms, interactive services, animation, learning and knowledge management systems Good mix of tenured leadership and new talent from the industry From the top management institutes in India and Abroad Strong career development and performance management processes Attractive career paths, job enhancements, ESOPs and profit share plans Track record of attracting and retaining high performers 15 HGS Confidential www.teamhgs.com March 20, 2015
HGS M&A Strategy ACCESS TO EMERGING TECHNOLOGIES SCALE ACCESS TO NEW MARKETS ACCESS TO NEW CAPABILITIES & COMPETENCIES Right valuations and strict Payback norms Avoid auctions; private, offmarket deals Right size, business and cultural fit Take time to integrate; single brand in the market Retain leadership 16 HGS Confidential www.teamhgs.com March 20, 2015
Onshore Acquisition Drives Offshore Growth Rev in USDmn 100.0 80.0 US Onshore Revenue (USD mn) 78.2 80.5 81.3 71.9 65.2 84.0 90.1 60.0 53.0 40.0 20.0 0.0 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 *Annualized 250.0 200.0 Offshore Onshore CAGR 15% 150.0 100.0 50.0 47.8 67.7 70.6 82.7 101.3 111.4 128.5 130.1 CAGR 8% - 53.0 65.2 71.9 78.2 80.5 81.3 84.0 90.1 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 17 HGS Confidential www.teamhgs.com March 20, 2015
Financial Overview
Tenured Client Relationships 23% Others 15% Top Client Top 20 clients contribute 77% of the Total Revenue 13% Clients 11-20 14% Clients 6-10 Client Concentration 35% Clients 2-5 6% Client Tenure Below 5 Years 6% Client Tenure Over 20 Years 66% of Revenues from clients with more than 10 years tenure 22% Client Tenure 5-10 Years Revenue by Tenure 66% Client Tenure 10-20 Years * Based on YTD Dec 14 Financials 19 HGS Confidential www.teamhgs.com March 20, 2015
37% of revenues originated have offshore delivery YTD Dec 14 19% CAD 62% USD 19% Canada 27% India 8% INR 11% GBP Revenue by Billing Currency 11% UK 27% USA Revenue Distribution by Geo 16% Philippines 20 HGS Confidential www.teamhgs.com March 20, 2015
USD/INR and USD/Philippine Peso variations impact our financials 70.00 65.00 60.00 USD/INR 62.12 Over the last 3 years: 55.00 50.00 45.00 49.58 Rupee has depreciated around 25% 46.00 45.00 44.00 43.00 USD/PHP 44.25 And Philippine Peso (PhP) has depreciated only about 4% 42.00 41.00 40.00 42.53 HGS hedges up to 75% of USD/ Rs and USD/ PhP revenues 21 HGS Confidential www.teamhgs.com March 20, 2015
Rs in m Revenue Growth of over 25 % per annum 30,000 25,000 20,000 15,000 10,000 5,000 8,920 10,730 15,540 19,830 25,090 28,010 - FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 ( YTD Dec 14 Annualised) 22 HGS Confidential www.teamhgs.com March 20, 2015
Revenue & Profitability Trend Revenues in Rs mn Revenue Business ROCE% EBITDA % PBT% PAT% 25,000 20% 16.8% 20,000 15% 12.8% 12.1% 15,000 10% 11.8% 11.3% 12.9% 10,000 5% 6.8% 4.6% 6.8% 5,000 0% 15,543 19,834 25,049 FY 12 FY 13 FY14 - Growth of HGS in FY 14 (in Rupee terms) was 26.3% Of this organic (currency neutral) growth was 14.6%, growth due to exchange rate was 10.2%, and growth due to full year impact of EBOS acquisition (in October, FY 13) was 1.5%. * Business ROCE is calculated as EBIT (excl. Treasury Income) / Capital Employed (excl. Treasury Surplus) 23 HGS Confidential www.teamhgs.com March 20, 2015
FY 15 Quarterly performance Strong growth in the Healthcare sector ; Profitability subdued due to ramp costs in Philippines 24 HGS Confidential www.teamhgs.com March 20, 2015
HGS Strategy Focus on Healthcare Business Healthcare Revenue in USD mn 180.0 40.0% 160.0 Healthcare Revenue As a % of Total Revenue 38.0% 140.0 120.0 33.8% 100.0 80.0 60.0 27.8% 40.0 24.8% 20.0 22.7% - 73.4 90.5 114.5 154.9 FY 12 FY 13 FY 14 FY 15* 36.0% 34.0% 32.0% 30.0% 28.0% 26.0% 24.0% 22.0% 20.0% Healthcare business has grown at a CAGR of 22% over the last 5 years * Based on YTD Dec 14 (Annualized) 25 HGS Confidential www.teamhgs.com March 20, 2015
Revenue in Rs Million Share of India Domestic CRM business reducing 2,500 India Payroll Business India CRM Business India CRM as % of Total Revenue 18.0% 2,000 227 389 553 587 16.0% 14.0% 1,500 10.8% 12.0% 1,000 8.0% 10.0% 8.0% 500 6.3% 6.1% 6.0% - 1,675 1,588 1,570 1,680 FY 12 FY 13 FY 14 FY 15* 4.0% * Based on YTD Dec 14 (Annualized) 26 HGS Confidential www.teamhgs.com March 20, 2015
Summary Financial Profile As at 31st Dec 2014 HGSL Particulars Rs. USD Net Worth (in millions) 15,561.5 246.3 Book value per share 752.4 11.9 Price per share 550.0 9 Dividend per share (FY 14) 20.0 0.3 EPS (TTM) 76.7 1.2 P/E Ratio (TTM) 7.2 7.2 Gross Debt (in millions) 6,297.0 99.7 Total Cash (in millions) 5,647.0 89.4 Net Debt (Net Cash) (in millions) 650.0 10.3 Net Debt/EBITDA 0.20x 0.20x Total Debt/Equity 0.40x 0.40x Book Value taken is as reported on QE Dec 2014 Stock prices and USD/INR exchange rate latest available prices Total Debt includes foreign currency debt taken at applicable exchange rates 27 HGS Confidential www.teamhgs.com March 20, 2015
Leverage Profile (Rs. Million) Dec 31, 2014 Mar 31, 2014 Total Debt 6,297 6,342 Less: Cash and Treasury Surplus 5,647 5,618 Net Debt/ Net Cash 651 724 Net Worth 15,662 14,521 Net Debt/ EBITDA 0.20x 0.22x Total Debt/ Equity 0.40x 0.44x 28 HGS Confidential www.teamhgs.com March 20, 2015
In Conclusion
Summing it up Big company capabilities with entrepreneur spirit HGS (Revenue over $400 mn) is a part of the multi-billion dollar Hinduja Group with big company attributes. We are entrepreneurs at our core and are known to be nimble and responsive with innovative customer centric solutions Financial Strength Debt-free and with the backing of our multi-billion dollar parent company, allows us to invest in our people, process, technologies, and business models that create value for our clients including carve outs, asset monetization and transformational agreements with committed outputs Unique Local UK, Canada and USA Operating Model Our local CEO s and leadership teams operate their business with complete P+L accountability and empowerment. These teams are from the local markets, providing extensive local client insight and intimate knowledge and a fabric within the local markets Operational Excellence Our heritage and business excellence framework enhances our clients business often reducing HGS fees and dramatic business value through automation, elimination and self serve Onshore Strategy and Investments HGS s industry leading 67% of revenue being delivered domestically enables empathy and consumer centricity to effectively support our clients and their customers Client specific and industry insight Our long tenured relationships across the entire consumer channel suite, allow HGS to act on our clients behalf to resolve and support their clients with deep industry insight in all methods that the consumers desire voice, web, email, paper, SMS, social Media, video, IVR and self service 30 HGS Confidential www.teamhgs.com March 20, 2015
Peer Comparison
Peer Comparison - Growth FY 14 USD Growth rate 18.0% 14.0% 10.0% 6.0% 2.0% -2.0% 16.1% 11.8% 9.4% 9.2% 6.6% -1.3% HGS* Sykes Genpact WNS EXL FSL* * Currency Adjusted growth rate (in USD) 32 HGS Confidential www.teamhgs.com March 20, 2015
Peer Comparison: TTM ending Dec 2014 Particulars HGSL FirstSource Genpact WNS Sykes EXL TTM data in $ mn Net Sales 448.09 502.75 2,279.44 531.36 1,327.50 499.29 TTM Growth 14.8% 1.8% 6.9% 8.1% 5.1% 4.4% EBITDA 54.44 62.15 333.11 100.85 151.68 88.82 Growth 6.6% 9.9% -4% 26% 37.8% -9.4% EBITDA% 12.1% 12.4% 14.6% 19.0% 11.4% 17.8% PBT 35.03 39.17 249.52 78.72 77.16 37.81 Growth -6.1% 30.6% -18% 62% 50.3% -41.7% PBT% 7.8% 7.8% 10.9% 14.8% 5.8% 7.6% PAT 25.92 37.76 192.24 57.24 57.79 32.48 Growth -9.3% 32.7% -17% 57% 55.2% -32.4% PAT% 5.8% 7.5% 8.4% 10.8% 4.4% 6.5% Effective Tax % 26.0% 3.6% 23.0% 27.3% 25.1% 14.1% Reported ROCE 11.6% 9.8% 14.2% 16.8% 10.9% 7.2% $/RE exchange rate used INR 61.20 to the dollar (average for the period Jan 14 to Dec 14) 33 HGS Confidential www.teamhgs.com March 20, 2015
Thank You For further information please contact: Name Surname Job title Email: name.surname@teamhgs.com Direct line: 1-XXX-XXX-XXXX Mobile: 1-XXX-XXX-XXXX Fax: 1-XXX-XXX-XXXX