Source: www.business-standard.com

After acquiring ABN Amro Holdings NV, who along with Barclays, Britain’s third-largest bank has a strong presence in India, there is every likelihood that the latter will shift 10,800 full-time jobs to low-cost destinations, including India.

In a statement issued jointly by Barclays and ABN Amro, the two confirmed the deal is expected to phase out 12,800 jobs over three years, after completing the world’s largest financial services takeover, thus reducing expenses by $3.8-billion.

As well, ABN Amro and Barclays could also see a top-level reshuffle in India. Presently, Mani Subramanium is the CEO of Barclays Bank India, with Samir Bhatia as its Managing Director, India and the Indian Ocean region. And, Romesh Sobti stands as CEO for ABN Amro India.

“Part of the expected staff reduction will be through establishing shared services and off-shoring those positions to low cost locations, such as India, where new staff will be recruited at ABN Amro’s existing ACES operations,” the statement said. ACES is an info-tech operations subsidiary

This means, at present, Barclays Bank and ABN Amro together have a combined workforce of about 2,17,000, comprising 1,23,000 employees for the British bank and 94,000-employees for ABN Amro, while excluding the headcount of LaSalle Corp. In a recent statement the Dutch bank’s officials declared, the Chicago-based LaSalle unit of ABN Amro is to be sold to Bank of America for $21-billion.

Earlier, ABN Amro Bank, who employs about 4,000 back-office workers in six offices in Mumbai, Chennai and New Delhi, had announced its plans to hire 2,000-people in India by end-March 2007.

Analysts proclaim this merger has created a win-win situation for both banks in India, since it was triggered by Barclays’ ambition to increase its exposure in Asia, particularly India, where it is in the process of launching full-scale retail and commercial banking.

Therefore, Barclays, with three branches in India is getting ready for access to ABN Amro’s 28-country-wide branches, a direct result of the merger, including access to ABN Amro’s low cost deposit base of around Rs. 11,864-crore and advances portfolio of Rs. 15,073-crore in India.

On an average, it is to be noted Reserve Bank of India issues foreign banks 12-licences for operating branches on an annual basis. Under such circumstances, the acquisition of ABN Amro has bestowed Barclays with an advantage, when it comes to distribution network.

Source: www.business-standard.com

Outsourcing / off-shoring has proved to be big business for India’s IT industry, especially its Big Four as Wipro, Satyam join TCS, Infosys in beating moolah blues.

Brushing aside fears that wage inflation, rupee appreciation and a perceived US slowdown would clamp the growth of Indian software firms, the total turnover of India’s top four IT service providers i.e. Tata Consultancy Services (TCS), Infosys Technologies, Wipro Ltd., and Satyam Computer Services has crossed the $10-billion mark for financial year 2007.

With the announcement of Wipro and Satyam’s financial year 2007-08 revenues of $3.13-billion (IT business amounting to only around Rs. 13,578-crore) and $1.46-billion (consolidated amounting to Rs. 6,668-crore) respectively, the total income of these four IT giants stands at around $12-billion (Rs. 52,825-crore), a slightly over 46% jump over last year’s figure of Rs. 37,682-crore.

This means that even after factoring in rupee appreciation and wage inflation, total income of these Indian Tigers, by 2009 could surpass the $20-billion mark, assuming an annual growth rate of 30%.

Even the aggregate net profits of the firms increasing by 43.5%, touched Rs. 12,432-crore (around $3-billion) in fiscal 2007.

However, their net profit margins (as a percentage of the revenue) have risen marginally by 0.54%, averaging 23.53% in fiscal 2007 against 22.99% in financial year 2006-07.

Satyam, which underperformed the other three firms, registered 30% growth in sales and 22.2% in profit in 2006-07.

However, the rising rupee (recording a 6% year-on-year increase) and wage inflation (the four companies added 67,352-employees in fiscal 2007 to take their total figure to 265,193 – a 34% increase) could play spoil sport.

“While the guidance of these companies is robust, the rupee could affect the operating margins by 150-basis points, while wage inflation could pluck around 300-basis points from the margins,” says Krupal Maniar, Research Analyst, Emkay.

For instance, the employee-related costs of the four firms went up 46.12% touching Rs. 28,827-crore, increasing 222-basis points to account for 54.54% of their total revenues.

The employee cost as a percentage of Wipro’s revenue was 49.7%, while it accounted for 63.8% of Satyam’s revenues.

Harit Shah, analyst, Angel Broking, corroborates: “We see the rupee volatility as a major factor in the forward growth of these companies. They will have to have structured currency management to maintain these growth rates.”

These fears notwithstanding, the analysts note that better pricing, improvement in employee utilisation figures, a move towards more off-shoring, and breaking into geographies other than the US could help the IT firms stem the adverse effects.

Indian IT firms have begun to take note of a changing scenario, even as they formulate an aggressive strategy to meet the challenge. Having gained steam, they are not about to let go what they have battled so hard for.