The Offering ( can be change at last moment, subject to demand )

Common stock offered :-  35,294,118 shares of common stock par value $0.01

Common stock outstanding after this offering :-  206,405,587 shares of common stock par value $0.01

Offer price range :- $16.00 and $18.00 per share

Valuations

This section contains the final estimate about company's valuations

For details about company/Business/outlook check Overview, For offer/objects of issue check Offer/Objects.

"Genpact" primarily is  business process management company, which provides business process outsourcing (BPO) and software implementation solution to its clients worldwide. It began in 1997 as the India-based captive business process services operation for General Electric Capital Corporation, or GE Capital, GE’s financial services business, and became an independent company at the beginning of 2005.

Prior to December 30, 2004, the business of the Company was conducted through various entities and divisions of the General Electric Company (‘‘GE’’).  In ‘‘2004 Reorganization’’ when company's all operations brought under single entity, the valuation of company was determined at $779,859,000 which include $485,234,000 as Goodwill. And if this offering got through the valuation of company will comes out at nearly $3,508,894,979.

Company earns most of its revenue from offshore BPO solutions, with operations in India contribute nearly 80% of total revenue.

To date company has 26731 employees and 27 delivery centers in various parts of world.

Net revenues attributable to geographic regions based on location of service delivery

Business/Company Outlook

In Offshore BPO business, the companies in developed countries with high labour cost shift some or most of their business processes like data entry, inquiry handling, documentation, tele marketing, customer care help lines, data analysis etc (which can be done and deliver through electronic medium) to other countries with cheap & skilled labour.

Main reason behind evolving of offshore BPO business is the cost advantage due to availably of cheap & skilled labour in various developing countries. Although with the time this cost advantage has been reduced to some extent due to rising economic conditions that lead's to hefty pay rises in developing countries.

More over recent decline in Dollar as compare to most currencies put an extra pressure on margins of these offshore BPO companies which already working with thin margins. As most of these companies earns in dollar but spend in local currency, every 1% decline in Dollar can easily hit company's margins by 0.5%. The effect of this exchange difference is not fully evident as of yet due to currency hedge done by most of the companies but as we go forward if dollar don't rise the effect will be much more evident and hard on offshore BPO companies.

Although the industry in dollar terms will kept on growing with time but if dollar stay at these levels the advantage of offshore BPO business will be decline, so as the margins, particularly of those companies who earns its most revenue from US and accrued their most expenses in developing countries like India.

All in all the future of offshore BPO depends on economic advantage it can deliver as compare to onsite & in-house business process units, which currently is on decline.

With long-term big deals in hand company's revenue is expected to rise in future, but due to geographic mix of it's earning and spending, margins remain uncertain.

Financials  ($ in million)

Company's financial year ends on December 31.

*Quarter ended March 31

Company has shown a revenue growth of nearly 25% and 33% in FY 2006 and Q1FY2007 as compare to corresponding periods last year.

Cash flows can just fulfill its current needs.

Cash in books is low and can't support any big acquisition.

Valuation/Offer value ($ In million)

(Company may not be able to perform this well, chances of company performing this well is, two out of five)

Assume that company shows (assuming that, nothing negative happen with company and company perform exceptionally well and without considering effect of declining dollar)

1. 25% rise in revenue year on year in FY 2007 and FY 2008 from $631 million in FY 2006 to $766 million in FY 2007 and $958 million in FY 2008.

2. Gross margins rise by 1% to 42%

3. Operating margins rise by 3% to 10%

This leave company with operating profit of $77 million and $96 million in FY 2007 and FY 2008 respectively and after deducting interest cost of nearly $12 and $15 and income tax cost of $8 & $9, this leave company with net profit of $57 million and $73 million, that is EPS of $ 0.28 and $ 0.35 for FY 07 and FY 08 respectively.

This means even if company perform exceptionally well, at offer price of $17 company's share is available at one year forward PE of nearly 61 and two year forward PE of nearly 49.

We rate this IPO 1- on scale of "1 to 5" (5 for best)

Negatives

• Offer price is extremely high.

• High dependence on one client i.e. GE.

• Currently company enjoy tax benefits for majority of its operations although by March 31 2009 profit from all of its current delivery centers in India, from which company derived 66% of its revenues in 2006 will be charged income tax @33.6%. Also in China the rate of income tax applicable on company's business is expected to rise by 10% from 15% to 25%.

• Dollar has shown steep decline against other currencies. Due to geographical mix of company's business this decline can hit company very hard.

• Competition is rising in its business and most tough competition is expected to come from software development companies which increasingly offering their existing clients with supplement BPO services.

• Cash flows can just fulfill its current needs.

• Due to high number of employees in BPO industry the dilution of equity capital due to employ stock options plan is much higher in BPO industry than in other industries.

• Cash in company's books is low and can't support any big acquisition, which is a major way of growth in BPO industry. Company has to raise extra debt for any big acquisition.

• In ‘‘2004 Reorganization’’ when company's all operations brought under single entity, the valuation of company was determined at $779,859,000 which include $485,234,000 as Goodwill. And now after nearly two and haft years the owners sees company's valuations at $3,508,894,979. Despite the fact that the company's profit has declined since then (due to amortization of intangibles), so as its future outlook.

• In ‘‘2004 Reorganization’’ company was valued at;

Nearly 4.7 times its gross profit  

And if one uses the same basis, the company's present valuations will comes out at nearly $1188 million that is $5.8 per share.

Nearly 1.8 times its revenue

And if one uses the same basis, the company's present valuations will comes out at nearly $1115 million that is $5.4 per share.

Nearly 9.5 times its operating profit

And if one uses the same basis, the company's present valuations will comes out at nearly $412 million that is $2.0 per share.

* At the time of ‘‘2004 Reorganization’’

** Using ‘‘2004 Reorganization’’ valuations as base.

*** Considering 206,405,587 shares outstanding

Positives

• Long-term contract with GE

• Global presence

• Rich in experience

• Deep insight in various industries like banking and financial services, insurance, manufacturing, transportation and healthcare.

• Global delivery model.

This article reflects personal view of the author about the company and one must read offer prospectus and consult its financial adviser before making any investment decision