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Old 27th August 2007, 04:49 PM
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Subprime crisis hits Indian outsourcers

http://www.businessweek.com/ap/finan.../D8R9C0CG1.htm

Subprime crisis hits Indian outsourcers

BANGALORE, India

Indian companies that process U.S. mortgages are reporting fewer work orders and diminishing revenue because of the subprime loan fallout overseas.

Several companies have moved employees once assigned to mortgage documentation and related services to other areas. There is a fear of layoffs should the crisis in the United States continue.

As U.S. lenders tighten credit or close down, the volume of paper work done by Indian outsourcing companies declines because of fewer applicants and fewer loans.

"There are likely to be staff cuts, but companies will first try and redeploy them toward other services," said Rishi Maheshwari, an analyst at Networth Stock Broking.

Mumbai-based WNS Holdings is in the process of redeploying 500 of its staff after one of its top 10 clients -- First Magnus Financial Corp. -- filed for bankruptcy in the U.S.

Bangalore-based Infosys Technologies Ltd. and iGate Global Solutions Ltd. have also redeployed about 50 and 100 staff respectively due to the winding up of their business with GreenPoint.

iGate said the share of mortgage processing in its total revenue fell from 10 percent to about 7 percent over the past two quarters because of "negligible contribution from GreenPoint."

Bigger companies such as Infosys Technologies Ltd. say they do not face much downside as mortgage processing forms a very small part of their business.

"There will be some impact on us, though minimal, maybe less than a million dollars," said Amitabh Chaudhury, who heads the company's business processing unit.

The full impact will be "clearer in the next two to three months" once U.S. companies complete their year-end budget evaluations, Maheshwari said.

Some companies feel redeploying staff would be cost prohibitive.

Chief Financial Officer Alok Misra at Mphasis Ltd. indicated his company might be forced to cut some jobs. "Redeploying staff ... is costly as it involves retraining," Misra said.

Mphasis, based in the western Indian city of Pune, is majority owned by EDS Corp. of the United States.
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