Hinduja Global Solutions revenue growth decelerated from 26.3% in FY2014 to 12.1% in FY2015

21-05-2015 • About Hinduja Global Solutions ($HGS) • By InTwits

Hinduja Global Solutions reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Hinduja Global Solutions has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.3%. At the same time it's a lot of higher than industry average of 4.7%.
CAPEX is quite volatile: 1,632 in FY2015, 1,537 in FY2014, 1,421 in FY2013, 4,891 in FY2012, 649 in FY2011
The company has business model with average profitability: ROIC is at 11.0%
It operates with high leverage: Net Debt/EBITDA is 1.4x while industry average is -0.4x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Hinduja Global Solutions ($HGS) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	10,732	15,543	19,834	25,049	28,076	12.1%
EBITDA	1,569	1,845	2,248	3,245	3,176	-2.1%
Net Income	1,073	1,061	906	1,696	1,650	-2.7%
Balance Sheet
Cash	6,183	5,823	641	1,575	1,969	25.1%
Short Term Debt	1,308	3,590	918	1,857	781	-57.9%
Long Term Debt	203	3,737	3,583	4,485	5,673	26.5%
Cash flow
Capex	649	4,891	1,421	1,537	1,632	6.2%
Ratios
Revenue growth	-66.6%	44.8%	27.6%	26.3%	12.1%
EBITDA growth	-6.5%	17.6%	21.9%	44.3%	-2.1%
EBITDA Margin	14.6%	11.9%	11.3%	13.0%	11.3%	-1.6%
Net Income Margin	10.0%	6.8%	4.6%	6.8%	5.9%	-0.9%
CAPEX, % of revenue	6.0%	31.5%	7.2%	6.1%	5.8%	-0.3%
ROIC	9.9%	8.1%	8.2%	12.4%	11.0%	-1.4%
ROE	11.0%	10.0%	7.7%	12.6%	13.1%	0.4%
Net Debt/EBITDA	-3.0x	0.8x	1.7x	1.5x	1.4x	-0.1x

Revenue and profitability

Hinduja Global Solutions's Revenue jumped on 12.1% in FY2015. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.6 pp from 13.0% to 11.3% in FY2015.

Net Income marign decreased slightly on 0.89 pp from 6.8% to 5.9% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 5.8% in FY2015. CAPEX/Revenue dropped on 25.7 pp from 31.5% in FY2012 to 5.8% in FY2015. It's average CAPEX/Revenue for the last three years was 6.4%.Hinduja Global Solutions invested a big chunk of EBITDA (51.4%) to CAPEX to fuel its growth.

Return on investment

The company operates at good ROE (13.06%) while ROIC is low (11.04%). ROIC decreased slightly on 1.4 pp from 12.4% to 11.0% in FY2015. ROE showed almost no change in FY2015.

Leverage (Debt)

Debt level is 1.4x Net Debt / EBITDA and 2.0x Debt / EBITDA. Net Debt / EBITDA decreased on 0.1x from 1.5x to 1.4x in FY2015. Debt increased slightly on 1.8% in FY2015 while cash jumped on 25.1% in FY2015.

Valuation

The company's trades at EV/EBITDA 4.8x and P/E 6.5x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 9.9x with the industry average at 4.7x.

Management team

Hinduja Global Solutions's CEO is Partha De Sarkar. Partha De Sarkar has 11 years tenure at the company.

Appendix 1: Peers in BPO/KPO

Below you can find Hinduja Global Solutions benchmarking vs. other companies in BPO/KPO industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eclerx Services ($ECLERX)	-69.1%	38.2%	39.7%	27.3%
Vakrangee ($VAKRANGEE)	-72.2%	52.1%	14.3%	26.2%
Xchanging Solutions ($XCHANGING)	65.8%	-62.2%	16.4%	18.0%
Firstsource Solutions ($FSL)		12.1%	25.0%	10.2%	-2.3%
Allsec Technologies ($ALLSEC)		15.5%	74.8%	-37.6%	-24.4%
Median (5 companies)	-69.1%	15.5%	25.0%	18.0%	-13.4%
Hinduja Global Solutions ($HGS)		44.8%	27.6%	26.3%	12.1%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eclerx Services ($ECLERX)	55.9%	40.4%	38.7%	42.0%
Vakrangee ($VAKRANGEE)	15.6%	17.8%	24.7%	27.4%
Firstsource Solutions ($FSL)	14.5%	8.7%	9.9%	11.7%	12.5%
Xchanging Solutions ($XCHANGING)	3.1%	13.1%	10.1%	4.1%
Allsec Technologies ($ALLSEC)	1.9%	-0.2%	11.4%	-13.5%	-6.1%
Median (5 companies)	14.5%	13.1%	11.4%	11.7%	3.2%
Hinduja Global Solutions ($HGS)	14.6%	11.9%	11.3%	13.0%	11.3%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Vakrangee ($VAKRANGEE)	6.8%	27.7%	6.0%	11.7%
Allsec Technologies ($ALLSEC)	5.2%	6.6%	5.8%	5.9%
Eclerx Services ($ECLERX)	7.0%	5.3%	4.0%	2.5%
Xchanging Solutions ($XCHANGING)	2.5%	3.4%	2.0%	1.8%
Firstsource Solutions ($FSL)	2.1%	2.3%	1.4%	1.2%	1.5%
Median (5 companies)	5.2%	5.3%	4.0%	2.5%	1.5%
Hinduja Global Solutions ($HGS)	6.0%	31.5%	7.2%	6.1%	5.8%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Eclerx Services ($ECLERX)	83.3%	61.1%	58.7%	62.4%
Vakrangee ($VAKRANGEE)	17.1%	20.2%	21.3%	28.3%
Firstsource Solutions ($FSL)	7.0%	4.0%	7.0%	9.0%	9.5%
Xchanging Solutions ($XCHANGING)	1.4%	8.3%	6.6%	2.2%
Allsec Technologies ($ALLSEC)	-8.7%	-13.0%	19.9%	-40.1%	-26.5%
Median (7 companies)	11.9%	8.3%	7.0%	9.0%	-8.5%
Hinduja Global Solutions ($HGS)	9.9%	8.1%	8.2%	12.4%	11.0%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Firstsource Solutions ($FSL)	4.3x	4.2x	4.2x	2.8x	2.5x
Vakrangee ($VAKRANGEE)	1.1x	1.9x	1.4x	0.9x
Eclerx Services ($ECLERX)	-0.1x	-0.7x	-0.5x	-0.7x
Xchanging Solutions ($XCHANGING)	-1.2x	-0.8x	-2.8x	-6.2x
Median (4 companies)	-0.0x	0.8x	1.3x	0.1x	2.5x
Hinduja Global Solutions ($HGS)	-3.0x	0.8x	1.7x	1.5x	1.4x

Hinduja Global Solutions stock price chart

Hinduja Global Solutions financials

mln.	FY2010	FY2011	FY2012

Revenue	32,129	10,732	15,543
EBITDA	1,677	1,569	1,845
Net income	1,301	1,073	1,061
CAPEX	417.9	649.0	4,891
Debt	1,148	1,511	7,327
Cash	812.0	6,183	5,823

About Hinduja Global Solutions

Hinduja Global Solutions Limited operates as a customer relationship and business process management company. It offers voice and non-voice based services, such as contact centre, back office transaction processing, and customized information technology solutions in North America, Europe, and Asia. The company provides customer acquisition services, such as lead generation, sales, and after sales services; customer retention services, including on boarding, dispute resolution, and loyalty programs; customer support services, such as help desk support, welcome calls, and billing support; back office support services, including data entry, claims processing, and fulfillment; and analytics and market research services, including satisfaction and loyalty surveys, data analytics, and real time trend and crisis alerts. It also offers interactive services, such as Web/enterprise portals, digital marketing, social CRM, and mobile applications; and HR outsourcing solutions, including payroll processing, HR analytics, global HR management information systems, outsourced recruitment, and learning solutions. Hinduja Global Solutions Limited serves companies in automotive, consumer electronics, consumer packaged goods, consumer products, energy and utilities, banking and financial services, government and public sector, health care, logistics, pharmaceuticals and health services, retail, publishing, technology, media and entertainment, telecommunications, e-commerce, and hospitality industries worldwide. The company was formerly known as HTMT Global Solutions Limited and changed its name to Hinduaja Global Solutions Limited in December 2008. Hinduja Global Solutions Limited was founded in 1973 and is headquartered in Bangalore, India.