2012

Engineering Services Outsourcing:

Financial Performance Review
Revenue fall necessitates curb in expenses

ValueNotes Database Pvt Ltd

1 Bhuvaneshwar Society, Abhimanshree Road,
Pashan, Pune 411008, Maharashtra, India

T:+91-20-6623 1767 / 1743

E:research@valuenotes.co.in
W: www.valuenotes.co.in

2012
Financial Performance Report Series

Engineering Services Outsourcing: Financial Performance Review

COPYRIGHT: The report and its contents are for the use of ValueNotes' license holders only, and may
not be provided to any third party, in any form, for any purpose whatsoever, without the express
written consent of ValueNotes Database Pvt Ltd.
As used in this document, ValueNotes means ValueNotes Database Pvt Ltd. Please see
www.valuenotes.co.in/about for a detailed description of ValueNotes Database Pvt Ltd and its
activities.
i
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

2012
Engineering Services Outsourcing: Financial Performance Review

Table of Contents
Research Methodology ......................................................................................................................vi
Executive Summary ........................................................................................................................... ix
1 Macroeconomics ......................................................................................................................... 1
1.1
Global Economy .................................................................................................................... 1
1.2
Major Economic Regions ....................................................................................................... 2
1.3
National Economic Performance of Select Countries ............................................................. 4
1.4
Currency Movements............................................................................................................ 7
1.5
Global Capital Markets .......................................................................................................... 8
2 Industry Insights.......................................................................................................................... 9
2.1
Indian IT-BPO Industry Revenue ............................................................................................ 9
2.2
IT-BPO Contribution Towards Indias GDP ........................................................................... 10
2.3
IT-BPO Contribution Towards Indias Exports ...................................................................... 10
3 Operating Earnings.................................................................................................................... 12
3.1
Total Income ....................................................................................................................... 12
3.2
Revenue Per Employee ....................................................................................................... 14
4 Expenses ................................................................................................................................... 16
4.1
Operating Cost .................................................................................................................... 16
4.2
Employee Cost .................................................................................................................... 18
4.3
Total Cost Per Employee ..................................................................................................... 19
5 Profitability ............................................................................................................................... 21
5.1
EBITDA Margin .................................................................................................................... 21
5.2
EBIT Margin ........................................................................................................................ 22
5.3
Net Profit Margin ................................................................................................................ 23
5.4
Net Profit Per Employee...................................................................................................... 24
6 Operating Efficiency .................................................................................................................. 26
6.1
Debtor Days ........................................................................................................................ 26
6.2
Creditor Days ...................................................................................................................... 28
6.3
Debtor Days Versus Creditor Days ....................................................................................... 29
6.4
Net Operating Cycle ............................................................................................................ 29
7 Solvency.................................................................................................................................... 31
7.1
Quick Ratio ......................................................................................................................... 31
7.2
Debt Ratio........................................................................................................................... 33
7.3
Debt/Equity Ratio ............................................................................................................... 34
7.4
Interest Coverage ............................................................................................................... 35
8 Capital Efficiency ....................................................................................................................... 37
8.1
Return On Capital Employed ............................................................................................... 37
8.2
Return on Equity ................................................................................................................. 38
8.3
Return On Assets ................................................................................................................ 39
9 Service Provider Evaluation ....................................................................................................... 41
10 Company Profiles ...................................................................................................................... 46
10.1 3D Concept ......................................................................................................................... 46
10.2 Aktis Engineering ................................................................................................................ 48
10.3 Altair India .......................................................................................................................... 50
10.4 Celstream ........................................................................................................................... 52
10.5 EniT Solutions ..................................................................................................................... 54
10.6 Hoyt Engineering ................................................................................................................ 56
10.7 ImageGrafix ........................................................................................................................ 58
10.8 Mahindra Engineering......................................................................................................... 60
10.9 Neilsoft ............................................................................................................................... 62
10.10 QuEST Global ...................................................................................................................... 64
ii
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

2012
Engineering Services Outsourcing: Financial Performance Review
10.11 Rave Tech ........................................................................................................................... 66
10.12 Tantra Infosolutions ............................................................................................................ 68
10.13 Tooltech ............................................................................................................................. 70
11 Appendix................................................................................................................................... 72

iii
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

2012
Engineering Services Outsourcing: Financial Performance Review

Table of Exhibits
Exhibit i: Service Provider Categories and Sample Size .................................................................................... vii
Exhibit ii: Parameters Used for Service Provider Comparison .......................................................................... vii
Exhibit iii: Legend Used for Service Provider Comparison ............................................................................... viii
Exhibit iv: List of Abbreviations ...................................................................................................................... viii
Exhibit v: Top Five Service Providers in the Engineering Services Outsourcing Segment in 2011 ......................... x
Exhibit 1: Global GDP Growth Rate from 2007 to 2013 ...................................................................................... 1
Exhibit 2: European Union (EU) GDP Growth Rate from 2007 to 2013 ............................................................... 2
Exhibit 3: BRIC (Brazil, Russia, India, China) GDP Growth Rate from 2007 to 2013.............................................. 2
Exhibit 4: India GDP Growth Rate from 2007 to 2013 ........................................................................................ 4
Exhibit 5: USA GDP Growth Rate from 2007 to 2013 ......................................................................................... 5
Exhibit 6: UK GDP Growth Rate from 2007 to 2013 ........................................................................................... 6
Exhibit 7: Indian Currency Movements from 2007 to 2011 ................................................................................ 7
Exhibit 8: Capital Market Performance from 2007 to 2011 ................................................................................ 8
Exhibit 9: Indian IT-BPO Revenue from 2007 to 2012 ........................................................................................ 9
Exhibit 10: Indian IT-BPO Contribution to the National GDP ............................................................................ 10
Exhibit 11: Indian IT-BPO Contribution to the National Exports ....................................................................... 10
Exhibit 12: Revenue and Growth Over Five Years ............................................................................................ 12
Exhibit 13: Revenue by Service Provider Type ................................................................................................. 13
Exhibit 14: Revenue Change (YoY) by Service Provider Type ............................................................................ 13
Exhibit 15: Revenue of ESO Segment by Service Provider in 2011 .................................................................... 14
Exhibit 16: Revenue Per Employee (RPE) Over Five Years ................................................................................ 14
Exhibit 17: RPE by Service Provider Type ......................................................................................................... 15
Exhibit 18: RPE Change (YoY) by Service Provider Type.................................................................................... 15
Exhibit 19: Operating Expense as a Percent of Revenue For Five Years ............................................................ 16
Exhibit 20: Operating Expense Change (YoY) by Service Provider Type ............................................................ 17
Exhibit 21: Operating Expense as a Percent of Revenue by Service Provider Type ............................................ 17
Exhibit 22: Employee Cost as a Percent of Operating Expense Over Five Years ................................................ 18
Exhibit 23: Employee Cost as a Percent of Revenue Over Five Years ................................................................ 18
Exhibit 24: Employee Cost as a Percent of Revenue by Service Provider Type .................................................. 19
Exhibit 25: Total Cost Per Employee Over Five Years ....................................................................................... 19
Exhibit 26: Total Cost Per Employee by Service Provider Type ......................................................................... 20
Exhibit 27: EBITDA Margin Over Five Years...................................................................................................... 21
Exhibit 28: EBITDA Margin by Service Provider Type........................................................................................ 22
Exhibit 29: EBIT Margin Over Five Years .......................................................................................................... 22
Exhibit 30: EBIT Margin by Service Provider Type ............................................................................................ 23
Exhibit 31: NPM Over Five Years ..................................................................................................................... 23
Exhibit 32: NPM by Service Provider Type ....................................................................................................... 24
Exhibit 33: Net Profit Per Employee Over Five Years........................................................................................ 24
Exhibit 34: Net Profit Per Employee by Service Provider Type.......................................................................... 25
Exhibit 35: Debtor Days Over Five Years .......................................................................................................... 26
Exhibit 36: Debtor Days by Service Provider Type............................................................................................ 27
Exhibit 37: Debtor Days Change (YoY) by Service Provider Type ...................................................................... 27
Exhibit 38: Creditor Days Over Five Years ........................................................................................................ 28
Exhibit 39: Creditor Days by Service Provider Type .......................................................................................... 28
Exhibit 40: Debtor Days Versus Creditor Days ................................................................................................. 29
Exhibit 41: Net Operating Cycle Over Five Years .............................................................................................. 29
Exhibit 42: Net Operating Cycle by Service Provider Type ................................................................................ 30
Exhibit 43: Quick Ratio Over Five Years ........................................................................................................... 31
iv
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

2012
Engineering Services Outsourcing: Financial Performance Review
Exhibit 44: Quick Ratio by Service Provider Type ............................................................................................. 32
Exhibit 45: Quick Ratio Change (YoY) by Service Provider Type ........................................................................ 32
Exhibit 46: Debt Ratio Over Five Years ............................................................................................................ 33
Exhibit 47: Debt Ratio by Service Provider Type .............................................................................................. 33
Exhibit 48: Debt/Equity Ratio Over Five Years ................................................................................................. 34
Exhibit 49: Debt/Equity Ratio by Service Provider Type ................................................................................... 34
Exhibit 50: Debt/Equity Ratio Change (YoY) by Service Provider Type .............................................................. 35
Exhibit 51: Interest Coverage Over Five Years ................................................................................................. 35
Exhibit 52: Interest Coverage by Service Provider Type ................................................................................... 36
Exhibit 53: Return On Capital Employed (ROCE) Over Five Years...................................................................... 37
Exhibit 54: ROCE by Service Provider Type ...................................................................................................... 38
Exhibit 55: Return On Equity (ROE) Over Five Years ......................................................................................... 38
Exhibit 56: ROE by Service Provider Type ........................................................................................................ 39
Exhibit 57: Return on Assets (ROA) Over Five Years ......................................................................................... 39
Exhibit 58: ROA by Service Provider Type ........................................................................................................ 40
Exhibit 59: Consolidated Ranking of Top Five Service Providers ....................................................................... 41
Exhibit 60: Revenue Ranking of Top Five Service Providers.............................................................................. 41
Exhibit 61: RPE Ranking of Top Five Service Providers ..................................................................................... 42
Exhibit 62: Total Cost Per Employee Ranking of Top Five Service Providers ...................................................... 42
Exhibit 63: EBITDA Margin Ranking of Top Five Service Providers .................................................................... 42
Exhibit 64: Net Profit Per Employee Ranking of Top Five Service Providers ...................................................... 43
Exhibit 65: Net Operating Cycle Ranking of Top Five Service Providers ............................................................ 43
Exhibit 66: Quick Ratio Ranking of Top Five Service Providers.......................................................................... 43
Exhibit 67: Debt/Equity Ratio Ranking of Top Five Service Providers ................................................................ 44
Exhibit 68: ROCE Ranking of Top Five Service Providers ................................................................................... 44
Exhibit 69: ROE Ranking of Top Five Service Providers ..................................................................................... 44

v
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

2012
Engineering Services Outsourcing: Financial Performance Review

Research Methodology
About the Financial Performance Report Series
These reports have been designed to analyze the financial performance of companies in the
Knowledge Process Outsourcing (KPO) industry. The information in this series will be of interest to
KPO service providers, consultancies, investment firms, and buyers of KPO services. It is aimed at
providing decision makers, analysts and influencers with relevant and actionable insights. The report
will enable service providers to benchmark their performance against their peers. It will help
investors and consultants evaluate the financial health of their service providers. Buyers of KPO
services can use this information to make informed decisions.

Scope of the Report

The Financial Performance Report analyzes key financial ratios of companies that constitute the
engineering services outsourcing (ESO) segment. The companies covered in this report are pure-play
KPOs with operations in India. Pure-play KPOs provide services for a specific segment, process or
industry; in this case, the engineering services outsourcing segment. Only private limited companies
that are incorporated in India and that filed annual returns with the Government of Indias Ministry
of Corporate Affairs (MCA) are considered in the report. The information presented in this report is
based on financial statements of companies between the fiscal period from 2007 and 2011.
In addition, publicly available information and past research by ValueNotes on information
pertaining to the companies service offerings and employee strength is used in this report. For more
information regarding ValueNotes publications on the engineering services outsourcing industry,
refer to the section titled For Further Reading.

Special Notes
As per the reporting guidelines of the MCA, private limited companies are required to file their
balance sheets, profit and loss accounts, annual returns and compliance certificates. However, all
the line items in the financial statements are not mandatory.

Financial information in the report is reported in Indian Rupees (INR).

The financial period reported by the company has been considered as is and has not been
adjusted. Companies in the sample have differing report periods such as April to March, and
January to December.
The financial statements of the companies have been computed as reported and
adjustments or normalizations have not been made by ValueNotes.
The analysis in this report uses a data set of those companies that have disclosed all the
pertinent financial information for that particular year required to calculate the appropriate
financial ratio.
Analysis and conclusions regarding industry trends have been made on the basis of available
data from the population of companies in ValueNotes sample (refer to Appendix).
The data in this report does not represent the entire engineering services outsourcing
industry, as it excludes multi-service providers and captives. However, we believe that
trends within the pure-play engineering services outsourcing business will be similar to
those of the industry as a whole.

vi
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

2012
Engineering Services Outsourcing: Financial Performance Review

Service Provider Categorization

Exhibit i: Service Provider Categories and Sample Size

The total number of companies that form

the sample for this report is 13. Companies
have been grouped into categories based
on their latest reported total revenue. This
has been done to allow for a more
meaningful comparison of results. The
categories, which are based on annual
revenue, are depicted in the adjacent table
along with the sample size of each
category.

Category name
Large
Medium
Small

Revenue range
INR 500+ mn
INR 50 - 500 mn
INR 1 - 50 mn

Service Provider Comparison and Ratings

The report provides a relative positioning of Indian service providers in the engineering services
outsourcing segment featured in the report. The evaluation is based on their financial performance
on each of the 10 key financial ratios as listed in the exhibit below.
Exhibit ii: Parameters Used for Service Provider Comparison

Parameter
Total Income
Revenue Per Employee
Total Cost Per Employee
EBITDA Margin
Net Profit Per Employee
Net Operating Cycle
Quick Ratio
Debt/Equity Ratio
Return On Capital Employed
Return On Equity

The methodology adopted for considering companies for inclusion in the ranking requires FY 2011
data to be available for calculating at least five of the financial ratios listed above. A relative ranking
is assigned to each company based on their performance on each financial ratio. A single relative
ranking is then given to each company by taking an equally weighted average of each ranking. The
top five service providers are then positioned relative to each other across the ratios listed in the
above exhibit, from 2007 to 2011.

vii
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

2012
Engineering Services Outsourcing: Financial Performance Review
The ranking of companies are represented using a four-bar scale. The scale used to denote the
relative positions is shown in the exhibit below.
Exhibit iii: Legend Used for Service Provider Comparison

Abbreviations
The exhibit below includes a list of abbreviations used in this report. For a more detailed explanation
of the financial ratios and how they were calculated, refer to the Glossary.

bn
BPO
CSO
ESO
EUR
FY
GBP
GDP
GSAM
IMF
INR
JPY
k
KPO
MCA
mn
NASSCOM
OECD
RBI
USD
WB
WEO
YoY

Exhibit iv: List of Abbreviations

Billions
Business Process Outsourcing
Central Statistics Office
Engineering services outsourcing
Euro
Fiscal Year
Pound Sterling
Gross Domestic Product
Goldman Sachs Asset Management
International Monetary Fund
Indian Rupee
Japanese Yen
Thousand
Knowledge Process Outsourcing
Ministry of Corporate Affairs
Millions
National Association of Software and Services Companies
Organization for Economic Development
Reserve Bank of India
United States Dollar
World Bank
World Economic Outlook
Year on Year

viii
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

2012
Engineering Services Outsourcing: Financial Performance Review

Executive Summary
Please write to us at reports@valuenotes.co.in for a complimentary copy of the executive summary.
To purchase the full report and discuss pricing please email meenakshi@valuenotes.co.in.
More information about the Engineering Services Outsourcing: Financial Performance Review report
is available here.

ix
Copyright 2012 ValueNotes Database Pvt Ltd. All rights reserved.

Authors

Contributors

Arjun Bhuwalka

Sameer Murdeshwar

T
E

+91-20-6623 1739
arjun@valuenotes.co.in

T
E

+91-20-6623 1797
sameer@valuenotes.co.in

Deepti Krishnan
T
E

+91-20-6623 1717
deepti@valuenotes.co.in

DISCLAIMER: This report is for general information only, and does not constitute a business
recommendation or professional advice. The information in this report has been obtained from
sources believed to be reliable. ValueNotes cannot guarantee the authenticity, accuracy or adequacy
of this information. All views expressed in this report are based on the opinions and judgments of
ValueNotes. Readers are encouraged to consult their own professional advisors before making any
decision based on the contents of this report. ValueNotes accepts no liability for any consequences
arising from the use of this report or the material contained herein.
Given that data is based on the financials of Indian registered companies, some of the overseas
subsidiaries or entities related to the Indian companies have not been included. This may result in
numbers that are discordant with other figures. If any of the companies covered in this report finds
an anomaly, please send an email to research@valuenotes.co.in, and we will rectify the data as soon
as possible.

For Further Reading

Offshoring of Automotive Design & Engineering Services to India

Date of Publication

July 2006

Our Other Reports

Analytics: Financial Performance Review

Date of Publication

September 2012

Outsourced Publishing Services: Financial Performance Review

Date of Publication

July 2012

Legal Process Outsourcing: Financial Performance Review

Date of Publication

June 2012

Banking BPO Services: Getting Back to Basics

Date of Publication

March 2012

The Heathcare Payor BPO Landscape In 2011

Date of Publication

February 2012

The Pharmaceutical Industry Sourcing Landscape In 2011

Date of Publication

January 2012

The Utilities Sourcing Landscape In 2011

Date of Publication

December 2011

How Is Outsourcing Fueling The Oil And Gas Industry?

Date of Publication

October 2011

Obamacare: Outsourcing Opportunities In Revenue Cycle Management

Date of Publication

June 2011

Where Offshore Analytics is Heading in 2011

Date of Publication

March 2011

ValueNotes is a leading provider of research-based business intelligence. Over the

past decade, through our research products and research support services, we have
helped organizations across diverse industries, markets and geographies in gaining
competitive advantage. Our strong capabilities in collecting, interpreting and
analyzing data enable us to provide actionable intelligence to our client.
We take pride in our ability to provide insights as an independent, unbiased third
party. Our strengths lie in our industry expertise, strong relationships across an
intricate network of industry participants, proven methodology for research and
analysis, and a team of researchers with rich experience adding up to several
hundred man years.

Research Services: we provide a wide range of bespoke business and financial

research services about specific markets, industries, companies and competitive
environments such as market segmentation/sizing, sector/ industry reports,
company reports/ profiles, investment appraisal, due diligence, partner selection,
competitive analysis, investor/user/buyer perception studies, desk research, news
tracking

Information Products: we publish proprietary market intelligence on the

(services) outsourcing industry in BFSI, e-learning, engineering, healthcare, legal
and publishing with an emphasis on knowledge services or KPO.

Competitive Intelligence Consulting: with over a decades experience in

conducting competitive intelligence (CI) and advising firms on their CI strategy, we
are able to assist companies implement CI to gain a strategic advantage.

Learning & Development: a consolidation of our own experience of doing CI into

a set of highly effective training programs for corporate teams and individual
practitioners.

ValueNotes.com: Indias leading financial & equity research portal that provides
an independent and unbiased aggregation of opinions, research, analysis and
insights on the Indian financial markets.

1 Bhuvaneshwar Society
Abhimanshree Road, Pashan
Pune 411008, Maharashtra, India

T
E
W

+91-20-6623 1767 / 1743

research@valuenotes.co.in
www.valuenotes.co.in