Larsen and Toubro to set up commercial banks

The financial services arm of construction and engineering major Larsen and Toubro (L&T) is planning to set up a commercial bank as part of its efforts to have a presence in the entire gamut of financial services in the country.

L&T Finance, which already holds 4.69 percent in City Union Bank, said here Thursday that there were related advantages of starting a bank especially to provide services to corporate partners.

Apart from L&T Finance, the group has floated another non-banking finance company (NBFC), L&T Infrastructure Finance, as well as incorporating a general insurance company, L&T General Insurance.

"Our long-term vision is to be present in the entire gamut of financial services including asset management, general and life insurance and bank. Our vision is to be a wholesome financial services player but no time frame has been fixed to achieve that," said Larsen and Toubro's executive vice president for financial services N. Sivaraman.

Various options will be looked at -- going alone, partnering another company or acquisition -- before a decision is taken, Sivaraman told reporters.

However, Larsen and Toubro's first expansion move in the financial services field will be in the general insurance sector through its investment arm L&T Capital Holdings.

"We don't find a need for a foreign partner for funds. For assessment of risks, it is actually based on local experience. A foreign partner brings in expertise in pricing of the risk. We can do that on our own," Sivaraman said.

According to him, though there are talks about the Indian general insurance sector moving towards consolidation, buying out the stakes of existing promoters did not enthuse Larsen and Toubro.

"The foreign promoters of Indian general insurance companies are here for the long run. Further, an existing company may come with a baggage which we do not want."

The non-life insurance company is expected to start business in 2010.

About floating a bank, Sivaraman said: "There are relative advantages of having an NBFC and a bank."

"There are two agendas for holding a stake in a bank. The first one is to have a share in the business. The second is the availability of banking services to our trade partners in opening letters of credit and other banking products."

The lending portfolio of Larsen and Toubro's two NBFCs at the end of last fiscal stood at around Rs.7,500 crore, which is expected to grow this year.

L&T Finance will also raise Rs.1,000 crore through issue of non-convertible debentures for business deployment.

Agencies

Barclays likely to layoff 2,100 jobs

Financial services major Barclays is to layoff 2,100 in investment banking and money management, as part of its cost cutting measures.

"Barclays is cutting about 2,100 jobs worldwide in investment banking and money management as it slashes costs to cope with the fall-out from the credit crisis", The Financial Times said.

According to FT, the company is cutting 1,300 people from Barclays Capital, the debt-focused investment banking business, 500 from the Barclays Wealth private banking arm, and 330 in asset management business Barclays Global Investors. Overall, the cuts amount to 7 per cent of the three divisions' staff, it added.

Noting that Barclays declined to reveal where the job cuts would come, the newspaper said that the axe is expected to fall heavily in London and New York.

However, the bank would continue to hire in areas such as equities, the report published online said.

Last year, Barclays had acquired the US operations of bankrupt Lehman Brothers.

Financial Times reported that at Barclays Wealth, cuts are expected in London, Glasgow and the Channel Islands. Quoting Unite, which represents staff at Barclays Wealth's division, the daily said, "We cannot continue with this situation of daily job cuts without any justification or explanation of the broader strategy for the bank."

"The bank, which built the units aggressively over the past five years to account for almost half of revenue, said it wanted to be 'appropriately sized', given the current market conditions," it added.

The move is likely to spark fears of further cost-cutting in Barclays' retail and corporate banking division, which includes its bank branch network, the report noted.

Agencies

KPO fastest growing vertical for Syntel Inc

With a growth rate of 51 percent annually, Knowledge Processing Outsourcing (KPO) is emerging as one of the fastest growing business opportunities for specialized players. India's leading global Information Technology provider -- Syntel Inc -- with global development centers in India and US has leveraged on its domain knowledge in financial services and forayed into KPO space.
In a discussion with Manu Sharma, Associate Editor of CIOL, Keshav R. Murugesh, president & chief operating officer of Syntel India speaks on Syntel's service portfolio of consulting, IT and business process outsourcing and also how Syntel emerged as one of the largest diverse 3rd party services provider across the investment operations spectrum.

CIOL: Why and when did Syntel foray into KPO space?
KM: KPO with a growth rate of 51 percent annually, is one of the fastest growing business opportunities for specialized players like us. Today, KPO as a whole generates $3.05 billion revenue annually and directly employs around 25,000 people in India. The worldwide KPO market is expected to grow to $16.7 billion in revenues by 2010-2011. From this, India would account for $12 billion.
Syntel had a rich 23 years heritage of providing IT services to Fortune 500 financial services firms across banking and capital markets. In 2003, we completed the entire build-out of a complex performance attribution system for the investor services division of one of the top 3 global custodians. It made logical sense for Syntel to leverage its extensive domain knowledge in financial services and provide an end-to-end service portfolio to existing and new clients. We forayed into KPO in late 2003 providing middle office investment operations services to one of the top 3 global custodians.

CIOL: What are the other businesses Syntel is presently into in India?
KM: In early 2000, Syntel's revenue was divided into staffing services and IT outsourcing services. We have remodeled our portfolio based on emerging trends and changing customer requirements. Today, we service clients across verticals via a three-pronged integrated service portfolio of consulting, IT and business process outsourcing. Our consulting services range from technology to process engineering across verticals. In KPO, Syntel is arguably the largest diverse 3rd party services provider across the investment operations spectrum. For e.g. Syntel KPO services one of the top 3 custodians across North America, UK, Europe and Asia Pacific for the entire middle and back office investment operations spectrum. We manage the entire post originations functions for a large retail brokerage firm. Similarly, we have an almost 1000 FTE KPO operation across the life insurance vertical.
Syntel provides customized IT, BPO and KPO solutions to verticals such as automotive, education, retail, finance, insurance, healthcare and life sciences. The BFSI industry overall outsources more than 20 percent (amounting to $400 billion) of its cost base to offshore services. Syntel offers value to its customers by offering services such as cash management, settlement, underwriting, claims, reinsurance etc.

CIOL: How much of business does KPO contribute to Syntel?
KM: The KPO business is the fastest growing vertical across Syntel businesses. KPO is a key revenue driver for Syntel, exiting the year 2007 at 19 percent of total revenue and posting 155 percent year-over-year growth.

CIOL: Is KPO emerging big in India like the BPO sector? If yes in what areas do you see the growth?
KM: Yes, the evolution and maturity of BPO services has given way to more knowledge intensive outsourcing services in India. The KPO industry is growing at a fast pace and the high talent base of chartered accountants, doctors, MBAs, lawyers and research analysts in India is certainly going to capture a big pie of the global KPO business. The knowledge process outsourcing industry (KPO) is likely to grow 45 percent in size by 2010 whereas the BPO industry, only 26 percent. Global KPO pie in 2010 will be around $17 billion of which $12 billion (70 percent) will be outsourced to India. Thus, India is fast emerging as a global KPO hub.
We see the fastest growth across banking and financial services, data management and legal services. Similarly HRO and pharmaceutical outsourcing shows promising growth by 2011.

CIOL: Syntel has been in the list of Global Services 100 list? How important is this achievement to the company?
KM: We are honoured that Global Services and neoIT chose Syntel as one of the world's top technology providers. Syntel is dedicated to delivering flexible solutions and innovative uses of technology to its clients that help them remain at the forefront of their industries and operate in their businesses more efficiently. It's encouraging to know that Syntel's business model has gained broad acceptance as an effective and well-proven method of providing innovation to businesses. This ranking is a testament to the great value Syntel delivers to our clients.

CIOL: Where do you see Syntel emerging by 2012?
KM: We continue to invest into the five-year plan strategy. The plan calls for Syntel to be positioned as a business partner as opposed to as a vendor. We like to position ourselves with our clients as Nimble, Flexible and Right sized as opposed to a giant unresponsive firm. Forrester recently said of us; "Small enough to listen, big enough to deliver."
Physical Infrastructure: We are developing our own campuses in Pune and Chennai. This is about 110 acres of SEZ facility. We are investing in the best-of-class technology and infrastructure. The campus strategy allows us to cater to our rapid sequential growth and meet the specific needs of our clients.
People Infrastructure: We have invested heavily in consolidating and deep rooting of all our talent initiatives, providing coverage across the entire talent life-cycle. These include a focused effort in ingraining our "growth from within" philosophy, with targeted programs to address the needs of specific talent levels in the organization. These investments continue to provide pay-offs in the form of lower than industry average employee attrition and increased client wallet-share and contract renewals.
Geographical expansion: Syntel continues to invest into the expansion of its sales infrastructure in North America and in Continental Europe. This is through front-end staff expansion and expansion in office bases. We are also looking at the EMEA (Middle East & Asia) region and the APAC region to finalize our entry strategy in these regions.
Innovation Labs: In line with our mission, Syntel has invested in Client-Focused, Collaborative Innovation Strategies and establish the R&D division, a Strategic Business Unit, to provide best-of-breed services to our customers to address their needs. Our R&D division initially plans to focus on few broad technology categories e.g. Proprietary technologies, Devices/ Embedded systems, Tools and Products, Open source and Methodologies/ Frameworks. Our R&D division will work closely with different verticals and support organizations within Syntel to foster better talent management, reduce time-to market of new offerings and services as well as support business development.
We continue to position ourselves to achieve a greater percentage of our revenues and growth through outsourcing, including BPO. We work with clients to develop and deliver business process innovations that transform their businesses or deliver higher performance levels at lower costs. Each of our BPO businesses provides function-specific or industry-specific business services to multiple clients on an outsourced basis through standard operating models. Some of our BPO businesses offer services to clients across many industries, while others offer services only to clients in a specific industry.
We have aggressive growth plans at our Indian Delivery Centre and believe this will be sufficient to cater to potential increases in the number of staff over time. Syntel currently has over 3,500 BPO employees working in different areas of capital market operations. The majority of these have been recruited specifically to service individual clients, as that is the business model we adopt for each BPO contract. We typically do not maintain a pool of unassigned generalist resources, because we find they do not meet clients' process-specific needs.
Our current plans anticipate growing our BPO capacity in India to between 10,000 and 15,000 seats within the next three to five years. This will be achieved through a multi-centre strategy, which envisages centers across at least two cities in India and more than one centre in each city, thus providing centre level and city level redundancy.

CIOL: What about your expansion plans in India?
KM: India is an important supply center for Syntel and will also be a good market for us as we introduce some of our key offerings here. Syntel Inc plans to invest $50-60 million (Rs 200-240 crore) in capacity expansion alone in India this year. This will enable the company to add around 6,000 seats. The bulk of our hiring will be in India and .we are very excited about the prospects of the country.

CIOL: Do you have plans to foray into the other sectors of KPO like legal, Medical etc?
KM: Syntel has a flexible business model that is constantly evolving. We are always looking for new avenues to invest in. The legal offshoring segment is increasingly gaining momentum.
Syntel is definitely looking to diversify its KPO portfolio and leverage its extensive experience for managing critical operations across verticals and explore emerging areas of KPO and pharma outsourcing.
The Healthcare Practice in Syntel contributes 17 percent of overall revenues and is one of the focus areas to aid our growth. Syntel's Healthcare & Life Sciences Practice team includes doctors, medical professionals, HL7 experts and DICOM specialists which help provide a comprehensive, integrated suite of IT and KPO services that help payers, providers, and pharmaceutical firms realize sustainable competitive advantages by focusing on continuous innovation and knowledge management. We continue to leverage our IT expertise in servicing huge healthcare companies to provide back office and analytical support as a full service model.
Syntel was included on the Healthcare Informatics 100, a list of the 100 leading global health care IT providers for four years in a row (2003-2006) and is already is one of the largest healthcare IT providers in the world. Syntel derives 14.5 percent of its annual revenue from healthcare projects.

CIOL: Where does Syntel stand among the KPO companies in India?
KM: As mentioned earlier, Syntel perhaps is the only 3rd party service provider to have current experience and capabilities of servicing clients across the entire investment operations spectrum. Similarly, we have the unique experience of helping a large industrial house break into a new service line of brokerage operations.
Today, we manage the entire post origination operations for the client. In the capital markets space, we have a team of almost 4000+ professionals servicing clients across low-end processes like reconciliation to the highly critical functions like performance measurement and attribution. We consider ourselves to be a highly experienced player across the securities processing and capital markets arena and capable of deploying our expertise in transaction processing, data analytics to leverage it across other domains.

CIOL: How big is the KPO industry in India today and what is the forecast for the future?
KM: India is fast emerging as a global KPO hub as globally businesses require specialized solutions, and India's engineering and technical institutes are increasingly providing highly qualified professional to address these manpower demands. The global KPO industry stands at close to $5 billion today.
A NASSCOM report estimates that with an annual growth rate of 39 percent KPO industry is expected to reach $17 billion by 2010, of which $12 billion would be outsourced to India. Also, the number of Indian KPO professionals is set to leap from 25,000 to 350,000 by 2010. Overall BPO revenues are slated to touch 40 billion by 2010.