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Mega-deal outsourcing deals - those contracts with a value of $1 billion or more - picked up in the second quarter of 2012, according to the quarterly Global TPI Index.
Five mega-deals were signed during the quarter compared with just one each in the second quarter of 2011 and the first quarter of 2012. All five were awarded outside of the mature U.S. and Western European markets-three of them in India and Brazil.
Mega-deal activity is always fairly uneven quarter to quarter, said John Keppel, partner and president of research and managed services for outsourcing consultancy ISG, which produces the index. But the location of the awards is worth noting.
"In the future we expect most new scope growth to come from emerging markets," said Keppel, "while the U.S. and Western Europe will generate the bulk of restructuring activity."
The mega-deals awarded by companies in the telecom, banking and consumer goods industries with a combined value of $6.3 billion, accounted for nearly 30% of global contract value signed during the second quarter. Four of them were entirely new deals, while one was a restructuring.
Additionally, 11 mega-relationships-those with an annual contract value of $100 million or more--were initiated in the quarter, the most since 2009 and an increase of four signed the year prior and seven in the previous quarter.
Keppel doesn't expect the mega-deal activity to return to decade-ago levels of robustness. "Some mega deals in the past year, especially those that are restructuring-related, are being broken up and returning to the market in the form of multiple smaller contracts with shorter durations," said Keppel. And the bellwether for large outsourcing deal affairs is likely to be the mega-relationship category of deals as contract durations continue to get shorter. The average deal length so far this year is 4.85 years, compared to 6.48 back in 2000.
"We expect mega-deals and mega-relationships will continue to make up an important part of the market," said Keppel. "We also expect more mega-deals to be awarded in less mature regions but mega-relationships to continue in mature and less mature regions."
Taking into account all outsourcing contracts worth $25 million or more, $13.1 billion in IT outsourcing business took place in the second quarter, up six percent year over year but down five percent over last quarter due to light contracting activity.
TPI is predicting a softer outsourcing market in the third quarter. "Historically, third quarters have been softer than other quarters, and current industry pipelines suggest this will hold true in 2012," Keppel said. "The fourth quarter will likely pick up, with some help from larger deals in the pipeline ready to go to award."
Meanwhile global outsourcing vendors continue to battle it out for business. American multi-national service providers have held 53% of total market share since 2010, down 10% from the 2007 to 2009 period.
European, Middle Eastern and Asian (non-Indian) vendors held 25% of the market since 2010, up three percent from the 2007-2009 period. While the Indian-heritage firms gained seven percent in market share, from 15% in the 2007 to 2009 period to 22% today.
Source: IT World
- BPO company Serco in talks with Agon for outsourcing deal (timesofindia.indiatimes.com)
- HCL inks $200 million deal with Disney (timesofindia.indiatimes.com)
- HCL bags Citibank BPO deal, to hire 800 (timesofindia.indiatimes.com)
- Indian IT services industry is at a crossroads: HCL Tech CEO (timesofindia.indiatimes.com)
- IT Outsourcing Predictions in 2012 (satpute.wordpress.com)
India will allow foreign nationals to invest directly in the country’s listed companies, in a bid to deepen its under-developed capital markets.
“[We] decided to allow qualified foreign investors to directly invest in the Indian equity market in order to widen the class of investors, attract more foreign funds, and reduce market volatility,” the finance ministry said in a statement. The move, which also allows pension funds and trusts greater freedom to invest directly, was announced over the holiday weekend and will come into into effect on January 15.
Foreigners were previously restricted to investing in India's equity market through mutual funds or other institutional channels.
But India is under pressure to attract overseas capital after a dismal year for its financial markets, with some economists warning of possible balance of payments difficulties in the months ahead .
Foreign institutional investors have turned bearish on India in recent months, scaling back investments as the country’s growth prospects dimmed and the global economic outlook worsened. The Sensex, India’s benchmark equity index, was one of the world’s worst performing markets in 2011, falling 25 per cent. Foreign investor returns were further hit by the rupee’s 16 per cent fall against the dollar last year.
Overseas funds withdrew a net $380m last year compared to record inflows of $29bn in 2010.
Last month the market capitalisation of all stocks listed on the Bombay Stock Exchange, Asia's fourth largest, fell below $1tn, a level the market first attained in May 2007.
“Such simplification in the procedure can help more inflows into Indian markets, definitely giving a boost to the stagnated current situation," said D.K. Aggarwal, an analyst at Delhi-based SMC Investments.
But other analysts are not convinced the initiative will result in an immediate rush of foreign capital to the flagging emerging market. “We are in an established downtrend. There’s no sign of change,” said Heman Kapadia, chief executive at Chart Pundit, a Mumbai-based investment advisory service.
India’s business leaders have urged the government to prioritise large infrastructure projects, as part of a larger effort to restore the country’s status as one of the world’s most promising investment destinations.
In his New Year address, Manmohan Singh, prime minister, told the nation it could not take India’s high economic growth rate for granted and warned of the need to pare back subsidies and implement tax reform.
“I am concerned about fiscal stability in future because our fiscal deficit has worsened in the past three years,” Mr Singh said.
“We have run out of fiscal space and must once again begin the process of fiscal consolidation.”
The Congress party-led government experienced embarrassing setbacks at the end of the year with failed efforts to introduce retail reform and pass anti-corruption legislation.
Source: FT - By James Lamont in New Delhi
- Left criticises opening of equity markets to foreign investors (thehindu.com)
- New Year Bonanza : Qualified Foreign Investors Can Now Invest in Indian Stock Markets (chennaifocus.wordpress.com)
- Government opens domestic equity market to qualified foreign investors (thehindu.com)
- Foreign Investors allowed to directly invest in Indian Equity Markets! (trak.in)
- India to allow individual foreign investors access to its stock market (thestar.com)
- Govt lets foreign individuals invest in stock markets (ibnlive.in.com)
- India to open stock market to foreign investors (marketwatch.com)
- Ministry of Finance Moves to allow Foreigners to Directly Invest in the Indian Stock Market (pxvlaw.wordpress.com)
- Sensex starts New Year on promising note, gains 69 points (thehindu.com)
India and the UK have agreed to work towards a memorandum of understanding (MoU) in areas related to urban development.
India is keen to benefit from experience of UK, said India’s minister of urban development Kamal Nath. The announcement was made following a meeting with UK minister for decentralisation and cities Greg Clark.
The MoU would be aimed at cooperation and deepening the engagement between India and UK in the areas such as land economics, sustainable masterplanning and transport planning. Another area of cooperation would be the sharing of knowledge in the formulation of Public private partnership models.
The challenges of urbanisation in India were huge, said Mr Nath, both in significance and scale. The government of India is keen on bridging the urban infrastructure deficit by benefiting from the wealth of experience of the UK government in the urban sector.
Mr Nath also participated in a meeting of the UK India Urban Infrastructure Group organized by the UK Business Council and UK Trade & Investment. The UK India Urban Infrastructure Group has proposed conducting an urban regeneration scoping study. The above group has also proposed to cooperate in the development of a regeneration masterplan, This could be demonstrated by adopting a satellite town to deploy UK expertise. The meeting was attended by UK companies including Arup, Biwater International, Clifford Chance, JCB, KPMG, Mott MacDonald and Serco.
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Mitsubishi Heavy Industries (MHI) and Suhail Bahwan Group (SBG) of Oman have set up a joint venture whose initial aims include developing business in transporation systems in the fast-growing Indian market.
The company, MHI Engineering & Industrial Projects India Private Limited (MEIP), was set this month. It will undertake business development, design, engineering, procurement, construction management, after-sale services and other roles for industrial and infrastructure projects handled by MHI's Machinery & Steel Infrastructure Systems division. It will start by developing business related to chemical and environmental plants (and transportation systems. Future plans call for MEIP to expand its business coverage to include the Middle East and Africa.
The initial capital of MEIP is about US$20m (£12.5m), with heavy machinery manufacturer MHI holding 51% and SBG owning 49%. SBG encompasses more than 40 companies engaged in a businesses including engineering and construction and the operation and maintenance of desalination and power plants.
Source: The Construction Index
Mott MacDonald has been commissioned to carry out prefeasibility studies for a proposed high speed rail service between Delhi, Agra, Lucknow, Varanasi and Patna in India.
The capital value of the high speed rail corridor is anticipated to be about INR 1100bn (£15bn).
The appointment by Indian Railways Construction Company (IRCON) International is on behalf of India’s Ministry of Railways.
India’s demand for public transport has been growing at around 10% a year over the last decade but the development of the country’s public transport infrastructure has lagged behind in comparison. The government’s Vision 2020 development plan is being introduced to rectify this imbalance and envisages the implementation of four high speed rail projects, one in each region. There are also plans for a further eight high-speed corridors to connect commercial, tourist and pilgrimage hubs in India.
Mott MacDonald will help to identify key issues for development of the project on a public-private partnership basis. This will include reviewing all technical aspects of the property and the corridor infrastructure development. It will also involve analysis of operational and business requirements, including forecasting ridership figures, costs and benefits analysis and development of a planning and implementation schedule as well as an organisational structure for taking the project forward.
“High speed rail would position India for future growth and economic development and spur tourism,” said Mott MacDonald’s project director Gaurav Srivastava. “There is an untapped, potentially huge market in India for premium transport services, which combine speed, safety and comfort.”
Mott MacDonald’s report is due for completion towards the end of this year.
Source: The Construction index
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The India Imperative Road Show.
India’s GDP growth has returned to a level in excess of 8.5% p.a. despite the issues within the broader global economy. This positive growth generates significant ongoing opportunities for UK plc. The UK coalition government has placed India at the heart of its global economic dialogues and through the upgraded diplomatic language of ‘special relationship’ is focusing on increased bilateral trade with India.
According to Ian Gomes, Chairman of High Growth Markets at KPMG in the UK, there are three compelling reasons why India should prominently figure in every business’s strategy – (i) it’s a market for all products, (ii) it serves as a cost reduction platform and (iii) it is a source of innovation and technology.
The potential rewards for doing business in India are thus significant and quite obvious. There are however domestic nuances that companies looking at India need to be aware of. The Indian market requires thorough preparation and a long term view.
The India Imperative road-show, which follows from a joint report titled ‘The India Imperative’ published and launched by UKIBC and KPMG at the UKIBC Annual Summit in March , aims to highlight some of these nuances and provide a roadmap to UK companies looking at doing business in this rapidly emerging market.
Some of the issues that our panel of India experts will be looking at addressing include:
- How India can be a platform for future growth and revenue opportunities
- What the competitive landscape looks like
- What the challenges are and how can these can be navigated
Who should attend?
International directors and senior executives of UK companies looking at doing business in India or expanding their existing presence in the market
When and Where?
Wednesday 22nd June - Leeds
KPMG Leeds Office
1 The Embankment
Thursday 23 June - Birmingham
Radisson Blu Hotel
12 Holloway Circus
Attire: Business Attire
View Event Summary