About the Financial Performance Report Series
ValueNotes has conducted a study of the financial performance of 12 pure-play analytics service providers (their size, operating margins, solvency, and efficiency), principally in the Indian analytics industry. The study, which covers fiscal years 2007 through 2011, found that since 2007, the companies in the sample achieved an aggregated compounded annual growth rate (CAGR) of 39%. Revenue of the population of companies in 2011 was INR 2,445 mn, with an increasing dominance of large sized companies (INR 200+ mn), though other companies have seen a slow but steady growth in revenue since 2007.
ValueNotes has found that the aggregated revenue per employee of companies in the sample was INR 1,117k in 2011, and has been steadily increasing at a CAGR of 8% from 2007 to 2011. A key finding is that although the pure-play analytics companies in India have successfully controlled their operating costs since 2010, employee costs as a percentage of revenue remain high, at 50%. Furthermore, medium sized companies (INR 50 – 200 mn) have taken on debt since 2008 to improve their financial performance, and currently their debt to equity ratio is the highest amongst their peers. The report includes service provider profiles of 12 analytics firms, along with their service offerings, key financial ratios, shareholding patterns, and names of directors.
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Scope of the Report
The Financial Performance Report analyzes key financial ratios of companies that constitute the analytics 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 analytics segment. Only private limited companies that are incorporated in India and that filed annual returns with the Government of India’s 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 analytics 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
- The data in this report does not represent the entire analytics industry, as it excludes multi-service providers and captives. However, we believe that trends within the pure-play analytics business will be similar to those of the industry as a whole.
Service Provider Categorization
Exhibit i: Service provider categories and sample size
The total number of companies that form the sample for this report is 12. 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 along with the sample size of each category.
Service Provider Comparison and Ratings
The report provides a relative positioning of Indian service providers in the analytics 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
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.
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
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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. 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.
