LOGO

CREDIT ANALYSIS, FINANCIAL MODELING & BUSINESS RESEARCH

Presented by: Faculty Guide:
Dr. C.S Adhikari

Rahul Agrawal Roll-12, F2 PGDM 2011-13

CONTENTS
1 2 3 4 5 6 Company Overview Objectives

Project-I: Business Research Project-II: Credit Analysis & Modeling Project-III: Financial Research
My Learning

COMPANY PROFILE
Sutherland Global Services is a multi-national technologyenabled BPO services company providing integrated Platformbased and Analytics enabled business-cycle support solutions for major Industry Verticals and global industry leaders.

Having started operations in 1986 in Rochester, New York, Sutherland now employs over 30,000 professionals.
It provides seamlessly blended services from operation centers in Bulgaria, Canada, Colombia, Egypt, India, Mexico, Philippines, the United Arab Emirates, the United Kingdom, and the United States.

MISSION & VISION

Mission:
"To help our clients maximize their customer lifetime value and increase their competitive advantage by helping drive productivity and efficiency while delivering measurable results.

Vision:
To be the premier and preferred provider of IT Enables and Business Process Outsourcing services in our chosen markets."

OBJECTIVES OF INTERNSHIP
BPO & KPO sector
Industry insight & professional knowledge in this field. As I am a Finance student, an industry level Credit Analysis Training in Microsoft Excel helped me to hone my skills & apply theoretical knowledge of Finance. Financial Projections & Corporate Valuation Models was an area I was very keen to working on as I am having this subject in my 4th & 5th semester.

PROJECT-I: BUSINESS RESEARCH

Research Report titled Report on FAO Sector for Sutherland detailing the industry & competitor analysis of F&A BPO sector both at industry & firm level at global & domestic level.
RESEARCH METHODOLOGY I worked on Secondary data collected primarily from companys websites, newspapers, magazines & professional research reports. My work was mainly to collect the latest information (by 2011) about F&A industry in detail & arrange them in a predetermined format as per company requirements.

GLOBAL SCENARIO OF FAO

In 2011, ACV grew 11% compared to 18% growth in 2010. The FAO market reached US$3.8 billion in ACV in 2011, representing about US$32 billion in total FAO spending.
The United States accounted for over 50% of total FAO contracts in 2011. According to Gartner, FAO is having a CAGR of 8%.

Accenture, IBM and Genpact together account for 50% of the FAO market in terms of ACV.
45 % of the new contracts signed in 2010-2011 included service provider add-on tools

Global Market share of F&A BPOs (2003-Present)

Accenture IBM Genpact 9% 5% 5% 5% 4% 4% 20% 3% 26% Cognizant OPI TCS VWA Infosys BPO EXL Service Wipro 10% WNS HP Xerox (ACS) 2%

3%
3%

2% 1% 1%

Steria Capgemini Other

Constitution of F&A BPO engagements (2008-Present)

Telecom, Software & Hi-Tech 10% 9% 9% 16% 8% 19%

Utilities, Energy & Chemicals

BFSI Public sector Other Media/Publishing Life Sciences & Healthcare

7%
5% 3% 2%

12%

Transportatioin & Logistics Retail manufacturing Consumer Packages Goods

Market Size- $10.6 billion

Global Delivery Footprint (FAO FTEs)

20% 5% India

East Europe

15%

Philippines & Central America

60% Others

The current BPO offshore delivery locations for F&A are Brazil, Canada, the Czech Republic, Hungary, India, Ireland, the Philippines, Poland and Romania.

DELIVERY MODELS IN VALUE CHAIN FOR F&A BPO

Key F&A Processes
Accounts Payable Payroll Travel and Expense Offshore Outsource Onshore/Nearshore Outsource o o o Offshore Captive o o o Retain In-House

Accounts Receivable
General Accounting Fixed Asset Accounting F&A IT Support Noncritical Account Collections Strategic Account Collections Financial Planning and Analysis Corporate Controller Treasury Operations External Audit Tax
Source: Booz Allen Hamilton

o
o o o o o o

o
o o o o o o

oAdditional Possible Delivery Model State of the Market

VARIOUS DELIVERY MODELS

Functional Model- It included Onshore outsourcing (activities, piecemeal) & was retained In-house
Traditional Shared-Services Model- It included Onshore outsourcing of entire functions & Offshore outsourcing of selective ones & was also retained in-house

Process-Centric Model- It included both Onshore & Offshore outsourcing of processes, Captive offshoring of processes, Joint venture models & is retained in-house

PRICING MODELS IN F&A BPO

Input Based Pricing Model Transaction Based Pricing Model Outcome Based Pricing Model

PRICING METHODOLOGIES
Fixed Price

FTE Based Pricing

Fixed Price with ARC/RRC mechanism

Transaction Pricing

TECHNOLOGY & SOFTWARE USED

Smartstream TLM, HFM for Planning SAP, Oracle EBS, AME, OBIEE, API/interfaces, 10g Payroll: 14 including Accenture, ACS, ADP, Arinso, Convergys, EDS, IBM, etc. Procure-to-pay (including accounts payable): Accenture, IBM Billing and receivables management (including accounts receivable): Tsystems Accounting Software used are- Sage Line, IRIS, VT Transaction, VT Accounting, Viztopia, Peachtree, Quicken, MYOB

Prevalence of different technology approaches in FAO

Technology Augmentation Offered on an ERP-led platform. Solution description Core technology implementation Architecture consulting and Single Instance/Regional Instance ERP Implementation as a part of Enterprise-wide transformation BPO-led transformation feeding outsourcing arbitrage benefits back into implementation Could be limited to F&A functions or span across all enterprise functions including HR, Supply Chain, Built-in technologies for analytics, forecasting are also in scope Oracle EBS SAP Other ERPs F&A Platform BPO Solutions Complete ownership undertaken by TCS including applications, infrastructure, and F&A services Hosted multi-client Focused on serving midmarket and large buyers in U.S., UK, and Europe End-to-end F&A outsourcing including P2P, O2C, and R2R

Process scope

Technology leveraged Delivery model & pricing

Platforms for reconciliation, planning & analytics. Automation within payables, receivables. Enabler functions such as OCR. Smartstream TLM for reconciliation HFM for Planning Multiple others including homegrown Transaction-based pricing Add-on cost per FTE

Oracle EBS for core F&A platform; other Oracle technologies include, AME, OBIEE, API/interfaces, 10g Pay per transaction, bundled in FTE pricing, minimal up-front fees, bundled price for FTE + price for client users access

Bundled technology transformation & transition pricing Cost arbitrage benefits support transformation costs

CAREER GUIDE & PATH FOR F&A

INTERNATIONAL CERTIFICATIONS

a) Certified Outsourcing Specialist Finance & Accounting (COS-F&A)b) Certified Financial Process Associate (CFPA) Program c) Certified Financial Process Specialist (CFPS) Program
CAREER GROWTH a) Associate/Senior Associate b) Team Lead c) Management Trainee/Assistant Manager/Manager/Senior Manager

F&A OUTSOURCING: AN INDIAN PERSPECTIVE

More than 80% of F&A outsourcing contracts feature an offshore component. Indian providers will bill between $20 billion and $25 billion for F&A services by 2012. Two-thirds of this opportunity will come from the banking, capital markets, insurance and manufacturing industries. North America ($14 to $16 billion) and the UK ($5.7 billion) are the key regions with respect to the market. In an F&A BPO business delivery model, peoples cost is 60% of the sales followed by the IT cost and other infrastructure costs. Attrition level in BPO Financial Services & Pharmaceuticals- 60% Retail & IT- 50% Auto, FMCG & Infrastructure- 50%

Revenue of Indian BPOs

6,000 5,000 4,000 3,000 2,000 1,000 0

Rev (Rs in Cr.) in 2009-2010

Rev (Rs in Cr.) in 2010-2011

GLOBAL BPOs OFFERING F&A BPO

Accenture ACS, A Xerox Company Capgemini Cognizant EXL Genpact HCL Technologies HP IBM Infosys Intelenet OPI Steria TCS Wipro WNS

CONCLUSION
The economies like UK & USA are creating companies that are growing from small to medium to big and they are expanding outside their home territories. FAO will continue to increase in the developed markets. An endto-end process-driven approach to FAO is also emerging as opposed to a traditional functional and piecemeal approach. There is ever expanding delivery network to newer locations, launching process maturity models, investing in technology solutions, building new process offerings etc. There is an increasing trend of verticalization in FAO, moving away from the traditional assumption that FAO is a horizontal function.

PROJECT-II: CREDIT ANALYSIS & MODELING

Excel based Modeling Collection of Financials of company from SEC filings (www.sec.gov) (last 4 Years & 8 qtrs./10Ks & 10Qs) Horizontal & Vertical Analysis of Balance Sheet & Income Statement was also done. Financial Analysis was done by me by calculating various profitability, turnover, solvency, coverage, margin & growth ratios. Enterprise Value calculation, P/E, EPS Analysis was also done. Calculation of Free Cash Flow, Adjusted EBITDA/EBIT, Net Cash available to debt holders, the position of the firm in paying off its interest obligations.

continued
To fill the debt related data from Bloomberg terminal & SEC filings (8K). And arranging the debt liabilities on the basis of their lien, security, amount, issue date, date of maturity & credit ratings.
A debt repayment schedule was also prepared & all details of both Operating & Financial Leases were also to be entered & analyzed. Other things like Ticker symbol, company profile, Market Cap, Share Price, Future Estimates & consensus (Bloomberg) were also to be entered.

PROJECT-III: FINANCIAL RESEARCH

Read Annual reports of various Fortune 5000 Companies & collect information about their Indian subsidiaries.
Information was to be filled in an Excel template on the basis of the Name of Subsidiary, Date of Incorporation, CIN, PBT, Nature of Industry, Filing Year, Sales, PBT & Equity value of Parent Company. Date of Incorporation was collected from MCA site (www.mca.gov.in) by entering the relevant CIN number.

Entered information for around 600-700 companies.

MY LEARNINGS
I have achieved my objectives of Internship as per the following ways:
Professional insight industry knowledge of BPO sector Industry-level live project on Credit Analysis. Critical from the view of Investment Banks, Equity/Credit Research firms etc. Excel based Analysis & Modelling Knowledge of Fortune 5000 companies Analysis of Annual Reports

LOGO

Presented by:

Rahul Agrawal Roll-12, F2 PGDM 2011-13