Using Yahoo Finance, I plotted the past three years stock price of Indian Offshores (Genpact, Wns, Exl) and in comparison with Indian Software companies (Infosys, Wipro, TCS, Sify) and market index.
The following insights emerge-
1) Indian Software companies have constantly created wealth.
2) Indian Offshoring companies have constantly lost market value – perhaps because they were able to dump IPO prices at much higher prices by creating hype.
3) You are much better off investing in Indian stock market or a blue chip Indian software company than take part in an Indian offshorers IPO.
4) SIFY lost most value and its founder CEO is now in jail for fraud. The fraud was he added phantom employees, and phantom revenue to boost balance sheet. Auditors from PwC (were jailed) included a board member of Indian Chartered Accountants and Satyam (SIFY) had won awards for corporate governance. It makes sense to do rigorous cash flow due diligence this side of the pond.
5) I won no stock in any of this companies (not surprisingly) but do have a portfolio of mutual funds (index).
So the next time you are promised the moon by an Indian IPO- KPO, remember to do the math 😉