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WNS Holdings Limited (WNS)

Filed: 15 May 19, 12:57pm
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 20-F

 

 

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2019

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

OR

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number001-32945

 

 

WNS (Holdings) Limited

(Exact name of Registrant as specified in its charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

Jersey, Channel Islands

(Jurisdiction of incorporation or organization)

Gate 4, Godrej & Boyce Complex

Pirojshanagar, Vikhroli (W)

Mumbai 400 079, India

(Address of principal executive offices)

Gopi Krishnan

General Counsel

Gate 4, Godrej & Boyce Complex

Pirojshanagar, Vikhroli (W)

Mumbai 400 079, India

(91-22) 4095-2100

gopi.krishnan@wns.com

(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which  registered

American Depositary Shares, each represented by WNS The New York Stock Exchange
one Ordinary Share, par value 10 pence per share  

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As at March 31, 2019, 50,051,920 ordinary shares (excluding 1,101,300 treasury shares), par value 10 pence per share, were issued and outstanding, of which 49,776,517 ordinary shares were held in the form of American Depositary Shares (“ADSs”). Each ADS represents one ordinary share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☒  Yes    ☐  No

If this is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ☐  Yes    ☒  No

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company,” inRule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ☒

  Accelerated filer  ☐            Non-accelerated filer  ☐
    Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP  ☐

  

International Financial Reporting Standards as issued

by the International Accounting Standards Board  ☒

  Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:    ☐  Item 17     ☐  Item 18

If this report is an annual report, indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

 

 

 


Table of Contents

TABLE OF CONTENTS

WNS (HOLDINGS) LIMITED

 

   Page 

PART I

  

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

   4 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

   4 

ITEM 3. KEY INFORMATION

   4 

ITEM 4. INFORMATION ON THE COMPANY

   35 

ITEM 4A. UNRESOLVED STAFF COMMENTS

   79 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

   80 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

   137 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

   165 

ITEM 8. FINANCIAL INFORMATION

   168 

ITEM 9. THE OFFER AND LISTING

   172 

ITEM 10. ADDITIONAL INFORMATION

   173 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   199 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

   200 

PART II

  

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

   201 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

   201 

ITEM 15. CONTROLS AND PROCEDURES

   201 

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

   203 

ITEM 16B. CODE OF ETHICS

   203 

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

   203 

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

   204 

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

   204 

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

   204 

ITEM 16G. CORPORATE GOVERNANCE

   204 

ITEM 16H. MINE SAFETY DISCLOSURE

   204 

PART III

  

ITEM 17. FINANCIAL STATEMENTS

   205 

ITEM 18. FINANCIAL STATEMENTS

   205 

ITEM 19. EXHIBITS

   206 

SIGNATURES

   208 

INDEX TO WNS (HOLDINGS)  LIMITED’S CONSOLIDATED FINANCIAL STATEMENTS

   F-1 

Ex-4.10 Facility Agreement dated January 18, 2017 between WNS North America Inc. and BNP Paribas, Hong Kong.

Ex-4.11 Facility Agreement dated March 10, 2017 among WNS (Mauritius) Limited, HSBC Bank (Mauritius) Limited and Standard Chartered Bank, UK.

Ex-8.1 List of subsidiaries of WNS (Holdings) Limited

Ex-12.1 Certification by the Chief Executive Officer to 17 CFR 240,15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Ex-12.2 Certification by the Chief Financial Officer to 17 CFR 240,15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Ex-13.1 Certification by the Chief Executive Officer to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Ex-13.2 Certification by the Chief Financial Officer to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Ex-15.1 Consent of Grant Thornton India LLP, independent registered public accounting firm

 

1


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CONVENTIONS USED IN THIS ANNUAL REPORT

In this annual report, references to “US” are to the United States of America, its territories and its possessions. References to “UK” are to the United Kingdom. References to “EU” are to the European Union. References to “India” are to the Republic of India. References to “China” are to the People’s Republic of China. References to “South Africa” are to the Republic of South Africa. References to “$” or “dollars” or “US dollars” are to the legal currency of the US, references to “ ” or “Indian rupee” or “Indian rupees” are to the legal currency of India, references to “pound sterling” or “£” are to the legal currency of the UK, references to “pence” are to the legal currency of Jersey, Channel Islands, references to “Euro” or “€” are to the legal currency of the European Monetary Union, references to “South African rand” or “R” or “ZAR” are to the legal currency of South Africa, references to “A$” or “AUD” or “Australian dollars” are to the legal currency of Australia, references to “CHF” or “Swiss Franc” are to the legal currency of Switzerland, references to “PHP” or “Philippine Peso” are to the legal currency of Philippines, references to “RMB” are to the legal currency of China, references to “LKR” or “Sri Lankan rupees” are to the legal currency of Sri Lanka and references to “NZD” or “New Zealand Dollar” are to the legal currency of New Zealand. Our financial statements are presented in US dollars. Our financial statements included in this annual report are prepared in accordance with the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). Unless otherwise indicated, references to “GAAP” in this annual report are to IFRS, as issued by the IASB.

References to a particular “fiscal” year are to our fiscal year ended March 31 of that calendar year. Any discrepancies in any table between totals and sums of the amount listed are due to rounding. Any amount stated to be $0.0 million represents an amount less than $5,000.

In this annual report, unless otherwise specified or the context requires, the term “WNS” refers to WNS (Holdings) Limited, a public company incorporated under the laws of Jersey, Channel Islands, and the terms “our company,” “we,” “our” and “us” refer to WNS (Holdings) Limited and its subsidiaries.

In this annual report, references to “Commission” are to the United States Securities and Exchange Commission.

We also refer in various places within this annual report to “revenue less repair payments,” which is anon-GAAP financial measure that is calculated as (a) revenue less (b) in our auto claims business, payments to repair centers for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients. Thisnon-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

We refer to information regarding the business process management (“BPM”) industry, our company and our competitors from market research reports, analyst reports and other publicly available sources. Although we believe that this information is reliable, we have not independently verified the accuracy and completeness of the information. We caution you not to place undue reliance on this data. BPM services are also sometimes referred to as business process outsourcing (“BPO”) services.

This annual report also includes information regarding the BPM market from the “Gartner Inc., Forecast: IT Services, Worldwide, 2017-2023, 1Q19 Update” report dated March 29, 2019 by Gartner Inc. (which we refer to herein as the “Gartner Report”). The Gartner Report described herein contains data, research opinions or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. The Gartner Report speaks as of its original publication date (and not as of the date of this annual report) and the opinions expressed in the Gartner Report are subject to change without notice.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains “forward-looking statements” that are based on our current expectations, assumptions, estimates and projections about our company and our industry. The forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “project,” “seek,” “should” and similar expressions. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources, tax assessment orders and future capital expenditures. We caution you that reliance on any forward-looking statement inherently involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be materially incorrect. These risks and uncertainties include but are not limited to:

 

  

worldwide economic and business conditions;

 

  

political or economic instability in the jurisdictions where we have operations;

 

  

our dependence on a limited number of clients in a limited number of industries;

 

  

regulatory, legislative and judicial developments;

 

  

increasing competition in the business process management industry;

 

  

technological innovation;

 

  

telecommunications or technology disruptions;

 

  

our ability to attract and retain clients;

 

  

our liability arising from fraud or unauthorized disclosure of sensitive or confidential client and customer data;

 

  

negative public reaction in the US or the UK to offshore outsourcing;

 

  

our ability to collect our receivables from, or bill our unbilled services to, our clients;

 

  

our ability to expand our business or effectively manage growth;

 

  

our ability to hire and retain enough sufficiently trained employees to support our operations;

 

  

the effects of our different pricing strategies or those of our competitors;

 

  

our ability to successfully consummate, integrate and achieve accretive benefits from our strategic acquisitions, and to successfully grow our revenue and expand our service offerings and market share;

 

  

future regulatory actions and conditions in our operating areas; and

 

  

volatility of our ADS price.

These and other factors are more fully discussed in “Part I — Item 3. Key Information — D. Risk Factors”, “Part I — Item 5. Operating and Financial Review and Prospects” and elsewhere in this annual report. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans, objectives or projected financial results referred to in any of the forward-looking statements. Except as required by law, we do not undertake to release revisions of any of these forward-looking statements to reflect future events or circumstances.

 

3


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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

Our consolidated financial statements as at and for the years ended March 31, 2019, 2018, 2017, 2016, and 2015 have been prepared in conformity with IFRS, as issued by the IASB.

The following selected financial data should be read in conjunction with “Part I — Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this annual report.

The following selected consolidated statement of income data for fiscal 2019, 2018, and 2017 and selected consolidated statement of financial position data as at March 31, 2019 and 2018 have been derived from our audited consolidated financial statements included elsewhere in this annual report. The selected consolidated statement of income data for fiscal 2016 and 2015 and selected consolidated statement of financial position data as at March 31, 2017, 2016 and 2015 have been derived from our audited consolidated financial statements which are not included in this annual report.

 

   For the year ended March 31, 
   2019  2018  2017  2016  2015 
   (US dollars in millions, except share and per share data) 

Consolidated statement of income data:

      

Revenue(2)

  $809.1  $758.0  $602.5  $562.2  $533.9 

Cost of revenue(1)

   518.2   503.1   403.3   365.4   342.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

   290.9   254.8   199.2   196.8   191.2 

Operating expenses:

      

Selling and marketing expenses(1)

   44.6   41.8   32.6   30.8   31.1 

General and administrative expenses(1)

   115.2   117.6   91.7   78.9   70.0 

Foreign exchange gains, net(2)

   (4.5  (15.0  (14.5  (11.0  (4.6

Impairment of goodwill

   —     —     21.7   —     —   

Amortization of intangible assets

   15.8   15.5   20.5   25.2   24.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating profit

   119.8   94.9   47.2   72.9   70.5 

Other income, net

   (14.6  (11.2  (8.7  (8.5  (11.9

Finance expense

   3.2   4.3   0.5   0.3   1.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit before income taxes

   131.1   101.8   55.3   81.1   81.0 

Income tax expense

   25.7   15.4   17.5   21.2   22.4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit after tax

  $105.4  $86.4  $37.8  $59.9  $58.6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings per share of ordinary share:

      

Basic

  $2.10  $1.72  $0.75  $1.17  $1.14 

Diluted

  $2.02  $1.63  $0.71  $1.12  $1.10 

Basic weighted average ordinary shares outstanding

   50,139,389   50,388,440   50,582,852   51,372,117   51,633,516 

Diluted weighted average ordinary shares outstanding

   52,278,113   52,915,600   52,940,308   53,639,670   53,428,981 

 

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   As at March 31, 
   2019  2018  2017  2016  2015 
   (US dollars in millions, except share and per share data) 

Consolidated statement of financial position data:

      

Assets

      

Cash and cash equivalents

  $85.4  $99.8  $69.8  $41.9  $32.4 

Investments

   67.9   121.0   112.0   133.0   133.5 

Trade receivables including unbilled revenue, net

   140.6   133.1   109.3   99.2   95.5 

Contract assets(3)

   4.2   —     —     —     —   

Other current assets(5)

   37.3   46.7   71.9   48.4   53.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total current assets

   335.4   400.6   363.0   322.5   315.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Goodwill and intangible assets, net

   211.0   224.9   230.6   103.4   122.4 

Property and equipment, net

   61.0   60.6   54.8   50.4   48.2 

Deferred tax assets

   23.8   27.4   16.7   22.5   21.3 

Investments

   82.5   0.5   0.4   —     —   

Contract assets(3)

   22.0   —     —     —     —   

Othernon-current assets(5)

   49.9   45.6   38.5   26.7   23.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalnon-current assets

   450.2   359.0   341.1   203.0   215.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

   785.6   759.6   704.1   525.5   530.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Liabilities and equity

    

Current portion of long term debt

   28.0   27.7   27.6   —     12.8 

Trade payables

   17.8   19.7   14.2   19.9   22.7 

Other current liabilities(6)

   116.2   119.9   106.9   83.5   92.5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total current liabilities

   162.0   167.3   148.7   103.4   128.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Long-term debt

   33.4   61.4   89.1   —     —   

Othernon-current liabilities(7)

   37.8   35.9   51.2   13.9   13.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Totalnon-current liabilities

   71.2   97.3   140.3   13.9   13.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Share capital (ordinary shares $0.16 (10 pence) par value, authorized 60,000,000 shares; issued: 51,153,220, 54,834,080, 53,312,559, 52,406,304 and 51,950,662 shares each as at March 31, 2019, 2018, 2017, 2016 and 2015, respectively)

   8.1   8.5   8.3   8.2   8.1 

Share premium

   269.5   371.8   338.3   306.9   286.8 

Other shareholders’ equity (8)

   331.2   248.9   163.2   123.6   94.2 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total shareholders’ equity, including shares held in treasury

   608.8   629.2   509.8   438.7   389.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Less: 1,101,300 shares as at March 31, 2019, 4,400,000 shares as at March 31, 2018, 3,300,000 shares as at March 31, 2017, 1,100,000 shares as at March 31, 2016 and Nil shares as at March 31, 2015, held in treasury, at cost

   (56.4  (134.2  (94.7  (30.5  —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total shareholders’ equity

   552.4   495.0   415.1   408.2   389.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities and equity

  $785.6  $759.6  $704.1  $525.5  $530.3 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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The following table sets forth for the periods indicated selected consolidated financial data,non-GAAP financial data and operating data:

 

   For the year ended March 31, 
   2019  2018  2017  2016  2015 
   

(US dollars in millions, except percentages

and employee data)

 

Other Consolidated Financial Data:

      

Revenue

  $809.1  $758.0  $602.5  $562.2  $533.9 

Gross profit as a percentage of revenue

   36.0  33.6  33.1  35.0  35.8

Operating profit as a percentage of revenue

   14.8  12.5  7.8  13.0  13.2

Non-GAAP Financial Data:

      

Revenue less repair payments(non-GAAP)(9)

  $794.0  $741.0  $578.4  $531.0  $503.0 

Gross profit as a percentage of revenue less repair payments(non-GAAP)

   36.6  34.4  34.4  37.1  38.0

Operating profit as a percentage of revenue less repair payments(non-GAAP)

   15.1  12.8  8.2  13.7  14.0

Operating Data:

      

Number of employees (at year end) (10)

   39,898   36,540   34,547   32,388   28,890 

Notes:

 

(1) 

Includes the following share-based compensation expense amounts:

 

   For the year ended March 31, 
   2019   2018   2017   2016   2015 
   (US dollars in millions) 

Cost of revenue

  $4.3   $3.8   $2.8   $1.9   $0.8 

Selling and marketing expenses

  $4.0   $2.6   $1.7   $1.4   $0.8 

General and administrative expenses

  $22.0   $24.2   $18.5   $14.6   $7.9 

 

(2) 

On adoption of IFRS 9 “Financial Instruments” (“IFRS 9”) with effect from April 1, 2018, cash flow hedging gains and losses, which were previously reported in foreign exchange gains or losses, net, are now reported in revenue. The comparative information has not been restated and continues to be reported in accordance with the principles of IAS 39 –“Financial Instruments: Recognition and Measurement”.

(3) 

Disclosed separately on adoption of IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”) with effect from April 1, 2018. The comparative information has not been restated and continues to be reported in accordance with the principles of IAS 18 –“Revenue”. See note 4 to our consolidated financial statements included elsewhere in this annual report.

(4) 

Consists of funds held for clients, derivative assets, and prepayments and other current assets.

(5) 

Consists ofnon-current portion of derivative assets, and othernon-current assets.

(6) 

Consists of provisions and accrued expenses, derivative liabilities, pension and other employee obligations, contract liabilities, current taxes payable and other liabilities.

(7) 

Consists ofnon-current portion of derivative liabilities, pension and other employee obligations, contract liabilities, deferred tax liabilities and othernon-current liabilities.

(8) 

Consists of retained earnings and other components of equity.

 

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(9) 

Revenue less repair payments is anon-GAAP financial measure which is calculated as (a) revenue less (b) in our auto claims business, payments to repair centers for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients. The following table reconciles our revenue to revenue less repair payments (anon-GAAP financial measure) for the indicated periods:

 

   For the year ended March 31, 
   2019   2018   2017   2016   2015 
   (US dollars in millions) 

Revenue (GAAP)

  $809.1   $758.0   $602.5   $562.2   $533.9 

Less: Payments to repair centers(a)

   15.2    17.0    24.1    31.2    30.9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue less repair payments(non-GAAP)

  $794.0   $741.0   $578.4   $531.0   $503.0 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note:

 

(a) 

Consists of payments to repair centers in our auto claims business for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients.

We have two reportable segments for financial statement reporting purposes — WNS Global BPM and WNS Auto Claims BPM. In our WNS Auto Claims BPM segment, we provide both “fault” and“non-fault” repairs. For “fault” repairs, we provide claims handling and repair management services, where we arrange for automobile repairs through a network of third party repair centers. WNS Legal Assistance LLP, a subsidiary of WNS Assistance Limited, provides legal services in relation to personal injury claims. In our repair management services, where we act as the principal in our dealings with the third party repair centers and our clients, the amounts which we invoice to our clients for payments made by us to third party repair centers are reported as revenue. Where we are not the principal in providing the services, we record revenue from repair services net of repair cost. Since we wholly subcontract the repairs to the repair centers, we evaluate the financial performance of our “fault” repair business based on revenue less repair payments(non-GAAP) to third party repair centers, which is anon-GAAP financial measure. We believe that revenue less repair payments(non-GAAP) for “fault” repairs reflects more accurately the value addition of the business process management services that we directly provide to our clients.

For our“non-fault” repairs business, we generally provide a consolidated suite of accident management services including credit hire and credit repair, and we believe that measurement of such business on a basis that includes repair payments in revenue is appropriate. Revenue including repair payments is therefore used as a primary measure to allocate resources and measure operating performance for accident management services provided in our“non-fault” repairs business. Our“non-fault” repairs business, where we provide accident management services, accounts for a relatively small portion of our revenue for our WNS Auto Claims BPM segment.

Thisnon-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. We believe that the presentation of thisnon-GAAP financial measure in this annual report provides useful information for investors regarding the financial performance of our business and our two reportable segments. Our revenue less repair payments(non-GAAP) may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation.

 

(10)

Commencing fiscal 2018, we are including in our disclosed total headcount the number of apprentices employed under the India government scheme, National Employability Enhancement Mission, pursuant to which apprentices undergo a three to 36 month apprenticeship to enhance their employability. There is no guarantee of employment with WNS following the completion of the apprenticeship. Our previously disclosed total headcount does not include apprentices. The total headcount presented for prior periods in the table above have beenre-computed to include apprentices for comparative purposes.

B. Capitalization and Indebtedness

Not applicable.

 

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C. Reason for the Offer and the Use of Proceeds

Not applicable.

D. Risk Factors

This annual report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those described in the following risk factors and elsewhere in this annual report. If any of the following risks actually occur, our business, financial condition and results of operations could suffer and the trading price of our ADSs could decline.

Risks Related to Our Business

The global economic andgeo-political conditions have been challenging and have had, and may continue to have, an adverse effect on the financial markets and the economy in general, which has had, and may continue to have, a material adverse effect on our business, our financial performance and the prices of our equity shares and ADSs.

Global economic conditions continue to show signs of turbulence. Although some key indicators of sustainable economic growth show signs of improvement, volatility in the domestic politics of major markets may lead to changes in the institutional framework of the international economy.

In June 2016, a majority of voters in the UK elected to withdraw from the EU in a national referendum, commonly referred to as “Brexit.” The referendum was advisory, and the terms of any withdrawal are subject to atwo-year negotiation period (unless an extension is agreed), which commenced on March 29, 2017. The withdrawal of the UK from the EU was set to take place on March 29, 2019, however this date has been postponed to October 31, 2019 and ongoing uncertainty remains as to what kind of post-Brexit agreement between the UK and the EU, if any, may be approved by the UK parliament. There is the possibility that the UK will end up leaving the EU without having reached final agreement with the EU on the terms of its withdrawal. The referendum, and now the risk of a “no deal” between the UK and the EU, has created significant uncertainty regarding the future relationship between the UK and the EU, including with respect to the laws and regulations that will apply as the UK determines whichEU-derived laws to replace or replicate in the event of a withdrawal. Uncertainty regarding the terms of Brexit, and its eventual effects once implemented, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations.

29.0% of our revenues and 27.6% of our revenue less repair payments(non-GAAP) for fiscal 2019 and 31.8% of our revenues and 30.2% of our revenue less repair payments(non-GAAP) for fiscal 2018 are denominated in pound sterling. The extent and duration of the decline in the value of the pound sterling to the US dollar and other currencies is unknown at this time. A long-term reduction in the value of the pound sterling as a result of the UK referendum or otherwise could adversely impact our earnings growth rate and profitability. We believe that our hedging program is effective and it substantially protects us against fluctuations in foreign currency exchange rates through a mix of forwards and options for this current fiscal year.

In the US, economic growth is tempered by continuing concerns over the failure to achieve a long-term solution to the issues of government spending, the increasing US national debt, and their negative impact on the US economy as well as concerns over potential increases in the cost of borrowing and reduction in availability of credit as the US Federal Reserve has, until recently, continued to raise interest rates. The policies that may be pursued by the presidential administration in the US have added further uncertainty to the global economy, and the prevailing political climate may lead to more protectionist policies. Further, there is uncertainty regarding the impact of the escalating “trade war” between China and the United States on the global economy. Globally, countries may require additional financial support, sovereign credit ratings may continue to decline, and there may be default on sovereign debt obligations of certain countries. Any of these may increase the cost of borrowing and cause credit to become more limited, which could have a material adverse effect on our business, financial condition and results of operations. Further, there continue to be signs of economic weakness, such as relatively high levels of unemployment, in major markets including Europe. Continuing conflicts and instability in various regions around the world may lead to additional acts of terrorism, and armed conflict around the world. The ongoing refugee crisis in Europe, North Africa and the Middle East may contribute to political and economic instability in those regions. A resurgence of isolationist and/or protectionist policies in North America, Europe and Asia may curtail global economic growth. China continues to have room for economic growth, but such growth opportunities remain subject to political developments, particularly with respect to aUS-China trade deal, and uncertainties in the regulatory framework of the economy.

These economic andgeo-political conditions may affect our business in a number of ways. The general level of economic activity, such as decreases in business and consumer spending, could result in a decrease in demand for our services, thus reducing our revenue. The cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Continued turbulence or uncertainty in the European, US, Asian and international financial markets and economies, and the political climate in the US and the UK, may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our clients. If these market conditions continue or worsen, they may limit our ability to access financing or increase our cost of financing to meet liquidity needs, and affect the ability of our clients to use credit to purchase our services or to make timely payments to us, resulting in adverse effects on our financial condition and results of operations.

 

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Changing economic conditions may have an effect on foreign exchange rates, which in turn may affect our business. For further information, see “— Currency fluctuations among the Indian rupee, the pound sterling, the US dollar, the Australian dollar and the South African rand could have a material adverse effect on our results of operations.”

Uncertainty about current global economic conditions could also continue to increase the volatility of our share price. We cannot predict the timing or duration of an economic slowdown or the timing or strength of a subsequent economic recovery generally or in our targeted industries, including the travel and leisure and insurance industries. If macroeconomic conditions worsen or current global economic conditions continue for a prolonged period of time, we are not able to predict the impact that such worsening conditions will have on our targeted industries in general, and our results of operations specifically.

A few major clients account for a significant portion of our revenue and any loss of business from these clients could reduce our revenue and significantly harm our business.

We have derived and believe that we will continue to derive in the near term a significant portion of our revenue from a limited number of large clients. In fiscal 2019 and 2018, our five largest clients accounted for 27.1% and 29.4% of our revenue and 27.6% and 30.1% of our revenue less repair payments(non-GAAP), respectively. In fiscal 2019 and 2018, our three largest clients accounted for 18.1% and 19.2% of our revenue and 18.5% and 19.6% of our revenue less repair payments(non-GAAP), respectively. In fiscal 2019, our largest client individually accounted for 6.9% and 7.1% of our revenue and revenue less repair payments(non-GAAP), respectively, as compared to 6.8% and 7.0% in fiscal 2018, respectively. Any loss of business from any major client could reduce our revenue and significantly harm our business.

For example, in line with our expectations, one of our top five clients by revenue contribution in fiscal 2014, an online travel agency (“OTA”), provided us with lower volume of business in fiscal 2015 as the OTA entered into a strategic marketing agreement with another OTA in August 2013, pursuant to which, it, over a period of time, from the fourth quarter of fiscal 2014 to the fourth quarter of fiscal 2015, moved its customer care and sales processes that were previously managed by us to a technology platform managed by the other OTA. As a result, we lost most of our business from that OTA and since June 2015, we ceased to provide services to that OTA. That OTA accounted for 2.5% and 6.1% of our revenue and 2.6% and 6.5% of our revenue less repair payments(non-GAAP) in fiscal 2015 and 2014, respectively. The other OTA uses several BPM vendors to manage such processes on their technology platform. We are approved as one of the other OTA’s providers of BPM services. We have managed to compete with incumbent BPM vendors for the other OTA’s business and the other OTA has become one of our large clients.

We have derived, and we expect to continue deriving for the foreseeable future,a significant portion of our revenue from Aviva Global Services (Management Services) Private Limited (“Aviva MS”). Under our master services agreement with Aviva MS (the “Aviva master services agreement”), Aviva MS is permitted to terminate the agreement without cause with 180 days’ notice upon payment of a termination fee.

In addition, the volume of work performed for specific clients is likely to vary from year to year, particularly since we may not be the exclusive outside service provider for our clients. Thus, a major client in one year may not provide the same level of revenue in any subsequent year. For example, until fiscal 2018, Aviva MS was our largest client and revenue from Aviva MS has decreased from $54.5 million in fiscal 2017 to $51.9 million in fiscal 2018 to $50.1 million in fiscal 2019. Part of this decline in revenue is attributable to revised pricing terms and part is attributable to a reduction of services due to automation performed by Aviva MS and the automation of certain services by WNS. The loss of some or all of the business of any large client could have a material adverse effect on our business, results of operations, financial condition and cash flows. A number of factors other than our performance could cause the loss of or reduction in business or revenue from a client, and these factors are not predictable. For example, a client may demand price reductions, change its outsourcing strategy or move workin-house. A client may also be acquired by a company with a different outsourcing strategy that intends to switch to another business process management service provider or return workin-house.

Our revenue is highly dependent on clients concentrated in a few industries, as well as clients located primarily in the US, the UK, Europe and Australia. Economic slowdowns or factors that affect these industries or the economic environment in the US, the UK, Europe or Australia could reduce our revenue and seriously harm our business.

A substantial portion of our clients are concentrated in the insurance industry and the travel and leisure industry. In fiscal 2019 and 2018, 26.6% and 25.7% of our revenue, respectively, and 25.2% and 24.0% of our revenue less repair payments(non-GAAP), respectively, were derived from clients in the insurance industry. During the same periods, clients in the travel and leisure industry contributed 17.4% and 18.7% of our revenue, respectively, and 17.8% and 19.2% of our revenue less repair payments(non-GAAP), respectively. Our business and growth largely depend on continued demand for our services from clients in these industries and other industries that we may target in the future, as well as on trends in these industries to outsource business processes.

 

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Turbulence in the global economy affects both the industries in which our clients are concentrated and the geographies in which we do business. For more information, see “ — The global economic andgeo-political conditions have been challenging and have had, and may continue to have, an adverse effect on the financial markets and the economy in general, which has had, and may continue to have, a material adverse effect on our business, our financial performance and the prices of our equity shares and ADSs.” Certain of our targeted industries are especially vulnerable to crises in the financial and credit markets and potential economic downturns. A downturn in any of our targeted industries, particularly the insurance or travel and leisure industries, a slowdown or reversal of the trend to offshore business process outsourcing in any of these industries or the introduction of regulation which restricts or discourages companies from outsourcing could result in a decrease in the demand for our services and adversely affect our results of operations.

Further, any weakening of or uncertainty in worldwide economic and business conditions could result in a few of our clients reducing or postponing their outsourced business requirements, which in turn could decrease the demand for our services and adversely affect our results of operations. In particular, our revenue is highly dependent on the economic environments in the US, the UK, Europe and Australia. In fiscal 2019 and 2018, 41.5% and 40.7% of our revenue, respectively, and 42.3% and 41.6% of our revenue less repair payments(non-GAAP), respectively, were derived from clients located in the US. During the same periods, 31.4% and 34.2% of our revenue, respectively, and 30.1% and 32.6% of our revenue less repair payments(non-GAAP), respectively, were derived from clients located in the UK, 7.0% and 6.2% of our revenue, respectively, and 7.1% and 6.4% of our revenue less repair payments(non-GAAP), respectively, were derived from clients located in Europe (excluding the UK), and 9.5% and 8.8% of our revenue, respectively, and 9.7% and 9.0% of our revenue less repair payments(non-GAAP), respectively, were derived from clients located in Australia. Any weakening of or uncertainty in the US, UK, European or Australian economy will likely have a further adverse impact on our revenue.

Other developments may also lead to a decline in the demand for our services in our targeted industries. Significant changes in the financial services industry or any of the other industries on which we focus, or a consolidation in any of these industries or acquisitions, particularly involving our clients, may decrease the potential number of buyers of our services and have an adverse impact on our profitability. Any significant reduction in or the elimination of the use of the services we provide within any of these industries would result in reduced revenue and harm our business. Our clients may experience rapid changes in their prospects, substantial price competition and pressure on their profitability. Although such pressures can encourage outsourcing as a cost reduction measure, they may also result in increasing pressure on us from clients in these key industries to lower our prices which could negatively affect our business, results of operations, financial condition and cash flows.

 

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Currency fluctuations among the Indian rupee, the pound sterling, the US dollar, the Australian dollar, the Euro, the South African rand and the Philippine peso could have a material adverse effect on our results of operations.

Although substantially all of our revenue is denominated in pound sterling, US dollars, and to a lesser extent, Australian dollars, Euro and South African rand, a significant portion of our expenses (other than payments to repair centers, which are primarily denominated in pound sterling) are incurred and paid in Indian rupees and, to a lesser extent, in South African rand and Philippine peso. Therefore, a weakening of the rate of exchange for the pound sterling, the US dollar, Euro or the Australian dollar against the Indian rupee or, to a lesser extent, a weakening of the pound sterling against the South African rand or the Philippine peso would adversely affect our results. Furthermore, we report our financial results in US dollars and our results of operations would be adversely affected if the pound sterling, Euro or the Australian dollar depreciates against the US dollar, or if the Indian rupee or, to a lesser extent, the South African rand or the Philippine peso appreciates against the US dollar. Fluctuations between the pound sterling, the Indian rupee, the South African rand, the Australian dollar or the Philippine peso, on the one hand, and the US dollar, on the other hand, expose us to translation risk when transactions denominated in such currencies are translated to US dollars, our reporting currency. The exchange rates between each of the pound sterling, Indian rupee, South African rand, Australian dollar, Euro and the Philippine peso, on the one hand, and the US dollar, on the other hand, have changed substantially in recent years and may fluctuate substantially in the future.

The referendum in the UK regarding the UK’s withdrawal from the EU and the uncertainty regarding the terms of Brexit and its eventual effects once implemented have created uncertainty in the British and European economies and in the global economy as a whole. See “—The global economic andgeo-political conditions have been challenging and have had, and may continue to have, an adverse effect on the financial markets and the economy in general, which has had, and may continue to have, a material adverse effect on our business, our financial performance and the prices of our equity shares and ADSs.” These developments have caused, and may continue to cause, volatility in the exchange rates between the pound sterling and other currencies.

The average pound sterling to US dollar exchange rate was approximately £0.76 per $1.00 in fiscal 2019, which represented a depreciation of the pound sterling by an average of 0.9% as compared with the average exchange rate of £0.75 per $1.00 in fiscal 2018, which in turn represented an appreciation of the pound sterling by an average of 1.4% as compared with the average exchange rate of £0.76 per $1.00 in fiscal 2017.

The average Indian rupee to US dollar exchange rate was approximately69.92 per $1.00 in fiscal 2019, which represented a depreciation of the Indian rupee by an average of 8.5% as compared with the average exchange rate of approximately64.46 per $1.00 in fiscal 2018, which in turn represented an appreciation of the Indian rupee by an average of 3.9% as compared with the average exchange rate of approximately67.10 per $1.00 in fiscal 2017.

The average South African rand exchange rate was approximately R13.76 per $1.00 in fiscal 2019, which represented a depreciation of the South African rand by an average of 6.0% as compared with the average exchange rate of approximately R12.98 per $1.00 in fiscal 2018, which in turn represented an appreciation of the South African rand by an average of 7.8% as compared with the average exchange rate of approximately R14.07 per $1.00 in fiscal 2017.

The average Australian dollar exchange rate was approximately A1.37 per $1.00 in fiscal 2019, which represented a depreciation of the Australian dollar by an average of 5.8% as compared with the average exchange rate of approximately A1.29 per $1.00 in fiscal 2018, which in turn represented an appreciation of the Australian dollar by an average of 2.8% as compared with the average exchange rate of approximately A1.33 per $1.00 in fiscal 2017.

The average Euro exchange rate was approximately €1.16 per $1.00 in fiscal 2019, which represented a depreciation of the Euro by an average of 1.0% as compared with the average exchange rate of approximately €1.17 per $1.00 in fiscal 2018, which in turn represented an appreciation of the Euro by an average of 6.7% as compared with the average exchange rate of approximately €1.10 per $1.00 in fiscal 2017.

The average Philippine peso exchange rate was approximately PHP 52.91 per $1.00 in fiscal 2019, which represented a depreciation of the Philippine peso by an average of 4.2% as compared with the average exchange rate of approximately PHP 50.76 per $1.00 in fiscal 2018, which in turn represented a depreciation of the Philippine peso by an average of 5.4% as compared with the average exchange rate of approximately PHP 48.18 per $1.00 in fiscal 2017.

Our results of operations would be adversely affected if the Indian rupee appreciates significantly against the pound sterling or the US dollar or if the pound sterling or the Australian dollar depreciates against the US dollar or, to a lesser extent, the South African rand or the Philippine peso appreciates significantly against the US dollar.

For example, the depreciation of the Indian Rupee and the South African rand against the US dollar in fiscal 2019 positively impacted our results of operations whereas the depreciation of the pound sterling and the Australian dollar against the US dollar negatively impacted our results of operations during that year.

The appreciation of the Indian rupee and the South African rand against the US dollar in fiscal 2018 negatively impacted our results of operations whereas the appreciation of the pound sterling and the Australian dollar against the US dollar positively impacted our results of operations during that year.

We hedge a portion of our foreign currency exposures using options and forward contracts. We cannot assure you that our hedging strategy will be successful or will mitigate our exposure to currency risk.

 

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The international nature of our business exposes us to several risks, such as unexpected changes in the regulatory requirements and governmental policy changes of multiple jurisdictions.

We have operations in China, Costa Rica, India, the Philippines, Poland, Romania, South Africa, Sri Lanka, Spain, Turkey, the UK and the US, and we service clients across Asia, Europe, South Africa, Australia and North America. Our corporate structure also spans multiple jurisdictions, with our parent holding company incorporated in Jersey, Channel Islands, and intermediate and operating subsidiaries (including branch offices) incorporated in Australia, China, Costa Rica, France, India, Mauritius, the Netherlands, the Philippines, Romania, South Africa, Singapore, Sri Lanka, Spain, Turkey, the United Arab Emirates, the UK and the US. As a result, we are exposed to risks typically associated with conducting business internationally, many of which are beyond our control. These risks include:

 

  

legal uncertainty owing to the overlap of different legal regimes, and problems in asserting contractual or other rights across international borders;

 

  

potentially adverse tax consequences, such as scrutiny of transfer pricing arrangements by authorities in the countries in which we operate;

 

  

potential tariffs and other trade barriers;

 

  

unexpected changes in legal regimes and regulatory requirements;

 

  

policy changes due to changes in government;

For example, during the fourth quarter of fiscal 2017, proposed changes to the laws of the UK governing personal injury claims generated uncertainty regarding the future earnings trajectory of our legal services business in our WNS Auto Claims BPM segment, as a result of which we had expected that we would eventually exit from providing legal services in relation to personal injury claims. We also experienced a decrease in volume of and loss of business from certain clients of our traditional repair services in our WNS Auto Claims BPM segment in fiscal 2017. As a result, we had in fiscal 2017 expected the future performance of our WNS Auto Claims BPM segment to decline significantly and therefore significantly reduced our financial projections and estimates of our WNS Auto Claims BPM segment. Accordingly, we performed an impairment review of the goodwill associated with the companies we had acquired for our auto claims business and recorded an impairment charge of $21.7 million to our results of operations for fiscal 2017. The occurrence of other changes in legal regimes or regulatory requirements, or any other events associated with the risks of conducting business internationally, could have a material adverse effect on our results of operations and financial condition.

Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements. Failure to adhere to the laws and regulations that govern our business or our clients’ businesses that we are required to comply with in performing our services could harm our business.

We have operations in 12 countries and our corporate structure spans multiple jurisdictions. Further, we service clients across multiple geographic regions and multiple industries. We are required to comply with numerous, and sometimes conflicting and uncertain, laws and regulations including on matters relating to import/export controls, trade restrictions, taxation, immigration, internal disclosure and control obligations, securities regulation, anti-competition, data privacy and protection, anti-corruption, and employment and labor relations. In addition, we are required to obtain and maintain permits and licenses for the conduct of our business in various jurisdictions. Our clients’ business operations are also subject to numerous regulations in the jurisdiction in which they operate or that are applicable to their industry, and our clients may contractually require that we perform our services in compliance with regulations applicable to them or in a manner that will enable them to comply with such regulations. For example, regulations to which our clients’ business operations are subject include the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act and Health Information Technology for Economic and Clinical Health Act in the US, the Financial Services Act in the UK and the General Data Protection Regulation in the EU. In addition, HealthHelp, which we acquired in March 2017, administers programs offered by the Centers for Medicare & Medicaid Services, a United States federal agency that administers Medicare and Medicaid. Regulatory changes may result in our exiting certain parts of our business.

On account of the global nature of our and our clients’ operations, compliance with diverse legal and regulatory requirements is difficult, time-consuming and requires significant resources. Further, the extent of development of legal systems varies across the countries in which we operate and local laws may not be adequately developed or be able to provide us clear guidance to sufficiently protect our rights. Specifically, in many countries including those in which we operate and/or seek to expand to, the practices of local businesses may not be in accordance with international business standards and could violate anti-corruption laws and regulations, including the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act 1977. Our employees, subcontractors, agents, business partners, the companies we acquire and their employees, subcontractors and agents, and other third parties with which we associate, could act in a manner which violates policies or procedures intended to ensure compliance with laws and regulations, including applicable anti-corruption laws or regulations.

 

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Violations of such laws or regulations by us, our employees or any of these third parties could subject us to criminal or civil enforcement actions (whether or not we participated or were aware of the actions leading to the violations), including fines or penalties, breach of contract damages, disgorgement of profits and suspension or disqualification from work, any of which could materially and adversely affect our business, including our results of operations and our reputation. If we are unable to maintain our licenses, permits or other qualifications necessary to provide our services, we may not be able to provide services to existing clients or be able to attract new clients and could lose revenue, which could have a material adverse effect on our business.

 

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We face competition from onshore and offshore business process management companies and from information technology companies that also offer business process management services. Our clients may also choose to run their business processes themselves, either in their home countries or through captive units located offshore.

The market for outsourcing services is very competitive and we expect competition to intensify and increase from a number of sources. We believe that the principal competitive factors in our markets are price, service quality, sales and marketing skills, business process transformation capabilities and industry expertise. We face significant competition from our clients’ ownin-house groups including, in some cases,in-house departments operating offshore or captive units. Clients who currently outsource a significant proportion of their business processes or information technology services to vendors in India may, for various reasons, including diversifying geographic risk, seek to reduce their dependence on any one country. We also face competition from onshore and offshore business process management and information technology services companies. In addition, the trend toward offshore outsourcing, international expansion by foreign and domestic competitors and continuing technological changes will result in new and different competitors entering our markets.

These competitors may include entrants from the communications, software and data networking industries or entrants in geographic locations with lower costs than those in which we operate. Technological changes include the development of complex automated systems for the processing of transactions that are formerly labor intensive, which may reduce or replace the need for outsourcing such transaction processing.

Some of these existing and future competitors have greater financial, human and other resources, longer operating histories, greater technological expertise, more recognizable brand names and more established relationships in the industries that we currently serve or may serve in the future. In addition, some of our competitors may enter into strategic or commercial relationships among themselves or with larger, more established companies in order to increase their ability to address client needs, or enter into similar arrangements with potential clients. Increased competition, our inability to compete successfully against competitors, pricing pressures or loss of market share could result in reduced operating margins which could harm our business, results of operations, financial condition and cash flows.

Changes in technology could lead to changes in our clients’ businesses as well as their requirements for business process services, which may adversely impact our business and results of operations.

Proliferation of accessible technology, such as smartphones and internet, has had an impact on the manner in which customers and businesses interact with each other. Companies are increasingly adopting social media platforms, online self-help portals and mobile applications for communicating with and servicing their customers rather than utilizing business process management companies such as ourselves to manage these interactions. Our clients also continue to invest in technology by upgrading their platforms and application capabilities towards increased automation of transactions. Advances in software, such as robotic process automation and voice recognition, have the potential to reduce dependency on human processing transactions. Such developments and other innovations, such as autonomous vehicles, have the potential to significantly change the way our clients’ businesses operate and may reduce their dependency on business process management companies, including our company, for managing their business processes. We are therefore subject to a risk of disintermediation on account of such changes in technology, which could impact our future growth prospects and may require continued investments in our business.

If we cause disruptions to our clients’ businesses, provide inadequate service or are in breach of our representations or obligations, our clients may have claims for substantial damages against us. Our insurance coverage may be inadequate to cover these claims and, as a result, our profits may be substantially reduced.

Most of our contracts with clients contain service level and performance requirements, including requirements relating to the quality of our services and the timing and quality of responses to the client’s customer inquiries. In some cases, the quality of services that we provide is measured by quality assurance ratings and surveys which are based in part on the results of direct monitoring by our clients of interactions between our employees and our client’s customers. Failure to consistently meet service requirements of a client or errors made by our associates or the software/platforms we use in the course of delivering services to our clients could disrupt the client’s business and result in a reduction in revenue or a claim for substantial damages against us. For example, some of our agreements stipulate standards of service that, if not met by us, will require us to pay penalties to our clients or result in lower payment to us. Failure to meet these service level requirements could result in the payment of significant penalties by us to our clients which in turn could have an adverse effect on our business, results of operations, financial condition and cash flows. In addition, in connection with acquiring new business from a client or entering into client contracts, our employees may make various representations, including representations relating to the quality of our services, abilities of our associates and our project management techniques. A failure or inability to meet a contractual requirement or our representations could seriously damage our reputation and affect our ability to attract new business or result in a claim for substantial damages against us.

 

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Our dependence on our offshore delivery centers requires us to maintain active data and voice communications between our main delivery centers in China, Costa Rica, India, the Philippines, Poland, Romania, South Africa, Sri Lanka, Spain, Turkey, the UK and the US, our international technology hubs in the UK and the US and our clients’ offices. Although we maintain redundant facilities and communications links, disruptions could result from, among other things, technical and electricity breakdowns, computer glitches and viruses and adverse weather conditions. Any significant failure of our equipment or systems, or any major disruption to basic infrastructure like power and telecommunications in the locations in which we operate, could impede our ability to provide services to our clients, have a negative impact on our reputation, cause us to lose clients, reduce our revenue and harm our business.

We depend on human resources to process transactions for our clients. Disruptive incidents, includingman-made events such as civil strikes and shutdowns, may impact the ability of our employees to commute to and from our operating premises.Non-natural disasters, whether unintentional (such as those caused by accidents) or intentional (such as those caused by terrorist attacks), may also disrupt our operations. While we have implemented business continuity plans for clients where we have contractually agreed to do so, we may not always be able to provide services to our clients for the duration of such incidents.

Although under most of our contracts with our clients, our liability for breach of our obligations is limited to actual damages suffered by the client and capped at a portion of the fees paid or payable to us under the relevant contract, our liability for breach of our obligations under certain of our contracts is unlimited. With respect to those of our contracts that contain limitations on liability, such limitations may be unenforceable or otherwise may not protect us from liability for damages. In addition, certain liabilities, such as claims of third parties for which we may be required to indemnify our clients, are generally not limited under those agreements. Further, although we have professional indemnity insurance coverage, the coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims and our insurers may disclaim coverage as to any future claims. The successful assertion of one or more large claims against us that exceed available insurance coverage, or changes in our insurance policies (including premium increases or the imposition of large deductible orco-insurance requirements), could have a material adverse effect on our business, reputation, results of operations, financial condition and cash flows.

 

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We are liable to our clients for damages caused by unauthorized disclosure of sensitive or confidential information, whether through a breach or circumvention of our or our clients’ computer systems and processes, through our employees or otherwise. Further, cybersecurity and data privacy considerations could impact our business.

We are typically required to manage, utilize and store sensitive or confidential client data in connection with the services we provide. Under the terms of our client contracts, we are required to keep such information strictly confidential. Our client contracts do not include any limitation on our liability to them with respect to breaches of our obligation to maintain confidentiality of the information we receive from them. Although we seek to implement measures to protect sensitive and confidential client data, there can be no assurance that we would be able to prevent breaches of security. Further, some of our projects require us to conduct business functions and computer operations using our clients’ systems over which we do not have control and which may not be compliant with industry security standards. In addition, some of the client designed processes that we are contractually required to follow for delivering services to them and which we are unable to unilaterally change, could be designed in a manner that allows for control weaknesses to exist and be exploited. Any vulnerability in a client’s system or client designed process, if exploited, could result in breaches of security or unauthorized transactions and result in a claim for substantial damages against us. Although we have implemented appropriate policies, procedures and infrastructure to reduce the possibility of physical, logical and personnel security breaches, along with appropriate audit oversight for verifying continued operating effectiveness of the same through internal audits and external SSAE16 / ISAE3402, ISO27001 andPCI-DSS reviews, such measures can never completely eliminate the risk of cybersecurity attacks. If any person, including any of our employees, penetrates our or our clients’ network security or otherwise mismanages or misappropriates sensitive or confidential client data, we could be subject to significant liability and lawsuits from our clients or their customers for breaching contractual confidentiality provisions or privacy laws.

To date, although there has not been a material cybersecurity attack that has had an adverse effect on our operations, there can be no assurance that there will be no material adverse effect in the future. Rapid advancements and changes to the technological landscape may require us to make significant further investments in the domain of cybersecurity in order to protect our and our clients’ data and infrastructure. In addition, such advancements coupled with the rise in the sophisticated nature of cyber threats and attacks make it possible that certain threats or vulnerabilities may not be detected in time to prevent an attack on our or our clients’ business. On account of the interconnected nature of our business, there is an interdependency between our clients, business partners and our business to implement appropriate cybersecurity controls in order to mitigate cybersecurity risk. A failure of cybersecurity controls at our client or business partners could therefore result in a breach at our company.

While we have insurance coverage for mismanagement or misappropriation of such information by our employees, that coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims against us, and our insurers may disclaim coverage as to any future claims. Penetration of the network security of our or our clients’ data centers or computer systems or unauthorized use or disclosure of sensitive or confidential client data, whether through breach of our or our clients’ computer systems, systems failure, loss or theft of assets containing confidential information or otherwise, could also have a negative impact on our reputation which would harm our business.

We also cannot be certain that advances in criminal capabilities (including cyber-attacks or cyber intrusions over the internet, malware, computer viruses and the like), discovery of new vulnerabilities or attempts to exploit existing vulnerabilities in our or our clients’ or business partners’ systems, other data thefts, physical system or networkbreak-ins or inappropriate access, or other developments will not compromise or breach the technology protecting our or our client’s or business partners’ computer systems and networks that access and store sensitive information. Cyber threats, such as phishing and trojans, could intrude into our or our client’s or business partners’ network to steal data or to seek sensitive information. Any intrusion into our network or our client’s or business partners’ network (to the extent attributed to us or perceived to be attributed to us) that results in any breach of security could cause damage to our reputation and adversely impact our business and financial results. A significant failure in security measures could have a material adverse effect on our business, reputation, results of operations and financial condition.

Our business could be materially and adversely affected if we do not protect our intellectual property or if our services are found to infringe on the intellectual property of others.

Our success depends in part on certain methodologies, practices, tools and technical expertise we utilize in designing, developing, implementing and maintaining applications and other proprietary intellectual property rights. In order to protect our rights in such intellectual properties, we rely upon a combination of nondisclosure and other contractual arrangements as well as trade secret, copyright and trademark laws. We also generally enter into confidentiality agreements with our employees, consultants, clients and potential clients, and limit access to and distribution of our proprietary information to the extent required for our business purpose.

India is a member of the Berne Convention, an international intellectual property treaty, and has agreed to recognize protections on intellectual property rights conferred under the laws of other foreign countries, including the laws of the United States. There can be no assurance that the laws, rules, regulations and treaties in effect in the United States, India and the other jurisdictions in which we operate and the contractual and other protective measures we take, are adequate to protect us from misappropriation or unauthorized use of our intellectual property, or that such laws will not change. We may not be able to detect unauthorized use and take appropriate steps to enforce our rights, and any such steps may not be successful. Infringement by others of our intellectual property, including the costs of enforcing our intellectual property rights, may have a material adverse effect on our business, results of operations and financial condition.

 

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Our clients may provide us with access to, and require us to use, third party software in connection with our delivery of services to them. Our client contracts generally require our clients to indemnify us for any infringement of intellectual property rights or licenses to third party software when our clients provide such access to us. If the indemnities under our client contracts are inadequate to cover the damages and losses we suffer due to infringement of third party intellectual property rights or licenses to third party software to which we were given access, our business and results of operations could be adversely affected. We are also generally required by our client contracts to indemnify our clients for any breaches of intellectual property rights by our services. Although we believe that we are not infringing on the intellectual property rights of others, claims may nonetheless be successfully asserted against us in the future. The costs of defending any such claims could be significant, and any successful claim may require us to modify, discontinue or rename any of our services. Any such changes may have a material adverse effect on our business, results of operations and financial condition.

Our clients may terminate contracts before completion or choose not to renew contracts, which could adversely affect our business and reduce our revenue.

The terms of our client contracts typically range from three to five years. Many of our client contracts can be terminated by our clients with or without cause, with three to six months’ notice and, in most cases, without penalty. The termination of a substantial percentage of these contracts could adversely affect our business and reduce our revenue. Contracts that will expire on or before March 31, 2020 (including work orders/statement of works that will expire on or before March 31, 2020) represented approximately 15.7% of our revenue and 16.0% of our revenue less repair payments(non-GAAP) from our clients in fiscal 2019. Failure to meet contractual requirements could result in cancellation ornon-renewal of a contract. Some of our contracts may be terminated by the client if certain of our key personnel working on the client project leave our employment and we are unable to find suitable replacements. In addition, a contract termination or significant reduction in work assigned to us by a major client could cause us to experience a higher than expected number of unassigned employees, which would increase our cost of revenue as a percentage of revenue until we are able to reduce or reallocate our headcount. We may not be able to replace any client that elects to terminate or not renew its contract with us, which would adversely affect our business and revenue. Further, we may face difficulties in providingend-to-end business solutions or delivering complex, large or unique projects for our clients that could cause clients to terminate or not renew their contracts with us, which in turn could harm our business and our reputation.

For example, one of our largest auto claims clients by revenue contribution in fiscal 2012 terminated its contract with us with effect from April 18, 2012. This client accounted for 10.4% and 7.5% of our revenue and 1.3% and 1.9% of our revenue less repair payments(non-GAAP) in fiscal 2012 and 2011, respectively.

In addition, one of our top five clients by revenue contribution in fiscal 2014, an OTA, provided us with a lower volume of business in fiscal 2015 as the OTA entered into a strategic marketing agreement with another OTA in August 2013 pursuant to which it over a period of time, from the fourth quarter of fiscal 2014 to the fourth quarter of fiscal 2015, moved its customer care and sales processes that were previously managed by us to a technology platform managed by the other OTA. As a result, we lost most of our business from that OTA and since June 2015, we ceased to provide services to that OTA. That OTA accounted for 2.5% and 6.1% of our revenue and 2.6% and 6.5% of our revenue less repair payments(non-GAAP) in fiscal 2015 and 2014, respectively. The other OTA uses several BPM vendors to manage such processes on their technology platform. We are approved as one of the other OTA’s providers of BPM services. We have managed to compete with incumbent BPM vendors for the other OTA’s business and the other OTA has become one of our largest clients. For more information, see “— A few major clients account for a significant portion of our revenue and any loss of business from these clients could reduce our revenue and significantly harm our business.”

Some of our client contracts contain provisions which, if triggered, could result in lower future revenue and have an adverse effect on our business.

In many of our client contracts, we agree to include certain provisions which provide for downward revision of our prices under certain circumstances. For example, certain contracts allow a client in certain limited circumstances to request a benchmark study comparing our pricing and performance with that of an agreed list of other service providers for comparable services. Based on the results of the study and depending on the reasons for any unfavorable variance, we may be required to make improvements in the service we provide or to reduce the pricing for services to be performed under the remaining term of the contract. Some of our contracts also provide that, during the term of the contract and for a certain period thereafter ranging from six to 12 months, we may not provide similar services to certain or any of their competitors using the same personnel. These restrictions may hamper our ability to compete for and provide services to other clients in the same industry, which may result in lower future revenue and profitability.

Some of our contracts specify that if a change in control of our company occurs during the term of the contract, the client has the right to terminate the contract. These provisions may result in our contracts being terminated if there is such a change in control, resulting in a potential loss of revenue.

 

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Fraud on account of circumvention of controls within our or our clients’ computer systems and processes could adversely impact our business.

Our business is dependent on the secure and reliable operation of controls within our and our clients’ information systems and processes, whether operated or executed by our clients themselves or by us in connection with our provision of services to them. Although we take adequate measures to safeguard against system-related and other fraud, there can be no assurance that we would be able to prevent fraud or even detect them on a timely basis, particularly where it relates to our clients’ information systems which are not managed by us. For example, we have identified incidences where our employees have allegedly exploited weaknesses in information systems as well as processes in order to record fraudulent transactions. We are generally required to indemnify our clients from third party claims arising out of such fraudulent transactions and our client contracts generally do not include any limitation on our liability to our clients’ losses arising from fraudulent activities by our employees. Our expansion into new markets may create additional challenges with respect to managing the risk of fraud due to the increased geographical dispersion and use of intermediaries. Accordingly, we may have significant liability arising from fraudulent transactions which may materially affect our business and financial results. Although we have professional indemnity insurance coverage for losses arising from fraudulent activities by our employees, that coverage may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims against us, and our insurers may also disclaim coverage as to any future claims. We may also suffer reputational harm as a result of fraud committed by our employees, or by our perceived inability to properly manage fraud related risks, which could in turn lead to enhanced regulatory oversight and scrutiny.

Our business may not develop in ways that we currently anticipate due to negative public reaction to offshore outsourcing, proposed legislation or otherwise.

We have based our strategy of future growth on certain assumptions regarding our industry, services and future demand in the market for such services. However, the trend to outsource business processes may not continue and could reverse.

The issue of domestic companies outsourcing services to organizations operating in other countries is a topic of political discussion in the United States, as well as in Europe, Asia Pacific and other regions in which we have clients. Some countries and special interest groups have expressed concerns about a perceived association between offshore outsourcing and the loss of jobs in the domestic economy. This has resulted in increased political and media attention, especially in the United States, where the subject of outsourcing and immigration reform has been a focus of the current presidential administration. It is possible that there could be a change in the existing laws that would restrict offshore outsourcing or impose new standards that have the effect of restricting the use of certain visas in the foreign outsourcing context. The measures that have been enacted to date are generally directed at restricting the ability of government agencies to outsource work to offshore business service providers. These measures have not had a significant effect on our business because governmental agencies are not a focus of our operations. However, some legislative proposals would, for example, require contact centers to disclose their geographic locations, require notice to individuals whose personal information is disclosed tonon-US affiliates or subcontractors, require disclosures of companies’ foreign outsourcing practices, or restrict US private sector companies that have federal government contracts, federal grants or guaranteed loan programs from outsourcing their services to offshore service providers. Potential changes in tax laws may also increase the overall costs of outsourcing or affect the balance of offshore and onshore business services. Such changes could have an adverse impact on the economics of outsourcing for private companies in the US, which could in turn have an adverse impact on our business with US clients.

Such concerns have also led the UK and other EU jurisdictions to enact regulations which allow employees who are dismissed as a result of transfer of services, which may include outsourcing tonon-UK or EU companies, to seek compensation either from the company from which they were dismissed or from the company to which the work was transferred. This could discourage EU companies from outsourcing work offshore and/or could result in increased operating costs for us. In addition, there has been publicity about the negative experiences, such as theft and misappropriation of sensitive client data, of various companies that use offshore outsourcing, particularly in India.

 

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Current or prospective clients may elect to perform such services themselves or may be discouraged from transferring these services from onshore to offshore providers to avoid negative perceptions that may be associated with using an offshore provider. Any slowdown or reversal of existing industry trends towards offshore outsourcing would seriously harm our ability to compete effectively with competitors that operate out of facilities located in the UK or the US.

Adverse changes to our relationships with the companies with whom we have an alliance or in the business of the companies with whom we have an alliance could adversely affect our results of operations.

We have alliances with companies whose capabilities complement our own. For example, some of our services and solutions are based on technology, software or platforms provided by these companies. The priorities and objectives of these companies with whom we have an alliance may differ from ours. As most of our alliance relationships arenon-exclusive, these companies with whom we have an alliance are not prohibited from competing with us or forming closer or preferred arrangements with our competitors. One or more of these companies with whom we have an alliance may be acquired by a competitor, or may merge with each other, either of which could reduce our access over time to the technology, software or platforms provided by those companies. In addition, these companies with whom we have an alliance could experience reduced demand for their technology, software or platforms, including, for example, in response to changes in technology, which could lessen related demand for our services and solutions. If we do not obtain the expected benefits from our alliance relationships for any reason, we may be less competitive and our ability to offer attractive solutions to our clients may be negatively affected, which could have an adverse effect on our results of operations.

If we are unable to collect our receivables from, or bill our unbilled services to, our clients, our results of operations and cash flows could be adversely affected.

Our business depends on our ability to successfully obtain payment from our clients for work performed. We evaluate the financial condition of our clients and usually bill and collect on relatively short cycles. We maintain allowances against receivables and unbilled services. Actual losses on client balances could differ from those that we currently anticipate and, as a result, we might need to adjust our allowances. We might not accurately assess the creditworthiness of our clients. Macroeconomic conditions, such as any domestic or global credit crisis and disruption or the global financial system could also result in financial difficulties for our clients, including limited access to the credit markets, insolvency or bankruptcy, and, as a result, could cause clients to delay payments to us, request modifications to their payment arrangements that could increase our receivables balance, or default on their payment obligations to us. Timely collection of client balances also depends on our ability to complete our contractual commitments and bill and collect our contracted revenues. If we are unable to meet our contractual requirements, we might experience delays in collection of and/or be unable to collect our client balances, and if this occurs, our results of operations and cash flows could be adversely affected. In addition, if we experience an increase in the time to bill and collect for our services, our cash flows could be adversely affected.

We may face difficulties as we expand our operations to establish delivery centers in onshore locations and offshore in countries in which we have limited or no prior operating experience.

In April 2014 our delivery center in South Carolina in the US became fully operational. We also opened an additional delivery center in Pennsylvania in the US in September 2014. In 2016, we opened an additional delivery center in the Philippines at Iloilo, and in fiscal 2017 we expanded into France, Germany and Turkey. In fiscal 2019, we added new facilities in Palma, Spain. We intend to continue to expand our global footprint in order to maintain an appropriate cost structure and meet our clients’ delivery needs. We plan to establish additional delivery centers in the Asia Pacific, North America and Europe, which may involve expanding into countries other than those in which we currently operate. Our expansion plans may also involve expanding into less developed countries, which may have less political, social or economic stability and less developed infrastructure and legal systems. As we expand our business into new countries we may encounter regulatory, personnel, technological and other difficulties that increase our expenses or delay our ability to start up our operations or become profitable in such countries. This may affect our relationships with our clients and could have an adverse effect on our business, results of operations, financial condition and cash flows.

We may be unable to effectively manage our growth and maintain effective internal controls, which could have a material adverse effect on our operations, results of operations and financial condition.

We were founded in April 1996, and we have experienced growth and significantly expanded our operations. For example, over the last five fiscal years, our employees have increased to 39,898 as at March 31, 2019 from 27,020 as at March 31, 2014. In fiscal 2011, we expanded our delivery center in Romania. In fiscal 2014, our facilities in China and Sri Lanka became operational. In fiscal 2015, our delivery centers in South Carolina and Pennsylvania, in the US, as well as in South Africa, became fully operational, as did our newest facility in China. In fiscal 2016, we added new facilities in Durban and Port Elizabeth, South Africa and Iloilo, the Philippines. In fiscal 2017, we added new facilities in Durban and Centurion, South Africa. In fiscal 2019, we added new facilities in Palma, Spain. We now have delivery centers across 12 countries in China, Costa Rica, India, the Philippines, Poland, Romania, South Africa, Sri Lanka, Spain, Turkey, the UK, and the US. We intend to further expand our global delivery capability, and we are exploring plans to do so in Asia Pacific and Europe.

We have also completed numerous acquisitions. For example, in the first quarter of fiscal 2017, we acquired Value Edge, a provider of commercial research and analytics services to clients in the pharma industry based in India, the US and Europe. In January 2017, we acquired Denali, a leading provider of strategic procurement BPM solutions based in the United States. In March 2017, we acquired HealthHelp, an industry leader in care management based in the United States. For more information about more recent acquisitions, see “—We may not succeed in identifying suitable acquisition targets or integrating any acquired business into our operations, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.”

 

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This growth places significant demands on our management and operational resources. In order to manage growth effectively, we must implement and improve operational systems, procedures and internal controls on a timely basis. If we fail to implement these systems, procedures and controls on a timely basis, we may not be able to service our clients’ needs, hire and retain new employees, pursue new business, complete future acquisitions or operate our business effectively. Failure to effectively transfer new client business to our delivery centers, properly budget transfer costs or accurately estimate operational costs associated with new contracts could result in delays in executing client contracts, trigger service level penalties or cause our profit margins not to meet our expectations or our historical profit margins. As a result of any of these potential problems associated with expansion, our business, results of operations, financial condition and cash flows could be materially and adversely affected.

Our executive and senior management team and other key team members in our business units are critical to our continued success and the loss of such personnel could harm our business.

Our future success substantially depends on the performance of the members of our executive and senior management team and other key team members in each of our business units. These personnel possess technical and business capabilities including domain expertise that are difficult to replace. There is intense competition for experienced senior management and personnel with technical and industry expertise in the business process management industry, and we may not be able to retain our key personnel due to various reasons, including the compensation philosophy followed by our company as described in “Part I — Item 6. Directors, Senior Management and Employees — Compensation.” Although we have entered into employment contracts with our executive officers, certain terms of those agreements may not be enforceable and in any event these agreements do not ensure the continued service of these executive officers. In the event of a loss of any key personnel, there is no assurance that we will be able to find suitable replacements for our key personnel within a reasonable time. The loss of key members of our senior management or other key team members, particularly to competitors, could have a material adverse effect on our business, results of operations, financial condition and cash flows. A loss of several members of our senior management at the same time or within a short period may lead to a disruption in the business of our company, which could materially adversely affect our performance.

We may fail to attract and retain enough sufficiently trained employees to support our operations, as competition for highly skilled personnel is significant and we experience significant employee attrition. These factors could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The business process management industry relies on large numbers of skilled employees, and our success depends to a significant extent on our ability to attract, hire, train and retain qualified employees. The business process management industry, including our company, experiences high employee attrition. During each of fiscal 2019, 2018 and 2017, the attrition rate for our employees who have completed six months of employment with us was 31%, 29% and 34%, respectively. The attrition rate for our employees increased in fiscal 2019 and we cannot assure you that our attrition rate will not continue to increase in the future. There is significant competition in the jurisdictions where our operation centers are located, including India, the Philippines, Romania, South Africa and Sri Lanka, for professionals with the skills necessary to perform the services we offer to our clients. Increased competition for these professionals, in the business process management industry or otherwise, could have an adverse effect on us. A significant increase in the attrition rate among employees with specialized skills could decrease our operating efficiency and productivity and could lead to a decline in demand for our services.

In addition, our ability to maintain and renew existing engagements and obtain new business will depend largely on our ability to attract, train and retain personnel with skills that enable us to keep pace with growing demands for outsourcing, evolving industry standards and changing client preferences. Our failure either to attract, train and retain personnel with the qualifications necessary to fulfill the needs of our existing and future clients or to assimilate new employees successfully could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Employee strikes and other labor-related disruptions may adversely affect our operations.

Our business depends on a large number of employees executing client operations. Strikes or labor disputes with our employees at our delivery centers may adversely affect our ability to conduct business. Our employees are not unionized, although they may in the future form unions. We cannot assure you that there will not be any strike, lock out or material labor dispute in the future. Work interruptions or stoppages could have a material adverse effect on our business, results of operations, financial condition and cash flows.

 

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Our loan agreements impose operating and financial restrictions on us and our subsidiaries.

We have incurred a substantial amount of indebtedness in connection with recent acquisitions. As at March 31, 2019, we had total indebtedness of $61.8 million in secured bank loans. See “Part I — Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources.” Our loan agreements contain a number of covenants and other provisions that, among other things, may impose operating and financial restrictions on us and our subsidiaries. These restrictions could put a strain on our financial position. For example:

 

  

they may increase our vulnerability to general adverse economic and industry conditions;

 

  

they may require us to dedicate a substantial portion of our cash flow from operations to payments on our loans, thereby reducing the availability of our cash flow to fund capital expenditure, working capital and other general corporate purposes;

 

  

they may require us to seek lenders’ consent prior to paying dividends on our ordinary shares;

 

  

they may limit our ability to incur additional borrowings or raise additional financing through equity or debt instruments; and

 

  

they may impose certain financial covenants on us that we may not be able to meet, which may cause the lenders to accelerate the repayment of the balance loan outstanding.

Further, the restrictions that may be contained in our loan agreements may limit our ability to plan for or react to market conditions, meet capital needs or make acquisitions or otherwise restrict our activities or business plans. Our ability to comply with the covenants of our loan agreements may be affected by events beyond our control, and any material deviations from our forecasts could require us to seek waivers or amendments of covenants or alternative sources of financing or to reduce expenditures. We cannot assure you that such waivers, amendments or alternative financing could be obtained, or if obtained, would be on terms acceptable to us.

To fund our capital expenditures, service our indebtedness and fund other potential liquidity requirements, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control and we may need to access the credit market to meet our liquidity requirements.

Our ability to fund planned capital expenditures and to make payments on our outstanding loans will depend on our ability to generate cash in the future. This, to a large extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Furthermore, given that the uncertainty over global economic conditions remains, there can be no assurance that our business activity will be maintained at our expected level to generate the anticipated cash flows from operations or that our credit facilities would be available or sufficient. If global economic uncertainties continue, we may experience a decrease in demand for our services, resulting in our cash flows from operations being lower than anticipated. This may in turn result in our need to obtain financing.

If we cannot fund our capital expenditures, service our indebtedness or fund our other potential liquidity requirements, we may have to take actions such as seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions and investments. We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms or at all.

 

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If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent or detect fraud. As a result, current and potential investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our ADS price.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports. The effective internal controls together with adequate disclosure controls and procedures are designed to prevent or detect fraud. Deficiencies in our internal controls may adversely affect our management’s ability to record, process, summarize, and report financial data on a timely basis. As a public company, we are required by Section 404 of the Sarbanes-Oxley Act of 2002 to include a report of management’s assessment on our internal control over financial reporting and an independent auditor’s attestation report on our internal control over financial reporting in our annual reports on Form20-F.

If material weaknesses are identified in our internal controls over financial reporting, we could be required to implement remedial measures. If we fail to maintain effective disclosure controls and procedures or internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on our ADS price.

Wage increases may prevent us from sustaining our competitive advantage and may reduce our profit margin.

Salaries and related benefits of our operations staff and other employees in countries where we have delivery centers, in particular India, are among our most significant costs. Wage costs in India have historically been significantly lower than wage costs in the US and Europe for comparably skilled professionals, which has been one of our competitive advantages. However, rapid economic growth in India, increased demand for business process management outsourcing to India, increased competition for skilled employees in India, and regulatory developments resulting in wage increases in India, may reduce this competitive advantage. For example, the Government of India has proposed the Code on Wages Bill, 2017, which, if passed, would replace four central labor laws, including the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976, and would introduce a national minimum wage for all employees to be administered by the central government.The Indian Supreme Court recently clarified that certain allowances paid by an employer to an employee should be included in the definition of “basic wage” for the purposes of employee provident fund contributions. As a result, our wage costs in India may increase. In addition, if the US dollar or the pound sterling declines in value against the Indian rupee, wages in the US or the UK will further decrease relative to wages in India, which may further reduce our competitive advantage. We may need to increase our levels of employee compensation more rapidly than in the past to remain competitive in attracting the quantity and quality of employees that our business requires. Wage increases may reduce our profit margins and have a material adverse effect on our financial condition and cash flows.

Further, following the establishment of our delivery centers in the US in 2014, our operations in the US have expanded and our wage costs for employees located in the UK and the US now represent a larger proportion of our total wage costs. Wage increases in the UK and the US may therefore also reduce our profit margins and have a material adverse effect on our financial condition and cash flows.

Our operating results may differ from period to period, which may make it difficult for us to prepare accurate internal financial forecasts and respond in a timely manner to offset such period to period fluctuations.

Our operating results may differ significantly from period to period due to factors such as client losses, variations in the volume of business from clients resulting from changes in our clients’ operations, the business decisions of our clients regarding the use of our services, delays or difficulties in expanding our operational facilities and infrastructure, changes to our pricing structure or that of our competitors, inaccurate estimates of resources and time required to complete ongoing projects, currency fluctuations and seasonal changes in the operations of our clients. For example, our clients in the travel and leisure industry experience seasonal changes in their operations in connection with the US summer holiday season, as well as episodic factors such as adverse weather conditions. Transaction volumes can be impacted by market conditions affecting the travel and insurance industries, including natural disasters, outbreak of infectious diseases or other serious public health concerns in Asia or elsewhere (such as the outbreak of the Influenza A (H7N9) virus in various parts of the world) and terrorist attacks. In addition, our contracts do not generally commit our clients to provide us with a specific volume of business.

 

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In addition, the long sales cycle for our services, which typically ranges from three to 12 months, and the internal budget and approval processes of our prospective clients make it difficult to predict the timing of new client engagements. Commencement of work and ramping up of volume of work with certain new and existing clients have in the past been slower than we had expected and may in the future be slower than we expect. Revenue is recognized upon actual provision of services and when the criteria for recognition are achieved. Accordingly, the financial benefit of gaining a new client may be delayed due to delays in the implementation of our services. These factors may make it difficult for us to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of those delays. Due to the above factors, it is possible that in some future quarters our operating results may be significantly below the expectations of the public market, analysts and investors.

If our pricing structures do not accurately anticipate the cost and complexity of performing our work, our profitability may be negatively affected.

The terms of our client contracts typically range from three to five years. In many of our contracts, we commit to long-term pricing with our clients, and we negotiate pricing terms with our clients utilizing a range of pricing structures and conditions. Depending on the particular contract, these include input-based pricing (such as full-time equivalent-based pricing arrangements), fixed-price arrangements, output-based pricing (such as transaction-based pricing), outcome-based pricing, and contracts with features of all these pricing models. Our pricing is highly dependent on our internal forecasts and predictions about our projects and the marketplace, which are largely based on limited data and could turn out to be inaccurate. If we do not accurately estimate the costs and timing for completing projects, our contracts could prove unprofitable for us or yield lower profit margins than anticipated. Some of our client contracts do not allow us to terminate the contracts except in the case ofnon-payment by our client. If any contract turns out to be economicallynon-viable for us, we may still be liable to continue to provide services under the contract.

We intend to focus on increasing our service offerings that are based onnon-linear pricing models (such as fixed-price and outcome-based pricing models) that allow us to price our services based on the value we deliver to our clients rather than the headcount deployed to deliver the services to them.Non-linear revenues may be subject to short term pressure on margins as initiatives in developing the products and services take time to deliver. The risk of entering intonon-linear pricing arrangements is that if we fail to properly estimate the appropriate pricing for a project, we may incur lower profits or losses as a result of being unable to execute projects with the amount of labor we expected or at a margin sufficient to recover our initial investments in our solutions. Whilenon-linear pricing models are expected to result in higher revenue productivity per employee and improved margins, they also mean that we continue to bear the risk of cost overruns, wage inflation, fluctuations in currency exchange rates and failure to achieve clients’ business objectives in connection with these projects.

Our profit margin, and therefore our profitability, is largely a function of our asset utilization and the rates we are able to recover for our services. An important component of our asset utilization is our seat utilization rate, which is the average number of work shifts per day, out of a maximum of three, for which we are able to utilize our work stations, or seats. During fiscal 2019, 2018 and 2017, we incurred significant expenditures to increase our number of seats by establishing additional delivery centers or expanding production capacities in our existing delivery centers. If we are not able to maintain the pricing for our services or an appropriate seat utilization rate, without corresponding cost reductions, our profitability will suffer. The rates we are able to recover for our services are affected by a number of factors, including our clients’ perceptions of our ability to add value through our services, competition, introduction of new services or products by us or our competitors, our ability to accurately estimate, attain and sustain revenue from client contracts, margins and cash flows over increasingly longer contract periods and general economic and political conditions. Our profitability is also a function of our ability to control our costs and improve our efficiency. As we increase the number of our employees and execute our strategies for growth, we may not be able to manage the significantly larger and more geographically diverse workforce that may result, which could adversely affect our ability to control our costs or improve our efficiency. Further, because there is no certainty that our business willramp-up at the rate that we anticipate, we may incur expenses for the increased capacity for a significant period of time without a corresponding growth in our revenue. Commencement of work and ramping up of volume of work with certain new and existing clients have in the past been slower than we had expected and may in the future be slower than we expect. If our revenue does not grow at our expected rate, we may not be able to maintain or improve our profitability.

 

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We have in the past and may in the future enter into subcontracting arrangements for the delivery of services. For example, in China, in addition to delivering services from our own delivery center, we used to deliver services through a subcontractor’s delivery center. We could face greater risk when pricing our outsourcing contracts, as our outsourcing projects typically entail the coordination of operations and workforces with our subcontractor, and utilizing workforces with different skill sets and competencies. Furthermore, when outsourcing work we assume responsibility for our subcontractors’ performance. Our pricing, cost and profit margin estimates on outsourced work may include anticipated long-term cost savings from transformational and other initiatives that we expect to achieve and sustain over the life of the outsourcing contract. There is a risk that we will underprice our contracts, fail to accurately estimate the costs of performing the work or fail to accurately assess the risks associated with potential contracts. In particular, any increased or unexpected costs, delays or failures to achieve anticipated cost savings, or unexpected risks we encounter in connection with the performance of this work, including those caused by factors outside our control, could make these contracts less profitable or unprofitable, which could have an adverse effect on our profit margin.

We may not succeed in identifying suitable acquisition targets or integrating any acquired business into our operations, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our growth strategy involves gaining new clients and expanding our service offerings, both organically and through strategic acquisitions. It is possible that in the future we may not succeed in identifying suitable acquisition targets available for sale or investments on reasonable terms, have access to the capital required to finance potential acquisitions or investments, or be able to consummate any acquisition or investments. Future acquisitions or joint ventures may also result in the incurrence of indebtedness or the issuance of additional equity securities, which may present difficulties in financing the acquisition or joint venture on attractive terms. The inability to identify suitable acquisition targets or investments or the inability to complete such transactions may affect our competitiveness and our growth prospects.

Historically, we have expanded some of our service offerings and gained new clients through strategic acquisitions. For example, in January 2017, we acquired Denali, a leading provider of strategic procurement BPM solutions in the high-technology (“high-tech”), retail and consumer packaged goods (“CPG”), banking and financial services, utilities and healthcare verticals, and in March 2017, we acquired HealthHelp, an industry leader in care management whose solutions are delivered by combining a proprietary technology platform rooted in evidence-based medical research,high-end predictive analytics, and deep healthcare industry expertise. In June 2016, we acquired Value Edge, a provider of commercial research and analytics services to clients in the pharma industry. The lack of profitability of any of our acquisitions or joint ventures could have a material adverse effect on our operating results.

In addition, our management may not be able to successfully integrate any acquired business into our operations or benefit from any joint ventures that we enter into, and any acquisition we do complete or any joint venture we do enter into may not result in long-term benefits to us. For instance, if we acquire a company, we could experience difficulties in assimilating that company’s personnel, operations, technology and software, or the key personnel of the acquired company may decide not to work for us. There is no assurance that these acquisitions will be profitable for us. Further, we face the risk that the legal regime or regulatory requirements imposed on any business that we acquire may change following our acquisition and such changes may adversely affect our ability to achieve the expected accretive benefits from the acquisition, which could in turn require us to recognize an impairment of goodwill associated with the acquired business. For more information see “—The international nature of our business exposes us to several risks, such as significant currency fluctuations and unexpected changes in the regulatory requirements of multiple jurisdictions.”

We also face risks arising from acquisitions of businesses reliant upon a small number of key clients. The value of such acquisitions may decline in the event that their key clients decide not to renew their contracts, or decrease their volume of business or the prices paid for services. For example, HealthHelp is reliant on one client. A decline in the volume of business from this client or in the pricing of our services to this client would likely adversely affect our ability to achieve the expected accretive benefits from our acquisition of HealthHelp.

Further, we may receive claims or demands by the sellers of the entities acquired by us on the indemnities that we have provided to them for losses or damages arising from any breach of contract by us. Conversely, while we may be able to claim against the sellers on their indemnities to us for breach of contract or breach of the representations and warranties given by the sellers in respect of the entities acquired by us, there can be no assurance that our claims will succeed, or if they do, that we will be able to successfully enforce our claims against the sellers at a reasonable cost. Acquisitions and joint ventures also typically involve a number of other risks, including diversion of management’s attention, legal liabilities and the need to amortize acquired intangible assets, any of which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

 

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Goodwill, intangible or other assets that we carry on our balance sheet could give rise to significant impairment charges in the future.

As at March 31, 2019, we had goodwill and intangible assets of approximately $211.0 million, which primarily resulted from our acquisitions of HealthHelp, Denali and Value Edge. Under IFRS, we are required to review our goodwill, intangibles or other assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. In addition, goodwill, intangible or other assets with indefinite lives are required to be tested for impairment at least annually. For example, during the fourth quarter of fiscal 2017, proposed changes to the laws of the UK governing personal injury claims generated uncertainty regarding the future earnings trajectory of our legal services business in our WNS Auto Claims BPM segment, as a result of which we had expected that we would eventually exit from providing legal services in relation to personal injury claims. We also experienced a decrease in volume of and loss of business from certain clients of our traditional repair services in our WNS Auto Claims BPM segment in fiscal 2017. As a result, we had in fiscal 2017 expected the future performance of our WNS Auto Claims BPM segment to decline significantly and therefore significantly reduced our financial projections and estimates of our WNS Auto Claims BPM segment. Accordingly, we performed an impairment review of the goodwill associated with the companies we had acquired for our auto claims business and recorded an impairment charge of $21.7 million to our results of operations for fiscal 2017. See also “—The international nature of our business exposes us to several risks, such as significant currency fluctuations and unexpected changes in the regulatory requirements of multiple jurisdictions.” We may be required to record further impairment charges to our goodwill and intangible assets associated with other acquisitions in the future. For example, of the total $211.0 million in goodwill and intangible assets we had as at March 31, 2019, $94.9 million pertains to our acquisition of HealthHelp in fiscal 2017. This goodwill and intangible assets associated with our acquisition of HealthHelp is primarily attributable to HealthHelp’s expected business from one client. We expect this client to renegotiate the pricing of our services to them but there is no certainty as to when that may occur. Further, there is no assurance that our pricing terms with this client will remain on terms acceptable to us. If there is a significant decline in the prices charged for services to this client or a decrease in the volume of business from this client, we may be required to review our goodwill and intangible assets for impairment and record a further impairment charge. Further, if, for example, the research and analytics industry experiences a significant decline in business and we determine that we will not be able to achieve the cash flows that we had expected from our acquisitions of Marketics Technologies (India) Private Limited, a provider of offshore analytics services which we acquired in 2007, and Value Edge, we may have to record an impairment of all or a portion of the goodwill or intangible assets relating to those acquisitions. Any further impairment to our goodwill or intangible assets may have a significant adverse impact on our results of operations.

We are incorporated in Jersey, Channel Islands and are subject to Jersey rules and regulations. If the tax benefits enjoyed by our company are withdrawn or changed, we may be liable for higher tax, thereby reducing our profitability.

As a company incorporated in Jersey, Channel Islands, we are currently subject to no Jersey income tax. Although we continue to enjoy the benefits of the Jersey business tax regime, if Jersey tax laws change or the tax benefits we enjoy are otherwise withdrawn or changed, we may become liable for higher tax, thereby reducing our profitability.

 

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Risks Related to Key Delivery Locations

A substantial portion of our assets and operations are located in India and we are subject to regulatory, economic, social and political uncertainties in India.

Our primary operating subsidiary, WNS Global Services Private Limited (“WNS Global”), is incorporated in India, and a substantial portion of our assets and employees are located in India. The Government of India, however, has exercised and continues to exercise significant influence over many aspects of the Indian economy. The Government of India has provided significant tax incentives and relaxed certain regulatory restrictions in order to encourage foreign investment in specified sectors of the economy, including the business process management industry. Those programs that have benefited us include tax holidays, liberalized import and export duties and preferential rules on foreign investment and repatriation. We cannot assure you that such liberalization policies will continue. The Government of India may also enact new tax legislation or amend the existing legislation that could impact the way we are taxed in the future. For more information, see “—New tax legislation and the results of actions by taxing authorities may have an adverse effect on our operations and our overall tax rate.” Other legislation passed by the Government of India may also impact our business. For example, in December 2015, the Government of India amended the Payment of Bonus Act, 1965, which mandated increased employee bonus amounts for certain wage categories, effective retroactively from April 1, 2014. As a result, our wage costs in India have increased. Our financial performance and the market price of our ADSs may be adversely affected by changes in inflation, exchange rates and controls, interest rates, Government of India policies (including taxation regulations and policies), social stability or other political, economic or diplomatic developments affecting India in the future.

India has witnessed communal clashes in the past. Although such clashes in India have, in the recent past, been sporadic and have been contained within reasonably short periods of time, any such civil disturbance in the future could result in disruptions in transportation or communication networks, as well as have adverse implications for general economic conditions in India. Such events could have a material adverse effect on our business, the value of our ADSs and your investment in our ADSs.

The UK’s impending withdrawal from the EU may have a negative effect on our operations in the UK and EU.

We have operations in the UK, Romania and Poland. In June 2016, a majority of voters in the UK elected to withdraw from the EU in a national referendum. The referendum was advisory, and the terms of any withdrawal are subject to atwo-year negotiation period, which commenced on March 29, 2017. The withdrawal of the UK from the EU was set to take place on March 29, 2019, however this date has been postponed to October 31, 2019 and ongoing uncertainty remains as to what kind of post-Brexit agreement between the UK and the EU, if any, may be approved by the UK parliament. The referendum, and now the risk of a “no deal” between the UK and the EU, has created significant uncertainty about the future relationship between the UK and the EU, including with respect to the laws and regulations that will apply as the UK determines whichEU-derived laws to replace or replicate in the event of a withdrawal. Uncertainty regarding the terms of Brexit, and its eventual effects once implemented, may have an adverse effect on our operations in the UK and the EU, the value of our ADSs and your investment in our ADSs.

Our business in South Africa is evaluated for compliance with the South African government’s Broad-Based Black Economic Empowerment (“BBBEE”) legislation. Failure to maintain a minimum BBBEE rating would result in a loss of certain government grants, and may also result in us losing certain business opportunities or clients imposing contractual penalties on us.

Our business in South Africa is evaluated for compliance with the South African government’s BBBEE legislation against a BBBEE scorecard, which has different levels based on various criteria. South African government grants are available to businesses that meet specified conditions, including achieving a specified minimum BBBEE rating. A level one BBBEE rating has the most rigorous criteria. Additionally, many South African companies require their service providers to maintain a minimum BBBEE rating, and many of our South African client contracts contain clauses that allow our clients to terminate their contracts with us or impose specified penalties on us if we do not maintain a minimum BBBEE rating.

We have been conducting our domestic business (serving clients based in South Africa) and international business (serving clients based outside South Africa) in South Africa through our South Africa subsidiary, WNS Global Services SA (Pty) Limited. Our program developed for the purpose of meeting the criteria to achieve the requisite BBBEE rating in respect of WNS Global Services SA (Pty) Limited includes, among other measures, divesting some of our interests in such subsidiary to address the criterion relating to the percentage of ownership of an entity by “black people” (as defined under the applicable legislation). We achieved a level three rating in respect of WNS Global Services SA (Pty) Limited in our BBBEE verification audit in May 2018 which is valid until May 2019. Based on the results of an interim BBBEE audit, we expect that we will achieve the required rating in our next BBBEE verification audit in May 2019 which, if achieved, would be valid until May 2020. In December 2018, we established WNS SA Domestic (Pty) Ltd, a wholly owned subsidiary of WNS Global Services SA (Pty) Limited, for the purposes of conducting our domestic business in South Africa. As part of the plan to achieve a level two BBBEE rating in respect of this new subsidiary, our Board of Directors has approved the divestment of 51.0% of our interests in WNS SA Domestic (Pty) Ltd to black people in accordance with the objectives and requirements of the Codes of Good Practice on Black Economic Empowerment (“BEE Code”), which we plan to complete in fiscal 2020. We expect to undertake a BBBEE verification audit in respect of WNS SA Domestic (Pty) Ltd in May 2020. However, there is no assurance that we will successfully achieve the requisite BBEEE rating in respect of WNS SA Domestic (Pty) Ltd or maintain our existing BBBEE rating with respect to WNS Global Services SA (Pty) Limited in our next annual BBBEE verification audit or thereafter. If we fail to achieve the required minimum BBBEE rating, we will cease to be eligible for government grants, will be disqualified from bidding for certain business, and certain of our clients may terminate their contracts with us or impose penalties on us. These outcomes would have an adverse effect on our business, results of operations, financial condition and cash flows.

 

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Our facilities are at risk of damage by natural disasters.

Our operational facilities and communication hubs may be damaged in natural disasters such as earthquakes, floods, heavy rains, tsunamis and cyclones. For example, Chennai was affected by severe flooding in November 2015. Although our clients experienced minimal disruptions during the Chennai flood due to the business continuity planning and infrastructure resiliency measures we have implemented with a view to minimizing the impact of natural disasters on our business, such measures may be rendered less effective in other circumstances. In addition, we have operational facilities and communication hubs located in regions which are considered to be particularly vulnerable to natural disasters, such as the Philippines and Houston in the United States, which have experienced severe natural disasters such as typhoons, hurricanes and floods. Such natural disasters may lead to disruption to information systems and telephone service for sustained periods. Damage or destruction that interrupts our provision of BPM services could damage our relationships with our clients and may cause us to incur substantial additional expenses to repair or replace damaged equipment or facilities. We may also be liable to our clients for disruption in service resulting from such damage or destruction. While we currently have property damage insurance and business interruption insurance, our insurance coverage may not be sufficient. Furthermore, we may be unable to secure such insurance coverage at premiums acceptable to us in the future or secure such insurance coverage at all. Prolonged disruption of our services as a result of natural disasters would also entitle our clients to terminate their contracts with us.

If the tax benefits and other incentives that we currently enjoy are reduced or withdrawn or not available for any other reason, our financial condition would be negatively affected.

We have benefitted from, and continue to benefit from, certain tax holidays and exemptions in various jurisdictions in which we have operations.

In fiscal 2019 our tax rate in India and the Philippines impacted our effective tax rate. In fiscal 2018 and fiscal 2017, our tax rate in India, the Philippines and Sri Lanka impacted our effective tax rate. We would have incurred approximately $15.7 million, $9.4 million and $5.2 million in additional income tax expense on our combined operations in our Special Economic Zone (“SEZ”) operations in India, the Philippines and Sri Lanka for fiscal 2019, 2018 and 2017 respectively, if the tax holidays and exemptions described below had not been available for the respective periods.

We expect our tax rate in India and the Philippines to continue to impact our effective tax rate. Our effective tax rate in Sri Lanka has been impacted by the withdrawal of tax exemption on export income in Sri Lanka with effect from April 1, 2018, following which the income from export of service has been subject to tax at 14% on net basis.

In the past, the majority of our Indian operations were eligible to claim income tax exemption with respect to profits earned from export revenue from operating units registered under the Software Technology Parks of India (“STPI”). The benefit was available for a period of 10 years from the date of commencement of operations, but not beyond March 31, 2011. Effective April 1, 2011, upon the expiration of this tax exemption, income derived from our STPI operations in India became subject to the prevailing annual tax rate, which is currently, and was in fiscal 2019, 34.95% and was in fiscal 2018 and fiscal 2017 34.61%. See “Part I — Item 4. Information on the Company – B. Business Overview – Regulations.”

When any of our tax holidays or exemptions expire or terminate, or if the applicable government withdraws or reduces the benefits of a tax holiday or exemption that we enjoy, our tax expense may materially increase and this increase may have a material impact on our results of operations. The applicable tax authorities may also disallow deductions claimed by us and assess additional taxable income on us in connection with their review of our tax returns.

 

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New tax legislation and the results of actions by taxing authorities may have an adverse effect on our operations and our overall tax rate.

New tax legislation could impact the way we are taxed in the future. For example, the Government of India has issued guidelines on General Anti Avoidance Rule (the “GAAR”), which came into effect on April 1, 2017, and which is intended to curb sophisticated tax avoidance. Under the GAAR, a business arrangement will be deemed an “impermissible avoidance arrangement” if the main purpose of the arrangement is to obtain tax benefits. If we are deemed to have violated any of its provisions, we may face an increase to our tax liability. However, we do not expect any adverse impact on account of the GAAR

Further, as another example, the US Government enacted new tax legislation with effect from January 1, 2018. During fiscal 2019, we have analyzed the impact of the effects of the change in law on our financial results and have recorded a finalone-time tax benefit of $0.4 million primarily resulting from the adjustments to our deferred tax balances arising from business combinations, share-based compensation, losses and accruals and transition tax, thereby reducing the effective tax rate by 0.2% for fiscal 2019.

The Government of India, the US or other jurisdictions where we have a presence could enact new tax legislation which would have a material adverse effect on our business, results of operations and financial condition. In addition, our ability to repatriate surplus earnings from our delivery centers in atax-efficient manner is dependent upon interpretations of local laws, possible changes in such laws and the renegotiation of existing double tax avoidance treaties. Changes to any of these may adversely affect our overall tax rate, or the cost of our services to our clients, which would have a material adverse effect on our business, results of operations and financial condition.

We are subject to transfer pricing and other tax related regulations and any determination that we have failed to comply with them could materially adversely affect our profitability.

Transfer pricing regulations to which we are subject require that any international transaction among our company and its subsidiaries, or the WNS group enterprises, be onarm’s-length terms. We believe that the international transactions among the WNS group enterprises are onarm’s-length terms. If, however, the applicable tax authorities determine that the transactions among the WNS group enterprises do not meetarm’s-length criteria, we may incur increased tax liability, including accrued interest and penalties. This would cause our tax expense to increase, possibly materially, thereby reducing our profitability and cash flows. We have signed an advance pricing agreement with the Government of India providing for the agreement on transfer pricing matters over certain transactions covered thereunder for a period of five years starting from April 2013, which has been renewed on similar terms for another five years starting from April 2018.

 

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We may be required to pay additional taxes in connection with audits by the tax authorities.

From time to time, we receive orders of assessment from Indian tax authorities assessing additional taxable income on us and/or our subsidiaries in connection with their review of our tax returns. We currently have orders of assessment for fiscal 2004 through fiscal 2015 pending before various appellate authorities. These orders assess additional taxable income that could in the aggregate give rise to an estimated2189 million ($31.7million based on the exchange rate on March 31, 2019) in additional taxes, including interest of755.6 million ($10.9 million based on the exchange rate on March 31, 2019).

These orders of assessment allege that the transfer prices we applied to certain of the international transactions between WNS Global or WNS Business Consulting Services Private Limited (“WNS BCS”), each of which is one of our Indian subsidiaries, as the case may be, and our other wholly-owned subsidiaries were not onarm’s-length terms, disallow a tax holiday benefit claimed by us, deny theset-off of brought forward business losses and unabsorbed depreciation and disallow certain expenses claimed as tax deductible by WNS Global or WNS BCS, as the case may be. As at March 31, 2019 we have provided a tax reserve of806.2 million ($11.7 million based on the exchange rate on March 31, 2019) primarily on account of the Indian tax authorities’ denying the set off of brought forward business losses and unabsorbed depreciation. We have appealed against these orders of assessment before higher appellate authorities. For more details on these assessments, see “Part I — Item 5. Operating and Financial Review and Prospects—Tax Assessment Orders.”

In addition, we currently have orders of assessment pertaining to similar issues that have been decided in our favor by appellate authorities, vacating tax demands of3,812.83 million ($55.1 million based on the exchange rate on March 31, 2019) in additional taxes, including interest of1,273.38 million ($18.4 million based on the exchange rate on March 31, 2019). The income tax authorities have filed or may file appeals against these orders at higher appellate authorities.

In case of disputes, the Indian tax authorities may require us to deposit with them all or a portion of the disputed amounts pending resolution of the matters on appeal. Any amount paid by us as deposits will be refunded to us with interest if we succeed in our appeals. We have deposited874.4 million ($12.6 million based on the exchange rate on March 31, 2019) of the disputed amount with the tax authorities and may be required to deposit the remaining portion of the disputed amount with the tax authorities pending final resolution of the respective matters.

As at March 31, 2019, corporate tax returns for fiscal 2016 and thereafter remain subject to examination by tax authorities in India.

After consultation with our Indian tax advisors and based on the facts of these cases, certain legal opinions from counsel, the nature of the tax authorities’ disallowances and the orders from appellate authorities deciding similar issues in our favor in respect of assessment orders for earlier fiscal years, we believe these orders are unlikely to be sustained at the higher appellate authorities and we intend to vigorously dispute the orders of assessment.

In March 2009, we also received an assessment order from the Indian Service Tax Authority demanding payment of348.1 million ($5.0 million based on the exchange rate on March 31, 2019) of service tax and related penalty for the period from March 1, 2003 to January 31, 2005. The assessment order alleges that service tax is payable in India on BPM services provided by WNS Global to clients based abroad as the export proceeds are repatriated outside India by WNS Global. In response to an appeal filed by us with the appellate tribunal against the assessment order in April 2009, the appellate tribunal has remanded the matter back to the lower tax authorities to be adjudicated afresh. Based on consultations with our Indian tax advisors, we believe this order of assessment is more likely than not to be upheld in our favor. We intend to continue to vigorously dispute the assessment.

In 2016, we also received an assessment order from the Sri Lankan Tax Authority, demanding payment of LKR 25.2 million ($0.1 million based on the exchange rate on March 31, 2019) in connection with the review of our tax return for fiscal 2012. The assessment order challenges the tax exemption that we have claimed for export business. We have filed an appeal against the assessment order with the Sri Lankan Tax Appeal Commission. Based on consultations with our tax advisors, we believe this order of assessment is more likely than not to be upheld in our favor. We intend to continue to vigorously dispute the assessment.

No assurance can be given, however, that we will prevail in our tax disputes. If we do not prevail, payment of additional taxes, interest and penalties may adversely affect our results of operations, financial condition and cash flows. There can also be no assurance that we will not receive similar or additional orders of assessment in the future.

 

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Terrorist attacks and other acts of violence involving India or its neighboring countries could adversely affect our operations, resulting in a loss of client confidence and materially adversely affecting our business, results of operations, financial condition and cash flows.

Terrorist attacks and other acts of violence or war involving India or its neighboring countries may adversely affect worldwide financial markets and could potentially lead to economic recession, which could adversely affect our business, results of operations, financial condition and cash flows. South Asia has, from time to time, experienced instances of terrorism, civil unrest and hostilities in and among neighboring countries, including Sri Lanka, India and Pakistan. In April 2019, several churches and hotels in Sri Lanka were targeted in a series of coordinated terrorist bombings, including one within one kilometer of our delivery center. In previous years, military confrontations between India and Pakistan have occurred in the region of Kashmir and along the India/Pakistan border. There have also been incidents in and near India, such as the bombings of the Taj Mahal Hotel and Oberoi Hotel in Mumbai in 2008, a terrorist attack on the Indian Parliament, troop mobilizations along the India/Pakistan border and an aggravated geopolitical situation in the region. Such military activity or terrorist attacks in the future could disrupt our operations or influence the Indian economy by disrupting communications and making travel more difficult. Resulting political tensions could create a greater perception that investments in Indian companies involve a high degree of risk. Such political tensions could similarly create a perception that there is a risk of disruption of services provided by India-based companies, which could have a material adverse effect on the market for our services. Furthermore, if India were to become engaged in armed hostilities, particularly hostilities that were protracted or involved the threat or use of nuclear weapons, we might not be able to continue our operations.

Restrictions on entry visas may affect our ability to compete for and provide services to clients in the US and the UK, which could have a material adverse effect on future revenue.

The vast majority of our employees are Indian nationals. The ability of some of our executives to work with and meet our European and North American clients and our clients from other countries depends on the ability of our senior managers and employees to obtain the necessary visas and entry permits. In response to previous terrorist attacks and global unrest, US and European immigration authorities have sharply increased the level of scrutiny in granting visas. Immigration laws in those countries may also require us to meet certain other legal requirements as a condition to obtaining or maintaining entry visas. These restrictions have significantly lengthened the time requirements to obtain visas for our personnel, which has in the past resulted, and may continue to result, in delays in the ability of our personnel to meet with our clients. In addition, immigration laws are subject to legislative change and varying standards of application and enforcement due to political forces, economic conditions or other events, including terrorist attacks. We cannot predict the political or economic events that could affect immigration laws or any restrictive impact those events could have on obtaining or monitoring entry visas for our personnel. If we are unable to obtain the necessary visas for personnel who need to visit our clients’ sites or, if such visas are delayed, we may not be able to provide services to our clients or to continue to provide services on a timely basis, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

If more stringent labor laws become applicable to us, our profitability may be adversely affected.

India has stringent labor legislation that protects the interests of workers, including legislation that sets forth detailed procedures for dispute resolution and employee removal and legislation that imposes financial obligations on employers upon retrenchment. Though we are exempt from a number of these labor laws at present, there can be no assurance that such laws will not become applicable to the business process management industry in India in the future. In addition, our employees may in the future form unions. If these labor laws become applicable to our workers or if our employees unionize, it may become difficult for us to maintain flexible human resource policies, discharge employees or downsize, and our profitability may be adversely affected.

Most of our delivery centers operate on leasehold property and our inability to renew our leases on commercially acceptable terms or at all may adversely affect our results of operations.

Most of our delivery centers operate on leasehold property. Our leases are subject to renewal and we may be unable to renew such leases on commercially acceptable terms or at all. Our inability to renew our leases, or a renewal of our leases with a rental rate higher than the prevailing rate under the applicable lease prior to expiration, may have an adverse impact on our operations, including disrupting our operations or increasing our cost of operations. In addition, in the event ofnon-renewal of our leases, we may be unable to locate suitable replacement properties for our delivery centers or we may experience delays in relocation that could lead to a disruption in our operations. Any disruption in our operations could have an adverse effect on our results of operations.

 

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Risks Related to our ADSs

Substantial future sales of our shares or ADSs in the public market could cause our ADS price to fall.

Sales by us or our shareholders of a substantial number of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline. These sales, or the perception that these sales could occur, also might make it more difficult for us to sell securities in the future at a time or at a price that we deem appropriate or to pay for acquisitions using our equity securities. As at March 31, 2019, we had 50,051,920 ordinary shares (excluding 1,101,300 treasury shares) outstanding, including 49,776,517 shares represented by 49,776,517 ADSs. In addition, as at March 31, 2019, a total of 2,854,747 ordinary shares or ADSs are issuable upon the exercise or vesting of options and restricted share units (“RSUs”) outstanding under our 2006 Incentive Award Plan (as amended and restated, the “2006 Incentive Award Plan”) and our 2016 Incentive Award Plan (as amended and restated, the “2016 Incentive Award Plan”). All ADSs are freely transferable, except that ADSs owned by our affiliates may only be sold in the US if they are registered or qualify for an exemption from registration, including pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). The remaining ordinary shares outstanding may also only be sold in the US if they are registered or qualify for an exemption from registration, including pursuant to Rule 144 under the Securities Act.

The market price for our ADSs may be volatile.

The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

 

  

announcements of technological developments;

 

  

regulatory developments in our target markets affecting us, our clients or our competitors;

 

  

actual or anticipated fluctuations in our operating results;

 

  

changes in financial estimates by securities research analysts;

 

  

changes in the economic performance or market valuations of other companies engaged in business process management;

 

  

addition or loss of executive officers or key employees;

 

  

sales or expected sales of additional shares or ADSs;

 

  

loss of one or more significant clients; and

 

  

a change in control, or possible change of control, of our company.

In addition, securities markets generally and from time to time experience significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also have a material adverse effect on the market price of our ADSs.

 

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We may not be able to pay any dividends on our shares and ADSs.

We have never declared or paid any dividends on our ordinary shares. We cannot give any assurance that we will declare dividends of any amount, at any rate or at all. Because we are a holding company, we rely principally on dividends, if any, paid by our subsidiaries to us to fund our dividend payments, if any, to our shareholders. Any limitation on the ability of our subsidiaries to pay dividends to us could have a material adverse effect on our ability to pay dividends to you.

Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and any other factors our Board of Directors deems relevant at the time.

Subject to the provisions of the Companies (Jersey) Law 1991 (the “1991 Law”) and our Articles of Association, we may by ordinary resolution declare annual dividends to be paid to our shareholders according to their respective rights and interests in our distributable reserves. Any dividends we may declare must not exceed the amount recommended by our Board of Directors. Our Board of Directors may also declare and pay an interim dividend or dividends, including a dividend payable at a fixed rate, if paying an interim dividend or dividends appears to the Board to be justified by our distributable reserves. We can only declare dividends if our directors who are to authorize the distribution make a prior statement that, having made full enquiry into our affairs and prospects, they have formed the opinion that:

 

  

immediately following the date on which the distribution is proposed to be made, we will be able to discharge our liabilities as they fall due; and

 

  

having regard to our prospects and to the intentions of our directors with respect to the management of our business and to the amount and character of the financial resources that will in their view be available to us, we will be able to continue to carry on business and we will be able to discharge our liabilities as they fall due until the expiry of the period of 12 months immediately following the date on which the distribution is proposed to be made or until we are dissolved under Article 150 of the 1991 Law, whichever first occurs.

Subject to the deposit agreement governing the issuance of our ADSs, holders of ADSs will be entitled to receive dividends paid on the ordinary shares represented by such ADSs. See “ — Risks Related to Our Business — We, from time to time, enter into agreements for credit facilities, which may impose operating and financial restrictions on us and our subsidiaries.”

Holders of ADSs may be restricted in their ability to exercise voting rights.

At our request, the depositary of our ADSs will mail to you any notice of shareholders’ meeting received from us together with information explaining how to instruct the depositary to exercise the voting rights of the ordinary shares represented by ADSs. If the depositary timely receives voting instructions from you, it will endeavor to vote the ordinary shares represented by your ADSs in accordance with such voting instructions. However, the ability of the depositary to carry out voting instructions may be limited by practical and legal limitations and the terms of the ordinary shares on deposit. We cannot assure you that you will receive voting materials in time to enable you to return voting instructions to the depositary in a timely manner. Ordinary shares for which no voting instructions have been received will not be voted.

As a foreign private issuer, we are not subject to the proxy rules of the Commission, which regulate the form and content of solicitations byUS-based issuers of proxies from their shareholders. The form of notice and proxy statement that we have been using does not include all of the information that would be provided under the Commission’s proxy rules.

 

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Holders of ADSs may be subject to limitations on transfers of their ADSs.

The ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems necessary or advisable in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when the transfer books of the depositary are closed, or at any time or from time to time if we or the depositary deem it necessary or advisable to do so because of any requirement of law or of any government or governmental body or commission or any securities exchange on which the American Depositary Receipts (“ADR”) or our ordinary shares are listed, or under any provision of the deposit agreement or provisions of or governing the deposited shares, or any meeting of our shareholders, or for any other reason.

Holders of ADSs may not be able to participate in rights offerings or elect to receive share dividends and may experience dilution of their holdings, and the sale, deposit, cancellation and transfer of our ADSs issued after exercise of rights may be restricted.

If we offer our shareholders any rights to subscribe for additional shares or any other rights, the depositary may make these rights available to them after consultation with us. We cannot make rights available to holders of our ADSs in the US unless we register the rights and the securities to which the rights relate under the Securities Act, or an exemption from the registration requirements is available. In addition, under the deposit agreement, the depositary will not distribute rights to holders of our ADSs unless we have requested that such rights be made available to them and the depositary has determined that such distribution of rights is lawful and reasonably practicable. We can give no assurance that we can establish an exemption from the registration requirements under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution of your holdings as a result. The depositary may allow rights that are not distributed or sold to lapse. In that case, holders of our ADSs will receive no value for them. In addition, US securities laws may restrict the sale, deposit, cancellation and transfer of ADSs issued after exercise of rights.

We may be classified as a passive foreign investment company, which could result in adverse US federal income tax consequences to US holders of our ADSs or ordinary shares.

Based on our financial statements and relevant market and shareholder data, we believe that we should not be treated as a passive foreign investment company for US federal income tax purposes (“PFIC”) with respect to our most recently closed taxable year. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you that we will not be a PFIC for any taxable year. Anon-US corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs and ordinary shares, fluctuations in the market price of the ADSs and ordinary shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC. If we are a PFIC for any taxable year during which a US holder (as defined in “Part I — Item 10. Additional Information — E. Taxation — US Federal Income Taxation”) holds an ADS or ordinary share, certain adverse US federal income tax consequences could apply to such US holder.

If a United States person is treated as owning at least 10% of our ordinary shares (or ADSs), such holder may be subject to adverse US federal income tax consequences.

If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our ordinary shares (or ADSs), such person may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group (if any). Because our group includes one or more US subsidiaries, certain of ournon-US subsidiaries could be treated as controlled foreign corporations regardless of whether we are or are not treated as a controlled foreign corporation (although there is currently a pending legislative proposal to significantly limit the application of these rules). A United States shareholder of a controlled foreign corporation may be required to annually report and include in its US taxable income its pro rata share of “Subpart F income”, “global intangiblelow-taxed income” and investments in US property by controlled foreign corporations, whether or not we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a US corporation. A failure to comply with these reporting obligations may subject such holder to significant monetary penalties and may prevent the statute of limitations with respect to such holder’s US federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether any of ournon-US subsidiaries are treated as a controlled foreign corporation or whether such investor is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult its own advisors regarding the potential application of these rules to its investment in our ordinary shares (or ADSs).

 

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Our share repurchase program could affect the price of our ADSs.

In March 2018, our shareholders approved a share repurchase program authorizing the repurchase of up to 3.3 million of our ADSs, each representing one ordinary share, at a price range of $10 to $100 per ADS. Under this repurchase program, our ADSs may be purchased in the open market from time to time over 36 months from March 30, 2018, the date the shareholders resolution approving the repurchase program was passed. We intend to fund the share repurchase program with cash on hand. The program would not obligate us to repurchase any dollar amount or number of ADSs, and may be suspended or discontinued at any time at our discretion. To date, we have repurchased 1,101,300 ADSs in the open market under this repurchase program.

Any repurchases pursuant to our repurchase program could affect the price of our ADSs and increase its volatility. The existence of a repurchase program could also cause the price of our ADSs to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity of our ADSs. There can be no assurance that any repurchases will enhance shareholder value because the market price of our ADSs may decline below the levels at which we repurchase any ADSs. In addition, although our repurchase program is intended to enhance long-term shareholder value, short-term price fluctuations in our ADSs could reduce the program’s effectiveness. Significant changes in the price of our ADSs and our ability to fund our proposed repurchase program with cash on hand could impact our ability to repurchase ADSs. The timing and amount of future repurchases is dependent on our cash flows from operations, available cash on hand and the market price of our ADSs. Furthermore, the program does not obligate us to repurchase any dollar amount or number of ADSs and may be suspended or discontinued at any time, and any suspension or discontinuation could cause the market price of our ADSs to decline.

We have certain anti-takeover provisions in our Articles of Association that may discourage a change in control.

Our Articles of Association contain anti-takeover provisions that could make it more difficult for a third party to acquire us without the consent of our Board of Directors. These provisions include:

 

  

a classified Board of Directors with staggered three-year terms; and

 

  

the ability of our Board of Directors to determine the rights, preferences and privileges of our preferred shares and to issue the preferred shares without shareholder approval, which could be exercised by our Board of Directors to increase the number of outstanding shares and prevent or delay a takeover attempt.

These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.

It may be difficult for you to effect service of process and enforce legal judgments against us or our affiliates.

We are incorporated in Jersey, Channel Islands, and our primary operating subsidiary, WNS Global, is incorporated in India. A majority of our directors and senior executives are not residents of the US and the majority of our assets and the assets of those persons are located outside the US. As a result, it may not be possible for you to effect service of process within the US upon those persons or us. In addition, you may be unable to enforce judgments obtained in courts of the US against those persons outside the jurisdiction of their residence, including judgments predicated solely upon the securities laws of the US.

 

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ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of our Company

WNS (Holdings) Limited was incorporated as a private liability company on February 18, 2002 under the laws of Jersey, Channel Islands, and maintains a registered office in Jersey at 22 Grenville Street, St Helier, Jersey JE4 8PX, Channel Islands. We converted from a private limited company to a public limited company on January 4, 2006 when we acquired more than 30 shareholders as calculated in accordance with Article 17A of the 1991 Law. We gave notice of this to the Jersey Financial Services Commission (“JFSC”) in accordance with Article 17(3) of the 1991 Law on January 12, 2006. Our principal executive office is located at Gate 4, Godrej & Boyce Complex, Pirojshanagar, Vikhroli (W), Mumbai 400 079, India, and the telephone number for this office is(91-22) 4095-2100. Our website address is www.wns.com. Information contained on our website does not constitute part of this annual report. Our agent for service in the US is our subsidiary, WNS North America Inc., 15 Exchange Place, 3 rd Floor, Suite 310, Jersey City, New Jersey 07302, US.

We began operations as anin-house unit of British Airways in 1996 and became a business process outsourcing service provider for third parties in fiscal 2003. Warburg Pincus acquired a controlling stake in our company from British Airways in May 2002 and inducted a new senior management team.

In July 2006, we completed our initial public offering, whereupon our ADSs became listed on the New York Stock Exchange (the “NYSE”) under the symbol “WNS.” In February 2012, in connection with ourfollow-on offering, we issued new ordinary shares in the form of ADSs, at a price of $9.25 per ADS, aggregating approximately $50.0 million and at the same time, Warburg Pincus divested 6,847,500 ordinary shares in the form of ADSs. In February 2013, Warburg Pincus sold its remaining 14,519,144 ordinary shares in the form of ADSs, thereby divesting its entire stake in our company.

From 2004 to July 2007, we provided business process outsourcing services to Aviva International Holdings Limited (“Aviva”), a major client, pursuant to build-operate-transfer contracts from facilities in Colombo, Sri Lanka and Pune, India. The contracts at that time granted Aviva Global Services Singapore Pte. Ltd. (“Aviva Global”) the option to require us to transfer our facilities in Sri Lanka and Pune to Aviva Global, which was the business process offshoring subsidiary of Aviva at that time. In 2007, Aviva Global exercised its call option requiring us to transfer the Sri Lanka facility to Aviva Global and the transfer was effective in July 2007. In July 2008, we acquired Aviva Global from Aviva and resumed ownership of the Sri Lanka facility. In connection with our acquisition of Aviva Global, we also entered into a master services agreement with Aviva MS in 2008 (the “2008 Aviva master services agreement”), which we replaced with the Aviva master services agreement in September 2014, pursuant to which we provide BPM services to Aviva’s UK business and Aviva’s Irish subsidiary, Hibernian Aviva Direct Limited, and certain of its affiliates. See “Part I — Item 5. Operating and Financial Review and Prospects — Revenue — Our Contracts” for more details on this transaction.

We have made a number of acquisitions since fiscal 2003, including our acquisition of Town & Country Assistance Limited, aUK-based automobile claims handling company, thereby extending our service portfolio beyond the travel and leisure industry to include insurance-based automobile claims processing. We subsequently rebranded the company as WNS Assistance, which is part of WNS Auto Claims BPM, our reportable segment for financial statement purposes. In fiscal 2004, we acquired the health claims management business of Greensnow Inc. In fiscal 2006, we acquired Trinity Partners Inc. (which we merged into our subsidiary, WNS North America Inc.), a provider of BPM services to financial institutions, focusing on mortgage banking. In August 2006, we acquired from PRG Airlines Services Limited (“PRG Airlines”) its fare audit services business. In September 2006, we acquired from GHS Holdings LLC (“GHS”) its financial accounting business. In May 2007, we acquired Marketics, a provider of offshore analytics services. In June 2007, we acquired Flovate Technologies Limited (“Flovate”), a company engaged in the development and maintenance of software products and solutions, which we subsequently renamed as WNS Workflow Technologies Limited. In March 2008, we entered into a joint venture with Advanced Contract Solutions, Inc. (“ACS”), a provider in BPO services and customer care in the Philippines, to form WNS Philippines Inc. and in November 2011, we acquired ACS’s shareholding in WNS Philippines Inc., which became our wholly-owned subsidiary. In April 2008, we acquired Chang Limited, an auto insurance claims processing services provider in the UK, through its wholly-owned subsidiary, Accidents Happen Assistance Limited (“AHA”) (formerly known as Call24-7 Limited, or Call24-7). In June 2008, we acquired Business Applications Associates Limited (“BizAps”), a provider of Systems Applications and Products (“SAP ®” ) solutions to optimize the enterprise resource planning functionality for our finance and accounting processes. In June 2012, we acquired Fusion Outsourcing Services (Proprietary) Limited (“Fusion”), a provider of a range of outsourcing services, including contact center, customer care and business continuity services, to both South African and international clients. Following our acquisition of Fusion, we have renamed it as WNS Global Services SA (Pty) Ltd. In June 2016, we acquired Value Edge, a leading provider of commercial research and analytics services to clients in the Pharma / Biopharma industry. In January 2017, we acquired Denali, a leading provider of strategic procurement BPM solutions. In March 2017, we acquired HealthHelp, an industry leader in BPM care management.

 

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In fiscal 2010, we restructured our organizational structure in order to streamline our administrative operations, achieve operational and financial synergies, and reduce the costs and expenses relating to regulatory compliance. This restructuring involved the merger of the following seven Indian subsidiaries of WNS Global into WNS Global through a Scheme of Amalgamation approved by an order of the Bombay High Court passed in August 2009 pursuant to the Indian Companies Act, 1956: Customer Operational Services (Chennai) Private Limited, Marketics, Noida Customer Operations Private Limited, NTrance Customer Services Private Limited, WNS Customer Solutions (Private) Limited, WNS Customer Solutions Shared Services Private Limited and WNS Workflow Technologies (India) Private Limited. In another restructuring exercise, three of our subsidiaries, First Offshoring Technologies Private Limited,Hi-Tech Offshoring Services Private Limited and Servicesource Offshore Technologies Private Limited, were merged into WNS Global through a Scheme of Amalgamation approved by an order of the Bombay High Court passed in March 2010 pursuant to the Indian Companies Act, 1956. In fiscal 2011 and 2012, we restructured and rationalized our UK and US group companies, wherein three of ourUK-basednon-operating subsidiaries, Chang Limited, Town & Country Assistance Limited and BizAps, were voluntarily dissolved. In the US, two of our subsidiaries, WNS Customer Solutions North America Inc. and Business Application Associates Inc. were merged with and into WNS North America Inc. In fiscal 2012, we also incorporated a new subsidiary in the US, WNS Global Services Inc., established a new branch of WNS (Mauritius) Limited in the Dubai Airport Free Zone, United Arab Emirates, WNS Mauritius Limited ME (Branch), andde-registered our existing subsidiary WNS Global FZE in theRas-Al-Khaimah Free Trade Zone, United Arab Emirates (“UAE”). In fiscal 2013, as part of our restructuring activities, WNS Philippines Inc. was merged into WNS Global Services Philippines, Inc. and ownership of our Costa Rican subsidiary, WNS BPO Services Costa Rica, S.R.L. (formerly known as WNS BPO Services Costa Rica, S.A.), was transferred and is now a subsidiary of WNS North America Inc. In May 2012, WNS Global Services (UK) Limited (“WNS UK”) established a branch in Poland, WNS Global Services (UK) Limited (Spółka Z Ograniczoną Odpowiedzialnością) Oddział W Polsce, Gdańsk. In March 2013, we also established a new branch of Business Applications Associates Beijing Ltd. in Guangzhou, China named Business Applications Associates Beijing Limited Guangzhou Branch. In January 2014, we incorporated a new subsidiary of WNS (Mauritius) Limited in China, WNS Global Services (Dalian) Co. Ltd. In March 2014, we incorporated WNS Legal Assistance LLP in the UK under the Limited Liability Partnership Act, 2000. In November 2014, we established a new branch of WNS Global Services Private Limited in Singapore, WNS Global Services Private Limited (Singapore Branch). In December 2015, we established a new branch of WNS Global Services (UK) Limited in France, WNS Global Services (UK) Limited (Branch) (France), and amalgamated WNS Customer Solutions (Private) Limited, which was a subsidiary of WNS Customer Solutions (Singapore) Private Limited, with WNS Global Services (Private) Limited, an entity based out of Sri Lanka. In February 2016, we established a new branch of WNS Global Services (UK) Limited in Romania, WNS Global Services (UK) Limited London Bucharest Branch.

In April 2016, WNS Workflow Technologies Limited was renamed WNS Assistance Limited and WNS Assistance (Legal) Limited, a wholly-owned subsidiary of WNS Assistance Limited, was incorporated. In June 2016, we incorporated Ucademy (Pty) Limited, a wholly-owned subsidiary of WNS Global Services SA (Pty) Limited. In December 2016, we established two new branches of WNS Global Services Netherlands Cooperatief U.A. in Ireland and Turkey, namely WNS Global Services Netherlands Cooperatief U.A (Ireland Branch) and WNS Global Services Netherlands Cooperatief U.A. Merkezi Hollanda Istanbul Merkez Subesi (Turkey Branch), respectively. In fiscal 2016, in order to streamline our administrative operations and achieve operational and financial synergies, WNS Assistance Limited (formerly known as WNS Workflow Technologies Limited) became a direct subsidiary of WNS. In March 2017, we established WNS Global Services (Dalian) Co. Ltd - Shanghai Branch, a new branch of WNS Global Services (Dalian) Co. Ltd. In April 2017, we established the WNSB-BBEE Staff Share Trust with the principal objective of creating meaningful participation of the Black employees (as defined in the applicable legislation) of our South African subsidiaries in the growth of the company. We are committed to transformation in South Africa and are implementing this structure to benefit “black people” in accordance with the objectives and requirements of the BEE Code as promulgated by section 9(1) of the Broad-Based Black Economic Empowerment Act No. 53 of 2003 of South Africa and our business in South Africa is evaluated for compliance with the South African government’s BBBEE legislation against a BBBEE scorecard based on various criteria. In June 2017, we established WNS New Zealand Limited, a wholly-owned subsidiary of WNS Global Services (Australia) Pty Ltd. In July 2017, we merged Value Edge into WNS Global Services Private Limited. In September 2018, we established WNS Global Services (UK) International Limited, a wholly-owned subsidiary of WNS (Mauritius) Limited. In October 2018, we established WNS Global Services North Americas Inc., a wholly-owned subsidiary of WNS Global Services (UK) International Limited, and WNS Global Services (UK) Limited, Sucursal En España, a new branch of WNS Global Services (UK) Limited. In December 2018, we established WNS SA Domestic (Pty) Ltd, a wholly-owned subsidiary of WNS Global Services SA (Pty) Limited, andWNS-Healthhelp Philippines Inc, a wholly-owned subsidiary of HealthHelp LLC. In fiscal 2019, WNS divested some of its interests in its affiliate, WNS Global Services (UK) Limited to WNS Global Services Private Limited. WNS currently holds 28.33% of the shares in WNS Global Services (UK) Limited. Our organizational structure now comprises 36 entities in 23 countries, and 10 branches in Poland, UAE, China, Singapore, France, Romania, Turkey, Ireland and Spain. Of these 36 entities, WNS Cares Foundation, which is a wholly-owned subsidiary of WNS Global, is anot-for-profit organization registered under the former Section 25 of the Indian Companies Act, 1956 (which has become Section 8 of the Indian Companies Act, 2013), India. The WNS Cares Foundation was formed for the purpose of promoting corporate social responsibilities and does not qualify as a subsidiary under IFRS 10— Consolidated Financial Statements and hence is not considered for the purpose of preparing our consolidated financial statements.

We have our principal executive office in Mumbai, India, and we have client service offices in Dubai (United Arab Emirates), Jersey City (New Jersey) (the US), Sydney (Australia), London (the UK), Frankfurt (Germany), Paris ( France) and Singapore, and we have delivery centers in Guangzhou, Dalian and Shanghai (China), San Jose (Costa Rica), Bangalore, Chennai, Gurgaon, Hyderabad, Mumbai, Nashik, Pune, Noida and Vizag (India), Manila, Iloilo and Alabang (the Philippines), Gydnia (Poland), Bucharest and Constanta (Romania), Cape Town, Claremont, Johannesburg, Durban and Port Elizabeth (South Africa), Colombo (Sri Lanka), Istanbul (Turkey), Ipswich, Cheadle (Manchester) and Hayes (the UK), Palma (Spain) and Columbia, Pittsburgh, Bellevue, Houston , and New York (the US).

 

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Our capital expenditures in fiscal 2019, fiscal 2018, and 2017 amounted to $32.3 million, $33.7 million and $22.9 million, respectively. Our principal capital expenditures were incurred for the purposes of setting up new delivery centers, expanding existing delivery centers and developing new technology-enabled solutions to enable execution and management of clients’ business processes. We expect our capital expenditure needs in fiscal 2020 to be approximately $37.0 million, a significant amount of which we expect to spend on infrastructurebuild-out, technology-enablement and the streamlining of our operations. The geographical distribution, timing and volume of our capital expenditures in the future will depend on new client contracts we may enter into or the expansion of our business under our existing client contracts. As at March 31, 2019, we had commitments for capital expenditures of $10.8 million (net of advances to capital vendors) relating to the purchase of property and equipment for our delivery centers. Of this committed amount, we plan to spend approximately $3.7 million in India, approximately $5.2 million in the Philippines, approximately $0.7 million in South Africa, approximately $0.2 million in Europe (excluding the UK), and approximately $1.0 million in the rest of the world. We expect to fund these estimated capital expenditures from cash generated from operating activities, existing cash and cash equivalents and the use of existing credit facilities. See “Part I — Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources” for more information.

 

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B. Business Overview

We are a global BPM company, offering an array ofend-to-end industry-specific and cross-industry solutions. We combine our deep industry knowledge with technology, analytics and process expertise toco-create innovative, digitally enabled transformational solutions with more than 400 clients across various industries. Our solutions and capabilities encompass intelligent automation (robotic process automation (“RPA”), artificial intelligence (“AI”) and cognitive computing), natural language processing and machine learning, blockchain, internet of things (“IoT”), businessprocess-as-a-service (“BPaaS”) platforms, embedded analytics and processre-engineering frameworks.

A key element in all our outsourcing engagements is our ability to continually deliver business value throughco-creation of solutions and products with our clients and strategic partners. This combined with our client-centric approach enables us to align our people, processes and delivery network with our clients’ businesses. Our industry-aligned approach helps us provide a specialized focus on each of the industries that we target, effectively manage our clients’ business processes, and offer customized solutions and business insights designed to improve their competitive positioning. The major industry verticals that we currently focus on are: insurance, diversified businesses (including manufacturing, retail and consumer packaged goods (“CPG”), media and entertainment and telecommunication or telecom), travel and leisure, healthcare, utilities, shipping and logistics, consulting and professional services, and banking and financial services.

Our cross-industry solutions, common across multiple industries, include customer interaction services, finance and accounting (including procurement), human resources, research and analytics, technology, and governance, risk and compliance services.

We measure our execution of clients’ business processes against multiple performance parameters, and aim to consistently meet and exceed these parameters in order to maintain and expand our client relationships. We endeavor to build long-term client relationships, and typically sign multi-year contracts with our clients that provide us with recurring revenue. In fiscal 2019, 125 and 120 clients contributed more than $1 million to our revenue and revenue less repair payments(non-GAAP), respectively. In fiscal 2018, 124 and 118 clients contributed more than $1 million to our revenue and revenue less repair payments(non-GAAP), respectively.

As at March 31, 2019, we had 39,898 employees executing business processes for our 403 clients (with each client generating more than $0.01 million in revenue in fiscal 2019).

In fiscal 2019, our revenue was $809.1 million, our revenue less repair payments(non-GAAP) was $794.0 million and our profit was $105.4 million. Our revenue less repair payments is anon-GAAP financial measure. For a discussion of our revenue less repair payments(non-GAAP) and a reconciliation of our revenue less repair payments(non-GAAP) to revenue, see “Part I — Item 5. Operating and Financial Review and Prospects — Overview.”

Industry Overview

The global outsourcing market continues to evolve in response to a disruptive business landscape. While companies are still looking to benefit from process efficiency, cost advantage and labor arbitrage from their BPM solution providers, there is now a broader and more strategic narrative to outsourcing with a strong focus oninnovation-led value. Amid customer experience, data and digital becoming integral to business outcomes, enterprises now expect their BPM solution providers to play a bigger and more profound role in driving transformational outcomes. As companies outsource some of their more complex andhigh-end business processes, the key consideration for them is the ability of the BPM provider to understand their requirements, execute intricate, multi-layered transfer programs and successfully manage these processes on an ongoing basis. We see the BPM outsourcing marketplace expanding beyond transactional processes to include more complex business processes, consulting, automation,technology-led initiatives, digitization, support for IoT capabilities, cloud computing, and research and analytics. Increasingly, companies with the aim of optimizing processes and maximizing the returns on their investments are demanding higher-value, cost-effective services such as processre-engineering and business transformation from their BPM providers. The increased focus on variable cost structures and the creation of tangible business benefit has resulted in alternative service delivery and pricing models such as transaction-based, outcome-based and subscription models.

Businesses are thus undertaking a rigorous and multi-faceted evaluation process when selecting a BPM provider. Based on our experience, a client typically seeks several key attributes in a business process management provider, including:

 

  

Domain knowledge and industry-specific expertise;

 

  

Process expertise across horizontal service offerings;

 

  

“Skin in the game” approach denoting the ability to work as a true partner, absorb risks and prioritize outcomes;

 

  

Ability to innovate, add new operational expertise and drive best practices based on internal and external benchmarking;

 

  

Proven ability to execute a diverse range of mission-critical and often complex business processes;

 

  

Ability to tie service delivery, technology implementation and process automation with the client’s existing information technology (“IT”) infrastructure, negating the need for large IT overhauls;

 

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Capabilities to drive improved process standardization across business units and multiple locations, demonstrating strong global delivery capabilities;

 

  

Comprehensive analytical capabilities to deliver actionable business insights;domain-led analytics solutions customized to industry requirements and embedded as part of the larger BPM services portfolio;

 

  

Technology-enabled services and solutions, including RPA, cognitive computing, intelligent automation, artificial intelligence, IoT, industrial robotics, blockchain, cloud-based offerings and platform-based BPM;

 

  

Global presence through a mix of offshore, nearshore and onshore delivery centers to access talent and capabilities, create cultural alignment, leverage language skills, and mitigate risks; and

 

  

Capability to scale employees and infrastructure without a diminution in quality of service.

The recent outsourcing trends have driven BPM providers to be more innovative, strategic and forward-looking in their outlook. Against the backdrop of this changed environment, we believe WNS, with our focused domain, technology and analytics capabilities, guiding principles ofco-creation and client centricity, extensive global footprint, and transformational andre-engineering frameworks, is well positioned to deliver business value to our clients. We offer technology-enabled BPaaS solutions that help companies adapt rapidly to changing business conditions. Further, we offer customized engagement models that cater to each client’s scale and diversification journey. In addition to traditional pricing models based on headcount (often referred to as full-time equivalents (“FTEs”), we offer transaction- and outcome-based pricing models to provide clients with cost flexibility and measurable business benefit.

In fiscal 2019, 35.4% of our total revenues were generated from“non-FTE” models. These“non-linear” pricing models, whichde-link the relationship between headcount and revenue for BPM providers, create an incentive for the providers to improve the productivity of their employees, increase the use of technology, and enhance the overall efficiency of their operations.

The global business process management industry is a large and growing industry. According to the Gartner Forecast: IT Services, Worldwide, 2017-2023, 1Q19 Update, the worldwide traditional BPO and BPaaS market is estimated to have grown to $167.458 billion in 2018. Gartner has estimated that the revenue for the worldwide BPO market (Business Process as a Service (“BPaaS”) and Traditional BPO) will grow from $167.458 billion in 2018 to $204.763 billion in 2023 at a compounded annual growth rate of 4.1% (compounded annual growth rate calculated by Gartner).

Source: Gartner, Inc., Forecast: IT Services, Worldwide, 2017-2023, 1Q19 Update. Dean Blackmore,Lai-ling Lam et al., March 28, 2019.

The Gartner Report(s) described herein, (the “Gartner Report(s)”) represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this annual report) and the opinions expressed in the Gartner Report(s) are subject to change without notice.

 

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The following chart sets forth the estimated growth in revenue generated from the worldwide BPO (Business Process as a Service (BPaaS) and Traditional BPO market:

 

LOGO

Graph created by WNS Global Services based on Gartner research.

Source: Gartner, Inc., Forecast: IT Services, Worldwide, 2017-2023, 1Q19 Update. Dean Blackmore,Lai-ling Lam et al., March 28, 2019.

The Gartner Report(s) described herein, (the “Gartner Report(s)”) represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this annual report and the opinions expressed in the Gartner Report(s) are subject to change without notice.

Competitive Strengths

We believe that we have the competitive strengths necessary to maintain and enhance our position as a leading global provider of BPM services.

Well-positioned for the evolving BPM market

The BPM industry, which started with the first wave of simple outsourced processes, has now expanded to include complex business processes and higher-value services that involve processre-engineering, business and digital transformation, management of mission-critical operations, and generation of business insights to aid decision-making. We believe that our industry-specific expertise,end-to-end service capabilities, transformation capabilities, technology-enabled solutions, process management skills, advanced analytics, global delivery network and customer-centric approach position us at the forefront of the evolving BPM market.

Deep industry expertise

We have established deep expertise in the industries we target as a result of our vertical organizational structure, legacy client relationships, proprietary technology offerings, key acquisitions and the hiring of management with specific industry knowledge. Our deep domain expertise in each of the 12 industries we serve helps us develop keen insights and transform them into leading-edge impactful business solutions with the help of technology, analytics and process rigor. We have developed methodologies, frameworks, proprietary knowledge and industry-specific technology platforms applicable to our target industries that allow us to provide industry-focused solutions and help clients compete within these industries.

We have organized our company into business units aligned with each of the industries on which we focus. By doing so, we are able to approach clients in each of our target industries with a combined sales, marketing and delivery effort that leverages ourin-depth industry knowledge and industry-specific technology platforms and solutions.

 

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We have received numerous recognitions for our industry leadership. Our awards and recognitions in fiscal 2019 and 2018 are set forth below:

Vertical-specific Recognitions

Insurance:

 

  

A “Leader & Star Performer” in Everest Group’s Property and Casualty Insurance BPO – Service Provider Landscape with Services PEAK Matrix™ Assessment 2019

 

  

A “Winner’s Circle” player in HFS Research’s Industry Blueprint: Insurance Operations 2018

 

  

A “Major Contender” in Everest Group’s Life & Pensions Insurance BPO – Service Provider Landscape with Services PEAK Matrix™ Assessment 2018

 

  

A “Major Contender” in Everest Group’s Insurance TPA – Service Provider Landscape with Services PEAK Matrix™ Assessment 2018

Travel and Leisure:

 

  

Number “#1” in HFS Research’s 2018 Top 10 report for Travel, Hospitality and Logistics service providers

 

  

A “Leader” in NelsonHall’s Vendor Evaluation and Assessment Tool (“NEAT”) for Customer Experience Services in Travel, Transport & Hospitality sector 2018

Healthcare:

 

  

A “Major Contender” in Everest Group’s Healthcare Analytics Services PEAK Matrix™ Assessment with Service Provider Landscape – 2019

Banking and Financial Services:

 

  

A “Leader” in NelsonHall’s NEAT for RPA and AI in Banking 2019

 

  

A “Major Contender” in Everest Group’s Capital Markets BPO – Service Provider Landscape with Services PEAK Matrix™ Assessment 2018

 

  

A “Major Contender” in Everest Group’sKYC-AML – Service Provider Landscape with Services PEAK Matrix™ Assessment 2018

 

  

A “High Performer” in HFS Research’s Industry Blueprint: BFS Operations 2018

Utilities & Energy:

 

  

A “Winner’s Circle” player in HFS Research’s Industry Blueprint: Utility Operations 2018

 

  

A “Leader” in NelsonHall’s NEAT for Customer Experience Services in Energy and Utilities 2019

 

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Horizontal-specific Recognitions

Customer Interaction Services:

 

  

A “Leader” in NelsonHall’s NEAT for Digital Customer Experience Services 2018

 

  

A “Major Contender” in Everest Group’s Contact Center – Service Provider Landscape with Services PEAK Matrix™ Assessment 2018

 

  

A “High Performer” in HFS Research’s Blueprint report on Digital OneOffice 2018

 

  

A “High Performer” in HFS Research’s Blueprint report on Cognitive Assistance Services 2018

Finance and Accounting (including Procurement and Supply Chain):

 

  

A “Major Contender & Star Performer” in Everest Group’s Finance and Accounting Outsourcing – Service Provider Landscape with Services PEAK Matrix™ Assessment 2019

 

  

A “Major Contender” in Everest Group’s Finance and Accounting Outsourcing Digital Augmentation Suite – Service Provider Landscape with Services PEAK Matrix™ Assessment 2018

 

  

A “Leader” in NelsonHall’s NEAT for Sourcing and Procurement 2018

 

  

Denali Sourcing Services Inc. (“Denali”) recognized as a top 50 Provider to Know by Spend Matters

Research & Analytics:

 

  

A “Major Contender” in Everest Group’s Analytics BPS – Service Provider Landscape with Services PEAK Matrix™ Assessment 2018

 

  

A “High Performer” in HFS Research’s Blueprint report on Smart Analytics 2018

 

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Corporate:

 

  

Golden Peacock Award for Risk Management for fiscal 2018-2019

 

  

Two awards at the Global Safety Summit 2019 – Environment Award (Information Technology Enabled Services(“ITES”)-BPO Sector) & Health & Safety Award (Information Technology EnabledServices-BPO Sector)

 

  

BW HR Excellence Award in the category Excellence in Performance Management for fiscal2018-2019

 

  

Best Employer, Top 50 companies in India with highest People capability Index for fiscal2018-2019

 

  

Fiscal 2018-2019 Stevie Awards for Sales & Customer Service – Collaboration Solution – New (Gold Stevie Winner)

 

  

Fiscal 2018-2019 Stevie Awards for Sales & Customer Service – Award for Innovation in Sales – Business Services Industries (Gold Stevie Winner)

 

  

Fiscal 2018-2019 Stevie Awards for Sales & Customer Service – Award for Innovation in Customer Service – All Other Industries (Silver Stevie Winner)

 

  

Fiscal 2018-2019 Stevie Awards for Sales & Customer Service – Customer Service Team of the Year – Recovery Situation – All Other Industries (Silver Stevie Winner)

 

  

Fiscal 2018-2019 Stevie Awards for Sales & Customer Service – Best Customer Satisfaction Strategy (Bronze Stevie Winner)

 

  

Fiscal 2018-2019 Stevie Awards for Sales & Customer Service – Award for Innovation in Customer Service – Other Service Industries (Bronze Stevie Winner)

 

  

Fiscal 2018-2019 Stevie Awards for Sales & Customer Service – Back-Office Customer Service Team of the Year – All Other Industries (Bronze Stevie Winner)

 

  

Golden Peacock Business Excellence Award 2018

 

  

Asia Pacific Customer Engagement Forum & Awards (ACEF) 2018 for Events and Promotion – Successful Use of CSR Activities (Gold Award)

 

  

Golden Peacock Innovation Management Award 2018

 

  

“Leader” in the 2018 Global Outsourcing 100 List by IAOP

 

  

WNS recognized as “PeopleSoft Innovator” by Oracle for fiscal2018-19

 

  

Fiscal 2018-2019 Stevie International Business Awards – Best New Product or Service of the Year – Software – Insurance Solution (Gold Award)

 

  

Fiscal 2018-2019 Stevie International Business Awards – Best New Product or Service of the Year – Software – Social Business Solution (Gold Award)

 

  

Fiscal 2018-2019 Stevie International Business Awards – Best New Product or Service of the Year – Software – Supply Chain Management Solution (Silver Award)

 

  

Fiscal 2018-2019 Stevie International Business Awards – Best New Product or Service of the Year – Software – Big Data Solution (Bronze Award)

 

  

Fiscal 2018-2019 Stevie International Business Awards – Corporate Social Responsibility Program of the Year – in Asia, Australia and New Zealand (Bronze Award)

 

  

Fiscal 2018-2019 Stevie International Business Awards – Best New Product or Service of the Year – Software – Business or Competitive Intelligence Solution (Bronze Award)

 

  

Fiscal 2018-2019 Stevie International Business Awards – Best New Product or Service of the Year – Software – Artificial Intelligence/ Machine Learning Solution (Bronze Award)

 

  

Chief Financial Officer (CFO) 100 2018 Roll of Honor in the “Mergers and Acquisitions” Category

 

  

International ICT Awards Philippines 2018 for Best Company of the Year Providing Services for Finance & Accounting

 

  

CNBC TV 18 India Business Leader Awards – CNBC’s Asia India Disruptor of the Year 2019

 

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Technology:

 

  

CIO Power List 2018

 

  

A “Leader” in NelsonHall’s NEAT for Business Process Transformation through Robotic Process Automation and Artificial Intelligence 2018

Human Resources (“HR”):

 

  

A “Major Contender” in Everest Group’s Multi-Process Human Resources Outsourcing – Service Provider Landscape with Services PEAK Matrix™ Assessment 2019

 

  

Golden Peacock HR Excellence Award 2018

Corporate Social Responsibility (“CSR”):

 

  

Asia Pacific Customer Engagement Forum & Awards (ACEF) 2018 for Events and Promotion – Successful Use of CSR Activities (Gold Award)

End-to-end service portfolio including higher-value transformational services and technology-enabled solutions

We seek to focus our service portfolio on more complex processes and solutions, and to shift away from reliance on services that are less integral to our clients’ core business operations, such as commoditized voice and transactional services (telemarketing and technical helpdesks), which characterized the business process outsourcing industry in its early days. We offer an array of higher-value, judgment-based services that seek to not only reduce cost and improve operating efficiency, but also enable improved decision-making, competitive positioning and business outcomes for our clients. These includehigh-end finance and accounting services, including strategic sourcing through supply chains, transformation services, technology-enabled offerings and analytics capabilities. We also provide a wide array of industry-specific solutions, which cut across these traditional “horizontal” services. These solutions are designed to help clients address process efficiency requirements, provide digital capabilities, generate business insights, and improve competitive positioning within their respective industries.

We have also developed and continue to develop technology-enabled, or “automated,” solutions that utilize our proprietary software and licensed software in conjunction with our core business process management services. These integrated, technology-enabled solutions allow us to offer higher-value, differentiated services, which are more scalable and repeatable and create value for our clients through increased process efficiency and quality. We also collaborate with technology companies, combining their software tools, platforms and expertise with our service capabilities to deliver business solutions to the marketplace. These technologies include RPA, cognitive computing, and artificial intelligence. We believe that technology-enabled “automated” solutions will enable us to grow our revenue in anon-linear way by decoupling revenue growth from headcount growth.

To this end, we offer platform-enabled BPM or BPaaS that tightly integrates our domain expertise, business processes, automation, embedded analytics and a cloud-based infrastructure.

Proven global delivery platform

We deliver our services from 59 delivery centers in 12 countries around the world, located in China, Costa Rica, India, the Philippines, Poland, Romania, South Africa, Spain, Sri Lanka, Turkey, the UK and the US. Our ability to offer services delivered from a mix of onshore, nearshore and offshore locations benefits our clients from the perspectives of access to skills and talent, cultural alignment, language capabilities, business continuity, risk mitigation, scalability, efficiency and cost-effectiveness.

We believe the breadth of our delivery capability allows us to meet our clients’ needs, diversifies our workforce and allows us to access local talent pools around the world.

Our client-centric focus

We have a client-centric engagement model that leverages our industry-specific and shared-services expertise, flexible pricing models, “client-partner” relationship approach, as well as our global delivery platform to offer business solutions designed to meet our clients’ specific needs.

 

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We seek to enhance our value proposition to our clients by providing them with flexible pricing models that align our objectives with those of our clients. In addition to traditional full-time equivalent-based pricing, we provide alternative pricing models such as transaction-based pricing, outcome-based pricing and subscription pricing. A sizable percentage of our revenue, being 35.4% in fiscal 2019, is derived from these“non-FTE”-based pricing models. These models enable our clients to pay only for actual work performed or tangible benefit received.

We have also adopted a client-centric sales model, which is tightly integrated with our vertical organizational structure. Strategic client accounts are assigned a dedicated client partner from our team who is responsible for managing theday-to-day relationship. The client partner is typically a seasoned resource with deep domain experience, who works directly from the client’s local offices. Within our company, the client partner is aligned with a specific vertical, and directly manages sales resources responsible for expanding client relationships (farmers). The client partner is responsible for driving business value to our clients, ensuring quality of delivery and customer satisfaction, and managing account growth and profitability.

Experience in transitioning processes and running them efficiently

Many of the business processes that clients outsource to us are core to their operations, requiring substantial program management expertise to enable the transition of work to us. A well-planned and effectively managed transition is the cornerstone of our business proposition and helps our clients outsource their operations effectively and efficiently, focus on their business priorities and implement operating models that are designed to help them achieve their business strategies.

Our transition approach is structured to help deliver business outcomes to our clients by:

 

  

Minimizing risk and achieving rapid transition of services;

 

  

Ramping up operations with minimal disruption to existing business, metrics, customers and suppliers;

 

  

Effectively managing changes brought about by transformative tools and technologies; and

 

  

Managing a seamless transfer of responsibilities from any incumbent service provider to us.

At its core, all aspects of the transition process are governed by EnABLE, our proprietary transition toolkit, which has been tested and evolved over 20 years. EnABLE embeds multi-level governance, visibility and transparency, flexibility and compliance across the entire transition lifecycle.

Our differentiators include:

 

  

Customer-centricity:Our practice of “early transition voice of customer” identifies and addresses opportunities to do better at meeting clients’ objectives and success criteria.

 

  

Robust governance: Our multi-level governance approach seeks to ensure that transition reviews are conducted at all levels up to executive leadership. Risks are assessed and proactive support is provided with a view to achieving clients’ objectives.

 

  

Strong leadership and experience: We have a robust and mature transition methodology with a strong record in managing and delivering transitions from clients as well as from major incumbent players.

 

  

Global presence: Our team of skilled transition managers operates from all our major global delivery locations. Our agile and readily deployable team is always available for clients’ needs.

Extensive investment in human capital development

At WNS, we have created a learning organization with the objective of empowering employees with skills that will help them to constantly collaborate,co-create and outperform in a changing business landscape. This learning organization is designed to offer developmental programs to every employee level in the organization, across business units and enabling units. Our learning organization is responsible for developing organization-wide skills within focus groups, including behavioral, domain, technical, leadership, functional and process-related skills. See “— Human Capital – Training and Development.”

 

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Experienced management team

We benefit from the effective leadership of a global management team with diverse backgrounds, including extensive experience in outsourcing. Members of our executive and senior management team have, on average, over 20 years of experience in diverse industries, including in the business process and information technology outsourcing sector, and in the course of their respective careers have gathered experience in developing long-standing client relationships, leveraging technology, launching practices in new geographies, developing new service offerings and successfully integrating acquisitions.

Business Strategy

Our objective is to strengthen our position as a leading global business process management provider. We seek to increase our client base and expand our existing relationships. We intend to achieve this through deep industry expertise and providing enhanced value proposition and actionable insights to our clients. We continually invest in domain expertise, analytics, technology and employees to serve our clients better. We also intend to make select acquisitions to fill capability gaps.

We have made significant investments to accelerate our growth. These investments include:

 

  

Expansion andre-organization of our sales force;

 

  

Increase in the expertise and management capability within our sales force;

 

  

Expansion of other sales channels including the development of new partnerships and alliances, and broadening our engagement with outsourcing industry advisors and analysts;

 

  

Increase in the range of services and solutions offered to our clients across different industries and business functions;

 

  

Building our analytics capabilities through internally developed intellectual property, strategic collaborations and acquisitions;

 

  

Building a consolidated suite of industry-specific and cross-industry digital BPM solutions, and augmenting our technology and automation capabilities through internal capability development, strategic collaborations andtuck-in acquisitions;

 

  

Expansion of our global delivery platform; and

 

  

Focused strategic acquisitions to improve our capabilities.

The key elements of our growth strategy are described below:

Increase business from existing clients and new clients

We have organized our company into vertical business units and were the first BPM company in the industry to do so. Our sales force of 101 members as at March 31, 2019, provides broad sales coverage and management experience. Our sales force is organized into two groups, one focused primarily on expanding existing client relationships (“farmers”) and another focused on adding new clients (“hunters”).

We seek to expand our relationships with existing clients by cross-selling new services (such as technology-based and analytics offerings), moving up the value chain, and expanding into other lines of business and geographies within each client. Our account managers and client partners have industry-specific knowledge and expertise, and are responsible for maintaining a thorough understanding of our clients’ outsourcing roadmaps as well as identifying and advocating new outsourcing opportunities. As a result of this strategy, we have built a strong track record of extending the scope of our client relationships over time.

For new clients, we seek to provide value-added solutions by leveraging our deep industry knowledge built on the back of process expertise, technology-enablement, analytics and transformation solutions. As a result of our capabilities and industry verticalgo-to-market approach, we have been able to compete effectively for new opportunities.

Reinforce leadership in existing industries

Through our industry-focused operating model, we have established leading business process management practices in various industries and business sectors. We intend to leverage our knowledge of the following industries to penetrate additional client opportunities: insurance; diversified businesses, including manufacturing, retail, CPG, media and entertainment and telecom; travel and leisure; healthcare; utilities; shipping and logistics; consulting and professional services; and banking and financial services.

To complement our industry-focused approach, we continue to invest in talent, analytics and technology platforms with the goal of expanding our business and acquiring industry-specific expertise to improve our service offerings across industries.

 

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Provide higher value-added services

The BPM market is continuing to evolve, bringing the ability to foster innovation and transformation into sharp focus. Enterprises now increasingly expect their BPM providers to play a strategic role in driving business transformation centered around digital, customer experience and data-driven intelligence. In line with the larger shifts, we are enhancing our client value proposition by leveraging our extensive domain expertise; our portfolio of higher-value services such as our finance and accounting services, research and analytics services, transformation services and technology-enabled solutions; and our flexible pricing models. We expect that as the BPM market further matures, the demand for industry-specific services andnon-linear pricing models will increase. Accordingly, we have made significant investments in both these areas which we expect will give us a competitive advantage. We intend to broaden the scope of our higher-value service offerings to capture new market opportunities. By delivering a wider portfolio of higher-value services to our clients, and migrating them towards transaction and outcome-based pricing models, we aim to move up the value chain with our clients and thereby enhance the size, strength and profitability of these relationships.

Our constant focus has been on building capabilities and product offerings around analytics, and technology and digital process models supporting targeted industry sectors. We are proactively addressing the shift to technology, analytics and automation through a combination of strategic collaborations, acquisitions and internal capability development. Our analytics practice, comprising data scientists, researchers, and artificial and machine learning experts, is well positioned to empower clients with a host of solutions including “Infra to Insights” (that is, data ingestion, harmonization, analysis and visualization), advanced analytics,domain-led analytics andanalytics-as-a-service offering. We have also set up an “Analytics Innovation Center” to quickly experiment with the latest analytics technologies in developingend-to-end modularized digital solutions. We are constantly updating our suite of comprehensive digital BPM solutions to keep up with the ever-changing technology needs of our clients (especially in the area of next-generation technologies including robotics, cognitive automation, AI, blockchain and IoT) by developing comprehensive enterprise technology platforms as well asplug-and-play solutions to suit client needs.

Enhance awareness of the WNS brand name

Our reputation for operational excellence, domain expertise, and technology and analytics capabilities among our clients has been instrumental in attracting and retaining new clients as well as talented and skilled employees. We believe that our guiding principles ofco-creation and client centricity resonate favorably with clients as they are indicative of our intent to completely align with client needs and leverage synergistic collaboration (with clients and strategic partners) to drive outcomes. We also believe that we have benefited from strongword-of-mouth references that have helped us to scale our business. We are actively increasing our efforts to enhance awareness of the WNS brand in our target client and employee markets. To accomplish this, we have a dedicated global marketing team comprised experienced industry talent. We are also focusing on developing channels to increase market awareness of the WNS brand, including participation in industry events and conferences, exposure in industry publications, publication of articles and white papers, webinars and podcasts, internet and digital media, and other initiatives that create enhanced visibility of the WNS brand and establish WNS’ thought leadership capabilities in the BPM industry. In addition, we are working to improve visibility and positioning with the BPM industry analysts, sourcing advisors, general management consulting firms, and boutique outsourcing firms, who are often retained by prospective clients to provide strategic advice, act as intermediaries in the sourcing processes, develop scope specifications, and aid in the partner selection process.

Expand our delivery capabilities

We currently operate from 59 delivery centers located in 12 countries around the world. In fiscal 2019, we expanded our delivery capacity by 2,374 seats or approximately 7.8% of our capacity at the end of fiscal 2018. We will expand our global delivery capability through additional delivery centers in onshore, nearshore and offshore locations as well through collaborations with other providers, based on client demand and market trends. This approach will allow us to offer our clients maximum value and flexibility, as well as gain access to potential clients and markets that may have specific delivery requirements or constraints.

Broaden industry expertise and enhance growth through selective acquisitions and partnerships

Our acquisition strategy is focused on adding new capabilities, including service offerings, technology-enabled automation tools and platforms, analytics capabilities, deeper industry expertise, and geographic delivery presence. Our acquisition track record demonstrates our ability to integrate, manage and develop the specific capabilities we acquire. One of our key objectives is to continue to pursue targeted acquisitions in the future and rely on our integration capabilities to expand the strategic positioning and growth of our business.

 

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Business Process Management Service Offerings

We offer our services to clients through industry-focused business units. We are organized into the following vertical business units to provide more specialized focus on each of these industries and more effectively manage our sales, solutions, marketing and delivery processes:

 

  

Insurance;

 

  

Diversified businesses including manufacturing, retail, CPG, media and entertainment, and telecom;

 

  

Travel and leisure;

 

  

Healthcare;

 

  

Utilities;

 

  

Shipping and logistics;

 

  

Consulting and professional services; and

 

  

Banking and financial services.

In addition to industry-specific services, we offer a range of services that are common across multiple industries (which we refer to as our horizontal services), including customer interaction services, finance and accounting (including procurement), research and analytics and technology services. In addition, our global transformation practice offers higher-value services such as transformation services, which are designed to help our clients modify their business processes to enhance productivity, manage changes in the business environment, and leverage business knowledge to increase market competitiveness. We help clients drive these initiatives with technology-enabled solutions, processre-design including using approaches such as the Six Sigma or Lean methodologies, and business analytics.

To achieve anin-depth understanding of our clients’ industries and the geographies in which they operate, we manage and conduct our sales processes in our three key markets – Europe, North America and Asia-Pacific. Our sales teams are led by senior professionals who focus on target industries, processes and clients. Each business unit is staffed by a dedicated team of managers and employees engaged in providing business process management client solutions. In addition, each business unit draws upon common support services from our information technology, human resources, training, corporate communications, corporate finance, risk management and legal departments, which we refer to as our corporate-enabling units.

Vertical Business Units:

Insurance

Our insurance services (actuarial andnon-actuarial) are structured into lines of business offerings customized for property and casualty insurance providers and life insurance and annuity providers. We cater to a diverse and sizeable number of clients globally, and have significant experience across a broad range of insurance product lines.

The key insurance industry sectors we serve include:

 

  

Life insurance and annuity providers;

 

  

Property and casualty insurance providers;

 

  

Reinsurers;

 

  

Insurance and reinsurance brokers;

 

  

Loss assessors;

 

  

Motor insurance companies;

 

  

Self-insured auto fleet owners; and

 

  

Lloyds of London Market.

 

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We offer “Broker Connect,” an advanced mobility solution designed to meet the requirements of insurance brokers and financial advisors. It has features such as real-time status update / push notifications on new policyset-up as well as policy amendments. Our eAdjudicator tool automates theend-to-end adjudication process of various types of claims. It is driven by RPA and analytics, and improves the insurer’s claims settlement rate with enhanced efficiency and accuracy. We also offer “WNS IPAS,” an insurance policy administration system integrator that provides a unified view of operations spread across multiple geographies with real-time distribution of work to manage high-transaction volumes. Our “Claim Lodgment IntelliBot,” a text analytics and automation tool, enables automatede-mail claim lodgment from unstructured data, leveraging natural language processing and text mining combined with robotics. Our new blockchain offering “Insurer Broker SmartChain” is a smart contract blockchain solution which addresses the challenges of document trails in multi-party syndication exchanges and provides a fool-proof audit trail ofback-and-forth communications. We have also added “WinBot” to our suite of solutions. WinBot is a self-serve chatbot, with a deep machine learning (“ML”) core that improves the knowledge base and ability of the chatbot to respond to the increasing complexities of customer interactions.

As at March 31, 2019, we had 9,972 employees working in this business unit. In fiscal 2019 and 2018, this business unit accounted for 26.6% and 25.7% of our revenue, and 25.2% and 24.0% of our revenue less repair payments(non-GAAP), respectively.

The following table illustrates the key areas of services that we provide to clients in this business unit:

 

Insurance – Service Offerings

Property & Casualty

  

Actuarial

  

Analytics

  

Life & Annuity

Sales & service, underwriting & support, policy administration, risk & compliance,

premium / billing management, claims management, actuarial services, research & analytics, shared services (procurement & claims, supply chain, finance & accounting, technology support, HR & payroll, consulting services), customer service (voice andnon-voice), consulting and transformation services (automation, business processre-engineering, digital)

  

Actuarial services in life insurance:In-force model projections / reporting, financial modeling, product management and pricing, capital management, asset liability management;

Actuarial services in property & casualty insurance: Reserving & claims analysis, solvency II (a regulatory framework applicable to insurance companies) & capital modeling, pricing and underwriting support, catastrophe modeling

  Claims analytics, subrogation & recovery analytics, fraud analytics, customer analytics, broker analytics, underwriting analytics, reserve estimation, risk selection and analytics, speech analytics, pricing analytics, digital analytics SocioSEERTM, BrandttitudeTM, Skense, Agilius, data mining and management services, reporting, dashboarding and visualization, data science and predictive modeling across claims  

Sales & service, underwriting & support, policy administration, risk & compliance,

premium / billing management, claims management, actuarial services, research and analytics, shared services (finance and accounting, technology support, HR and payroll, consulting services), closed book, customer service (voice andnon-voice), consulting and transformation services (automation, business processre-engineering, digital)

Diversified Businesses (including Manufacturing, Retail, CPG, Media and Entertainment and Telecom)

We deliver comprehensive BPM services for diversified businesses, including manufacturing, retail, consumer packaged goods, media and entertainment, and telecom.

As at March 31, 2019, we had 4,669 employees in this business unit. In fiscal 2019 and 2018, this business unit accounted for 17.6% and 18.1% of our revenue and 17.9% and 18.5% of our revenue less repair payments(non-GAAP), respectively.

Manufacturing: Our manufacturing team has rich experience in delivering metrics-driven solutions and transformation programs for our manufacturing clients. The key manufacturing sectors that we serve include:

 

  

Electronics manufacturers;

 

  

Metal and mining companies;

 

  

Optical equipment and imaging product manufacturers;

 

  

Building and construction product manufacturers;

 

  

Aeronautical product manufacturers;

 

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Precision engineering companies;

 

  

Industrial manufacturing companies;

 

  

Specialty chemicals companies;

 

  

High-tech products companies; and

 

  

Food processing companies.

The following table illustrates the key areas of services provided to clients in this business unit:

 

Manufacturing—Service Offerings

Supply Chain Planning

        and Forecasting         

  

Sourcing and

Procurement

  

Fulfillment &

    Logistics    

  

Warranty and

Returns

 Management 

  

Shared Services

  

Sales,

Marketing and

Customer

        Services         

Sales and operations planning, demand forecasting, supply planning, inventory management, inventory analytics  Strategic sourcing, category management, contract management, spending analytics, transactional procurement  Order entry & processing, order tracking, billing / invoicing, transport management, logistics optimization  Warranty customer operations, warranty claims management, parts / repair management, warranty financial management, returns management, customer helpdesk  Finance and accounting services, statutory and compliance support, customer care services, human resource services, IT service desk and application support  Global market opportunities, brand building, go to market strategy, customer services, order management, acquisition analysis, retention analysis

Retail and CPG: Our retail and CPG solutions are designed to help our clients derive consumer behavioral insights, optimize marketing expenditures, plan their growth strategy, reduce operational costs and streamline processes through efficiency, quality and productivity improvements, and improve customer service.

The key retail and CPG companies that we serve include:

 

  

Beverage companies;

 

  

Fast food chains and restaurants;

 

  

Processed food suppliers;

 

  

Cosmetics and healthcare companies;

 

  

Apparel and footwear;

 

  

General merchandize retailers;

 

  

Specialty retailers; and

 

  

E-commerce retailers.

To support our services, we use our research and analytics platform, WADESM, which was designed and developed to enable retail and CPG companies to access, organize and analyze data from various outside sources and use the information to make informed decisions.

 

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The following table illustrates the key areas of services that we provide to clients in this business unit:

 

Retail and Consumer Packaged Goods—Service  Offerings

Strategy Solutions

  

Customer Service Solutions

  

Supply Chain Solutions

  

Revenue Management

             Solutions            

  

Content Services

  

Shared Services

Market entry strategy, balancing portfolio investments, consumer and market insights, innovation strategies, power brand strategy, marketing spending optimization  Omni-channel (phone,e-mail, fax, website, live chat, social media) customer relationship management  Retailer-supplier collaboration for demand-driven supply chain and retail execution management, supply intelligence, supplier performance and risk monitoring, contract management, supply chain orchestration – global trade shared services, trading partner helpdesks, logistics  Planning and execution of transaction and interaction-based campaign strategies, loyalty management, credit control and collections  

Product catalogs, user-generated content moderation,

digital content protection,

web / print content,

website analytics and optimization

  Finance and accounting services, statutory and compliance support, sourcing and procurement services, human resource services, IT service desk and application support

Media and Entertainment: Our media and entertainment solutions are designed to help our clients create new revenue streams, capitalize on emerging digital opportunities, harnessnew-age consumers to their advantage and boost margins. The key media and entertainment sectors that we serve include:

 

  

Music;

 

  

Publishing;

 

  

Television;

 

  

Radio;

 

  

Filmed entertainment;

 

  

Gaming and animation;

 

  

Sports entertainment; and

 

  

Internet and outdoor advertising firms.

Working with some of the largest media and entertainment companies in the world gives us an undisputed advantage in understanding the nuances of the business. We leverage years of industry and process experience, and a large team of digital media experts in deliveringnew-age cost-effective solutions to clients in this industry.

 

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The following table illustrates the key areas of services that we provide to clients in this business unit:

 

Media and Entertainment—Service Offerings

Strategy Solutions

  

Digital Operations and

Royalty Management

             Solutions            

  

Sales, Marketing and

Distribution Solutions

  

Customer Service Solutions

  

Content Services

  

Shared Services

Market entry strategy, balancing portfolio investments, consumer and market insights, innovation strategies, brand power strategy, marketing expense optimization  Digital operations solutions to help companies successfully expand into the digital business; royalty management solutions to help clients manage rights and royalties in both new media and traditional media; piracy protection services to help companies prevent media piracy issues  Seamless integration of traditional and digital product sales, marketing and distribution to enable clients to roll out timely innovative pricing / packaging strategies  Omni-channel (phone,e-mail, fax, website, live chat, social media) customer relationship management  Product catalogs, user-generated content moderation, digital content protection, web / print content, website analytics and optimization  

Finance and accounting services,

statutory and compliance support, sourcing and procurement services, human resource services, IT service desk and application support

Telecom: Our experience in consolidating and centralizing the functions of our telecommunications clients withbuilt-in variable capacity to meet business requirements helps us deliver business value. Withend-to-end BPM services, our solutions are designed to enable telecom companies to transform their value chain while tackling myriad challenges. Our solutions are underpinned by the right mix of analytics, technology, domain and process expertise that enable our clients to achieve cost efficiencies and drive sustainable growth strategies.The following table illustrates the key areas of services that we provide to clients in this business unit:

 

Telecommunications—Service Offerings

Customer Acquisition

  

Order Provisioning and Order

                 Management                

  

Operations and Customer

Relationship Management

                 (“CRM”)                

  

Shared Services

Contract administration, sales order processing, service administration and data control  New products and services, service delivery process creation, order provisioning, technical validation and support, rejected order tracking, order tracking, proactive order management, billing, data management (e.g. forms and administration)  Inbound customer interaction services, logging and monitoring service requests, CRM analytics, collection analytics, web correspondence, IT customer care (global service desk)  Finance and accounting services, statutory and compliance support, sourcing and procurement services, human resource services, IT service desk and application support

Travel and Leisure

We deliverend-to-end services to clients across the travel and leisure industry value chain. We provide a wide range of scalable solutions that support air, car, hotel, cruise lines and packaged travel and leisure services offered by our clients.The key travel and leisure industry sectors that we serve include:

 

  

Airlines;

 

  

Travel agencies, including online travel agencies, tour operators and travel management companies;

 

  

Global distribution systems (“GDS”) providers;

 

  

Car rental companies and motor clubs; and

 

  

Hotels and cruise lines.

 

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As at March 31, 2019, we had 9,283 employees in this business unit, several hundred of whom have International Air Transport Association, Universal Federation of Travel Agents or other travel industry related certifications. In fiscal 2019 and 2018, this business unit accounted for 17.4% and 18.7% of our revenue and 17.8% and 19.2% of our revenue less repair payments(non-GAAP), respectively. The following table illustrates the key areas of services that we provide to clients in this business unit:

 

Travel and Leisure—Service Offerings

Front-office

  

Mid-office

  

Back-office

Reservations / sales, fares support, multi-channel customer interaction, mishandled baggage management, disruption management, loyalty program management  Fare filing and distribution, revenue integrity, fulfillment services, refunds processing, fraud management, cargo operations support, contract loading, content management  Finance and accounting, procurement, revenue accounting, human resource management, cabin crew management, helpdesk, training, project management

Research and analytics: Loyalty analytics, customer interaction service analytics, commercial intelligence, flight operations, pricing and revenue management

Robotic process automation:Process automation of contact center, finance and accounting and industry-specific functions combined with artificial intelligence and machine learning

Business process consulting: Short-term, engagement-based consulting service with a focus on business processre-engineering

Technology Platforms:

The following technology platforms are designed to improve guests’ experience:

 

  

Low Fare Hunter: Identify lowest fares;

 

  

RePAXSM: Automated flight disruption management solution;

 

  

GuestKonnectTM: Omni-channel customer interaction analytics;

 

  

SocioSEERTM: Social media analytics platform; and

 

  

InTouchTM: Social media engagement platform.

The following technology platforms are designed to uplift revenue:

 

  

Verifare Plus 3.0SM: Fare audit tool;

 

  

SmartProSM: Interline audit tool;

 

  

Protect 360TM: Integrated solution forend-to-end airline revenue integrity;

 

  

Rapid Refund: Refund automation; and

 

  

AnciFly: Ancillary revenue analytics engine.

The following technology platforms are designed to improve efficiency:

 

  

QbaySM:Multi-GDS platform for queue management;

 

  

Qmail:E-mail categorization and workflow;

 

  

GDS Interconnect: Integrates multiple GDSs in a single graphical user interface;

 

  

Auto Even Exchange: Reissue of tickets due to schedule changes; and

 

  

WinBot: Chatbot solution.

 

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The following technology platform is designed to improve operations control:

 

  

Commercial Planning Suite: An integrated revenue analytics platform.

We also collaborate with technology solution providers across the world with a view to enhancing customer experience with innovative service offerings in chatbots and omni-channel customer relationship management.

Healthcare

We deliverend-to-end BPM services across the healthcare industry value chain. We offer services that are designed to enable our clients to reduce administrative costs through process transformation, automation and robotics. Our services also seek to help clients enhance their quality of care by driving improved compliance with clinical pathways and derive deeper insights for better decision-making through advanced analytics. The healthcare industry segments that we serve include:

 

  

Durable medical equipment manufacturers;

 

  

Health insurance companies;

 

  

Healthcare provider practices and hospitals;

 

  

Pharmaceutical and biotech companies; and

 

  

Third-party administrators.

We are strongly positioned in the pharmaceutical and biopharmaceutical industry with research and analytics expertise to support drug development and commercial services. For this, we leverage Integrate Edge (a cloud-based, fully customizable competitive intelligence platform), Agilius (a proprietary cloud-based business intelligence self-serve analytics platform), SocioSEERTM (a unique social-media analytics platform), Therapy Area Analyzer (a proprietary therapy area knowledge repository, covering 12 disease areas and 120 indications and providing information on disease etiology, epidemiology and product analysis for 15 countries) and other technology or domain intellectual property (“IP”), which we have built with a view to delivering additional value to our clients.

Further, we are well-positioned to be a strategic provider, helping the healthcare industry deliver benefits management across several key specialty healthcare areas, including radiology, cardiology, oncology, sleep care, orthopedics and pain management. Our analytics-based and medical-content-rules-driven platforms ConsultTM and ProtusTM, which provide an alternative to traditional care management outsourcing, seek to deliver the right care to patients and reduce cost of care for our clients in the process. Our Analytics Knowledge Center comprising more than 800 analytics experts leverages its deep pharma domain knowledge, strong analytics capabilities and proprietary frameworks to deliver actionable business insights to leading pharma companies.

As at March 31, 2019, we had 3,611 employees in this business unit. In fiscal 2019 and 2018, this business unit accounted for 15.3% and 14.7% of our revenue and 15.6% and 15.1% of our revenue less repair payments(non-GAAP), respectively. The following table illustrates the key areas of services that we provide to client segments in this business unit:

 

Healthcare—Service Offerings

Providers

  

Payer

  

Durable Medical

Equipment Manufacturers

  

Enterprise Shared Services

  

Pharmaceutical and

Consumer Health

Revenue cycle management, medical coding, bill preparation, receivables management, payment posting, debt analysis  Claims administration, member and provider services, clinical support, overpayment recovery, fraud detection and investigation, utilization management services (that is, optimizing payer healthcare spend on areas such as tests and procedures without compromising the patient care-quality-safety norms)  Billing and submissions, fulfillment support, collections, patient services, collection analytics, reporting and dashboarding, sales force effectiveness  Finance and accounting, workflow / platforms, research and analytics (knowledge process outsourcing), technology solutions,front-end / mailroom, customer interaction services  Competitive intelligence, pipeline analysis, product profiling, key performance indicators (“KPI”) reporting, epidemiology analysis, market opportunity assessment, social media analysis, key opinion leader (“KOL”) research, modeling and tool building support, pricing analytics, patient data analytics, market mix model, big data platform development, data governance

 

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Utilities

We are a leading utilities BPM service provider, with domain expertise across the utilities value chain - generation, transmission and distribution. Our service portfolio supports utility companies catering to the residential, industrial, and small and medium enterprise (“SME”) segments.

The key energy and utilities industry sectors we serve include:

 

  

Oil and gas;

 

  

Electricity;

 

  

Water; and

 

  

Renewable energy.

As at March 31, 2019, we had 3,370 employees working in this business unit. In fiscal 2019 and 2018, this business unit accounted for 7.0% and 8.7% of our revenue, and 7.1% and 8.9% of our revenue less repair payments(non-GAAP), respectively.

We are a strategic outsourcing provider for clients from the US, the UK and Asia-Pacific regions. We offer digital-driven, technology-enabled,analytics-led and automation-infused services. We supportbusiness-to-consumer andbusiness-to-business processes for our clients through our offerings spanningmeter-to-cash services (including customer acquisition and management, billing and metering, payment processing, credit and collections) and other areas within the utilities value chain, including distribution and field services. Our long-standing relationships with leading companies globally have helped us develop geography- and industry-specific domain expertise and capabilities in the above-mentioned service segments. Our service delivery is enabled by analytics, digital platforms, tools and solutions, and automation through AI and cognitive intelligence solutions.

Our capabilities to support clients across processes in oil and gas, electricity and water suppliers include end customer support, back-office processes, asset management, FAO services (including procurement services), debt management and other enabling services, such as meter reading, bill printing and digital support services (including smart metering). We offer platform integration, application integration, data integration, process integration, component integration and system integration capabilities to enhance process management through technology-enabled platforms. We also work with clients to provide a single view of the customer, using social media analytics and big data analytics across multiple channels. Our analytics offerings include data mining of structured and unstructured data, speech and text analysis, and debt management analytics with a view to increasing customer satisfaction, helping our clients acquire more customers and improving cross-sell,up-sell and collection rates. The table below illustrates the key services that we provide to our utility clients:

 

Utilities

Meter-to-Cash Revenue Cycle

                 Operations                

  

Customer Management

  

Supply Chain Management

            &  Procurement            

  

IT Solutions

  

Research and Analytics

Customer billing, dispute resolution, exception handling, prepaid account management, billing of unmetered services, credit and collections, payment services, tariff plans, renewals, home move processing, and anall-encompassing Digital Smartmeter-to-cash offering  Customer acquisitions, customer retention, customer enhancement, cross- selling /up-selling, customer care – queries, correspondence, asset management  eSourcing, vendor rationalization, supplier management, procurement optimization, sourcing, support,procure-to-pay (“P2P”) transaction, supply chain analytics  Document control and digitization, master data management, enterprise resource planning (“ERP”) implementation and support, digitalmeter-to-cashbusiness-process-as-a-service, robotics process automation, workflow, support for SAP implementations  Data mining, decision support services, collections optimizations, customer analytics – segmentation, lifetime value analysis, net promoter score (“NPS”) analysis, predictive analytics, text analytics

 

Shared Services

Finance and Accounting

  

Human Resource Management

Order-to-cash, financial analysis,procure-to-pay, accounts receivable / payable, joint venture accounting, royalty accounting, contract accounting services specific to utilities and oil and gas industries  Administration support and payroll services

 

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Shipping and Logistics

We deliver a range of industry-specific business processes across the shipping and logistics industry, in addition to providing services in the areas of finance and accounting (including procurement), customer interaction services, business technology and human resources administration. We also offer decision support services in the form of research and analytics. To support our shipping and logistics team, we leverage various enabling tools, technologies and our proprietary digitization platform to deliver high-quality service to our clients. The key shipping and logistics industry sectors that we serve include:

 

  

Global express and courier companies;

 

  

Ocean sector –non-vessel operating common carrier, ocean liners, ports and terminals and shipping agencies;

 

  

Trucking sector – less-than-truckload, full truckload, truck rental and leasing, compliance, safety and accountability companies;

 

  

Third and fourth-party logistics;

 

  

Car androll-on /roll-off carriers; and

 

  

IT companies in the logistics sector.

As at March 31, 2019, we had 2,881 employees working in this business unit. In fiscal 2019 and 2018, this business unit accounted for 6.2% and 4.5% of our revenue, and 6.3% and 4.6% of our revenue less repair payments(non-GAAP), respectively.

 

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The following table illustrates the key areas of services provided to clients in this business unit:

 

Shipping and Logistics

Sales & Marketing

  

Customer Service

  

Document    

    Processing        

  

    

  

Operations

    Support    

  

Finance &

Accounting

  

Research and

    Analytics    

  

Technology

    Services    

Tariff filing and maintenance, rate quotes, service contract / rate agreement creation and maintenance  Customer file and debtor file administration, customer helpdesk, booking desk-phone /e-mail / electronic data interchange, web rating  Exports, bill of lading, processing and data entry, advance manifest processing, freight audit, billing and invoicing, vessel closures, imports, import data quality process / checks, arrival notifications import general manifest filings with delivery order issuance, customer document processing, verified gross mass updating  Vessel schedules – long term support , vessel schedules – coastal, routing module maintenance, traffic control coordination, booking with carrier, hazardous cargo approvals, vendor management – vendor file administration, purchase order / job order creation, gate moves, ship husbanding, stowage planning, bay plan submission and distribution, inbound and outbound trans-shipment, maintenance and repairs, global stock reconciliation, container leasing validation, vessel performance reports, inventory management, chart corrections management, safety and environmental KPI monitoring onshore  Accounts payable, accounts receivables, disbursement accounting, credit and collections, agency reconciliations, general ledger / bank reconciliation, cash reporting and audit / vendor reconciliation, financial management reporting, vendor helpdesk, monthly closing / quarterly / yearly closing, treasury support, agency audits, claims management  Metrics realization & analysis, network design and optimization, transport management, shipping performance management, tonnage analytics, carrier sourcing analytics, fleet analysis and maintenance, corporate management, revenue analytics, reverse logistics analytics, revenue analytics, distribution center analytics  Intranet support, claims management, data hubbing,e-commerce registration,e-learning module content management,e-learning module content creation

 

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Consulting and Professional Services

Our consulting and professional services (“CPS”) business unit’s objective is to help clients differentiate and outperform in their industry by leveraging industry-specific knowledge and domain expertise. We currently service more than 25 clients from our key delivery centers in India, Romania, China, the Philippines and Sri Lanka.

Our CPS business unit offers an array of services to a range of client sectors in consulting and professional services. These sectors include:

 

  

Content and information publishers;

 

  

Research and consulting firms;

 

  

Real estate service firms;

 

  

Executive search firms;

 

  

High-tech firms;

 

  

Marketing service providers; and

 

  

Legal services firms.

As at March 31, 2019, we had 1,780 employees in the business unit. In fiscal 2019 and 2018, this business unit accounted for 5.5% and 5.2% of our revenue and 5.6% and 5.4% revenue less repair payments(non-GAAP), respectively.

We provide a wide range of services from complex business and financial research and analytics to very simple data management operations. Besides providing shared services support to our clients such as finance and accounting, human resource management, customer support and IT and infrastructure management, we provide the following domain-specific services:

 

Consulting and Professional Services—Service  Offerings

Content & Information Publishers

  

Research and Consulting Firms

  

Real Estate Services Firms

  

Executive Search Firms

Content sourcing, indexing / tagging, analysis & product creation, content editing, product & database management, including design and production services for digital / print products  Opportunity assessment, sector / thematic research, target screening, company analysis, including financial modeling, competitive intelligence and benchmarking  Strategy support, sales and marketing support, business research, survey management support,end-to-end conveyancing process, lease preparation & abstraction, contract management  Pitch book support, industry and company research, databaseclean-up, update and management, name identification, business executive support

 

High-tech Firms

  

Marketing Service Providers

  

Legal Services Firms

Customer interaction services, sales center of excellence, research and analytics, finance and accounting, human resources and procurement support  Industry, company & product research support, market research operations, market research analytics, shopper & CRM analytics, web / digital analytics, 24/7 data management production support, digital content management and production support (designing & development)  Legal support, legal and business research, digital dictation transcription, pitch support, accounts payables & general ledger, employee data management and payroll

 

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Banking and Financial Services

Our banking and financial services practice supports more than 20 leading clients, including large commercial and retail banks, wholesale and retail lenders, wealth advisors, asset managers, hedge funds, financial technology (or commonly referred to as fintech) organizations and mortgage servicing companies, with a comprehensive suite of business process management and transformation solutions.

We seek to add value to our clients’ businesses by improving customer experience, unlocking cost efficiencies and revenue opportunities, and streamlining processes, and leveraging a wide range of processre-engineering, automation (robotic andnon-robotic), and digital and advance analytics (AI / ML) solutions.

The key banking and financial sectors that we serve include:

 

  

Retail and commercial banking;

 

  

Mortgage and loans;

 

  

Wealth and investment banking;

 

  

Financial technology;

 

  

Capital markets and asset management;

 

  

Financial advisory firms;

 

  

Financial research and financial market intelligence companies;

 

  

Trade finance; and

 

  

Financial institutions.

As at March 31, 2019, we had 1,920 employees working in this business unit. In fiscal 2019 and 2018, this business unit accounted for 4.5% and 4.4% of our revenue and 4.6% and 4.5% of our revenue less repair payments(non-GAAP), respectively.

 

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The following table illustrates the key areas of services that we provide to clients in this business unit:

 

   

Banking and Financial Services—Service  Offerings

      

Retail Banking

  

Commercial Banking

  

Capital Markets

  

Mortgage Banking

  

Fintech

Acquisition: Lead generation and deployment, customer behavioral analysis, campaign management, product development / management and support;

 

On-boarding: Application scanning and indexing, account opening, product application processing, detailed documentation review and verification, underwriting / spend limit assignment, welcome calls;

 

Maintenance and servicing: Account maintenance, account and general enquiries, customer data maintenance, statement generation, payment processing, funds allocation and return payment processing, complaint handling, funds transfers, remittance, refunds and settlements, billing queries and statement processing;

 

Collections: Collections and recovery, skip tracing (that is, locating people who have defaulted on a debt),pre-delinquency management, payment plans; and

 

Bank Secrecy Act / Anti-money laundering: Alert elimination, enhanced due diligence, fraud & cyber-crime, politically exposed persons and negative news.

  

Trade finance: Account opening, bills for collection, export bills negotiation, import bills, letter of credit processing, bank guarantee credit limits;

 

Credit risk management: Financial spreading, proposal development, reconciliation, credit analysis, collateral management, renewal support, billing and contribution management, audit support;

 

Cash management: Funds transfer, trade processing, foreign exchange settlement reporting, reconciliations, accrual calculations, investigations, payment processing, settlement, reference data management, reporting;

 

Commercial lending: Account opening, “know your customer,” loan onboarding, documentation, covenant monitoring, billing, statutory accounting.

 

Treasury services: Cash management, foreign exchange settlements, bill discounting, rates updates, mark to market, margin allocation; and

 

Compliance reporting & support: Assist clients in compliance reporting and complaints analysis.

  

Front office: Financial and business research, investment strategy and modeling, order entry, allocation / rebalancing; portfolio construction support, pitch book support, financial statement spreading (that is, spreading of financial statements using percentages to forecast future financials. It is a process of standardizing the presentation of financials);

 

Middle office: Reference data management, cash flow forecasting, risk management, amendments / maintenance of existing data, manual trade allocations, manual trade booking, trade exception / rejection management, trade amendment, trade confirmation, queries handling;

 

Back office – Accounting: Expense and income processing, securities lending, corporate actions processing, fund accounting / net asset value calculations, financial reporting, settlementfollow-up with clients;

 

Back office – Asset servicing: Clearing and settlement, custody / record keeping, stock transfer, collateral management, transfer agency, claims management; and

 

Back office – Treasury: Cash management, cash forecasting, payment processing, invoicing / billing processing.

  

Originations: Indexing,pre-underwriting checklist,pre-funding audit, correspondent indexing, title commitment, credit evaluation, contact point verification, disbursals;

 

Servicing: Customer service, loan boarding andset-up, adjustable rate mortgage audit, payments processing, assignments and endorsements, lien release, escrow management / periodic analysis, final documents follow up and audit;

 

Default servicing:Pre-loss mitigation, foreclosure support, borrower research, operations intake, claims processing, investor reporting, closing and monitoring functions, trial period monitoring (forbearance support), loan modification document preparation; and

 

Secondary markets services: Post close audit, due diligence of acquired packets, documentary fulfillment.

  

Origination:Application data entry, document review and verification, accountset-up;

 

Credit evaluation:Supporting financial research, ability to pay, annual review, collateral monitoring;

 

Servicing:Fulfillment of customer requests, complaints, transaction processing exception management, customer account maintenance; and

 

Advisory services:Enable robust process controls, operational best practices and effective risk management.

 

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The following table highlights our research and analytics practice tailored to the banking and financial services sector:

 

Retail Banking

  

Investment Banking

  

Commercial Banking

  

Wealth Management

  

Asset Management

Loans, cards,

profitability,

attrition,

risk,

fraud

  

Mergers and acquisitions (“M&A”), initial public offerings,

private placements

  

Financial statement spreading,

credit appraisal,

risk ratings,

portfolio construction,

portfolio measurement,

probability of default, loss given default exposure at default prediction models

  

Current investment reviews,

new business, pitch books,

CRM support,

fund research,

portfolio research

  

Fixed income,

equities,

investment strategies, portfolio monitoring

 

  

Data Mining and Data Management

Analysis of structured and unstructured data across the banking and finance sector, organization of data for retrieval and analysis

  

 

  

Financial Crime and Compliance

Anti-money laundering and know-your-customer (or commonly referred to as “KYC”) verification, suspicious transaction monitoring and remediation, and others

  

 

  

Reporting, Dash-boarding and Visualization

Generation and presentation of data-driven insights, communication tools for analysts

  

 

  

Model Development and Recalibration

Actionable models for optimization of operations and strategic planning, insights for changing market conditions

  

 

  

Consulting-led Transformation

Collaborating with clients on robotic process automation, artificial intelligence and business processre-engineering to optimize costs, increase efficiencies and improve customer satisfaction

  

 

 

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Horizontal Units

Customer Interaction Services

We have a strong track record of supporting customer interaction services while focusing on business outcomes. We seek to help our clientsco-create winning outcomes leveraging our domain expertise, cutting-edge technology and analytics, and client-centric collaborative approach. Customer interaction services are offered across our vertical business units.

As at March 31, 2019, we had 11,660 employees in this horizontal unit. In fiscal 2019 and 2018, this horizontal unit accounted for 22.6% and 25.5% of our revenue, and 23.1% and 26.1% of our revenue less repair payments(non-GAAP), respectively.

The following table illustrates the key customer interaction services that we provide:

 

   

Customer Interaction Services—Service Offerings

   

Services

  

Channels

  

Languages

Customer acquisition (salesup-sell or cross-sell, campaign management, digital content management)

Customer retention (complaint management, loyalty program management, customer / guest relations)

Customer service (account management, transaction processing, billing and payments)

Collections (early stage, late stage, skip tracing)

Technical helpdesk (support for query levels “L0” and “L1” – website assistance)

Digital customer experience management (multi-channel, cognitive, robotic process automation, immersive experiences – augmented reality, virtual reality, augmented visual resolution

As-a-Service models (quality, training, workforce management)

Analytics (customer segmentation, loyalty management, sentiment analytics, sales analytics)

Center of Excellence(“COE”)-led consulting services (sales, customer experience,COE-led maturity assessment, digitalassurance-as-a-service, user-experience design consulting, business processre-engineering leveraging “Agile” and “Kaizen” methodologies)

  Bots (voice, chat,e-mail, conversational AI), biometrics, visual interactive voice response, social media (traditional sites such as Facebook, Twitter, forums, blogs, and review sites), digital engagement (mobile, web), voice (inbound / outbound),e-mail, chat, social media, short message service  English, French, Italian, Russian, Spanish, Portuguese, German, Hungarian, Greek, Turkish, Finnish, Dutch, Polish, Swedish, Mandarin, Cantonese, Japanese, Korean, Arabic, Filipino (Tagalog), IsiZulu, IsiXhosa, Afrikaans, and more than 20 regional languages

Finance and Accounting

Our finance and accounting service offerings include a full suite of finance and accounting processes, business processre-engineering, and transformation, including automation of finance operations. Finance and accounting services are offered across all our vertical business units. We have experience in delivering large-scale and complex finance and accounting transformation programs, which include:

 

  

Industry-specific accounting processes such as royalty accounting, fiduciary accounting, actuarial science, revenue recovery management and airline passenger revenue accounting;

 

  

Source-to-pay procurement, including strategic sourcing capabilities such as category management, contract management, vendor management, working capital optimization, payables and spend analytics, financial risk and audit analytics;

 

  

Services acrossorder-to-cash, including order management, supply chain fulfillment support, supply chain management, working capital optimization, receivables and collections analytics, credit risk analytics;

 

  

End-to-end processes ranging from simple, transaction-based processes (such as journals and reconciliations) tohigh-end, judgment-based processes, such as analytics and treasury;

 

  

Global risk and compliance services such as forensics, background screening and digital credit screening;

 

  

Automation suite for accounting activities, including WNS IP best practices, robotics process automation, embedded analytics and reporting, under the “CFO TRAC” offerings delivered through our proprietary and third-party led solutions enabled through an optimal combination of cloud and hosted platforms;

 

  

End-to-end business transformation through our proprietary “Outperforming CFO Framework” which includes a host of assessment tools such as “Investor Analyst View,” “Business Readiness Maturity Model” and “Process Maturity Model.” These tools enable objective assessment of not only an organization’s processes, technology and people, but also of their ability to respond to business disruptions. Business processre-engineering is powered by “ADAPT,” our proprietary methodology that combines the art and science of process, technology, transformation and risk management with a view of enabling us to provide our clients with optimized outcomes;

 

  

Rapid, large-scale transitions;

 

  

Implementation of shared service centers and rationalization of financial systems to optimize and consolidate our clients’ information technology platforms; and

 

  

Multi-location, multi-system global finance and accounting consolidation.

As at March 31, 2019, we had 5,708 employees in this horizontal unit. In fiscal 2019 and 2018, this horizontal unit accounted for 21.7% and 21.4% of our revenue, and 22.1% and 21.9% of our revenue less repair payments(non-GAAP), respectively.

The following table illustrates the key finance and accounting services we provide:

 

   

Finance and Accounting—Service Offerings

   

Source-to-Pay

  

Order-to-Cash

  

Record-to-Report

  

Decision Support

  

Corporate Functions

Sourcing services including strategic sourcing & category management, procurement and administration, invoice / expense processing and payment, accounts payables, accounting and treasury support  Accounts receivables, billing and cash application, order management, credit control, collections and deductions management  General accounting, fixed assets, reconciliations,month-end reporting and consolidation, tax filing and reporting, cost accounting, inter-company accounting, statutory reporting  Budgeting, forecasting, variance analysis, management reporting  Treasury, cash management, financial planning and analysis, tax and compliance, decision support, management accounting

 

Supply Chain

      Finance      

  

Industry-specific

      Accounting      

  

Technology Solutions

  

Governance, Risk, Compliance and

                   Audit Services                  

Product costing, inventory accounting, manufacturing accounting, supply chain analytics, supply chain fulfillment support  Passenger revenue accounting, revenue audit and recovery, claims management, loan account maintenance, royalty accounting, fiduciary accounting, trip records, freight and fuel charges accounting, cost accounting, franchise accounting, meter reading,pre-payment billing, disbursement accounting  

ERP: Implementation, hosting, optimization

 

Bolt-on tools: Reconciliations, reporting, workbench, query management, web portal

 

Enablers: Mailroom solution, workflow

  Governance consulting, risk analytics services, compliance services and audit services

Proprietary Platform:

 

  

Proprietary platform-based service offerings include: “CFO TRAC – Finance and Accounting Automation Suite” brand umbrella, and “Xponential — The ERP Card Solution™,” a part of our BizAps P2P solutions brand umbrella

 

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Research and Analytics

With more than 2,500 employees, our research and analytics practice helps more than 100 global clients make critical business decisions with data-driven insights. We combine our consultative approach with deep domain knowledge and advanced analytics to provide decision support to our clients. Our practice endeavors to support clients along the entire spectrum of “Infra to Insights”, comprising analytics services from data infrastructureset-up to insights generation, ranging from data aggregation and data processing to visualization of insights and data. This is achieved by leveraging customized big data, machine learning, artificial intelligence, social media analytics and advanced analytics solutions to drive digital transformation, better customer understanding, improved marketing efficiencies, and risk reduction.

Our industry analytics portfolio spans various verticals, including retail and CPG, healthcare, hospitality, travel, banking and insurance, utilities and other emerging industries.

Our integrated business analytics services provide focused solutions to clients and seek to create long-term business value. We employ our proprietary frameworks, products and techniques based on the business context to generate actionable insights, focus on operational goals of quality and efficiency, and aid transformational initiatives. Our “Analytics Innovation Center,” a specialized research and development-focused unit comprising data scientists and leading analytics experts, develops cutting-edge solutions, products and capabilities with the view to enhance our clients’ returns on their analytics investments.

Continued investments in AI / ML have helped create innovative solutions and products. In an increasingly blended digital and analytics ecosystem, new capabilities and products in areas such as personalization are helping to improve digital customer experience for our clients.

As at March 31, 2019, we had 2,538 employees in this horizontal unit. In fiscal 2019 and 2018, this horizontal unit accounted for 11.3% and 11.8% of our revenue, and 11.6% and 12.1% of our revenue less repair payments(non-GAAP), respectively.

The following illustrates our key research and analytics products and services:

“WNS Agilius” is our big data analytics platform providingend-to-end “Infra to Insights” solutions including data ingestion, integration, storage and analytics coupled with our domain expertise. The platform enables analytics solutions across multiple verticals (retail and CPG, banking and financial services, healthcare, and utilities) and horizontals (procurement, finance and accounting, and customer interaction services).

“SocioSEERTM” is our proprietarybig-data-enabled social media analytics platform that lets organizations create brand advantage by harnessing the power of social media. SocioSEERTM combines machine learning and deep domain expertise to seek to help brands proactively manage and outperform their stated goals around brand health, customer centricity and topline growth.

“Skense” is our cognitive data capture and processing platform that employs AI / ML algorithms to extract data from multiple unstructured data sources (such ase-mail, documents, and spreadsheets) and format such data to create structured datasets. Its application extends across multiple industries and various judgment intensive functions, including quality control for fast-moving consumer goods firms, automated financial statement spreading for banks, and medical record summarization for insurance and payor firms.

“Imagn” is our image analytics platform that employs AI / ML algorithms in multiple use cases designed to improve business process efficiencies. It helps insurance companies to identify roof top damages based on images captured by drones and significantly reduces the time to estimate the magnitude and value of damages.

“BrandttitudeTM” is our proprietary cloud-based big data analytics product designed to track brand performance and perceptions over multiple dimensions across varied data sources to help clients make informed decisions. The product is built using open source technologies on a scalable data harmonization platform.Leading consumer brands are already using this product in a licensing model to identify insights from harmonized data, such as the correlation between weather patterns and brand sales.

“Unison™” is our proprietary multi-channel customer interaction analytics platform that provides360-degree customer insights (including insights generated from multiple channels such as social media,e-mail, website, mobile apps, CRM and other offline channels) based on sentiment analysis. It is flexible and scalable to add additional channels of customer interaction and provides actionability and insights through key customer service metrics that are contextualized to specific industries using our proprietary categorization engine.

“InTouch™” is another proprietary intelligent social media, customer service and analytics platform designed to enable quick, automated and customized audience engagement across multiple social media channels, blogs and forums to help drive long-term brand and customer-centricity for clients. The artificial-intelligence-powered platform prioritizes customer interactions according to severity of issues and manages interactions across multiple languages, making it aone-stop solution for intelligently managing customer queries.

 

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Research and Analytics—Service Offerings

AI and ML

  

Big Data & Analytics Consulting

  

Data & Information Management

                      Advisory                     

•   Modeling and algorithm design

•   Knowledge discovery

•   Cognitive and predictive analytics

•   Natural language processing and generation

  

•   Strategy roadmap and consulting

•   Solution architecture

  

•   Data modeling and integration

•   Data engineering and governance

•   Data visualization and virtualization

Customer Analytics & Personalization

  

Digital Transformation and Social

             Media Analytics                 

  

HR Analytics

•   Acquisition / retention / cross-sell /up-sell

•   Campaign management analytics

•   Loyalty management

•   Sales and marketing analytics

•   Pricing analytics

  

•   Social media management

•   Web analytics

•   Sentiment & text analytics

•   Image / video analytics

  

•   Smarter workforce solution

•   Employee satisfaction analytics

•   Attrition analytics

Chief Procurement Officer / Chief

Financial Officer (“CFO”) Analytics

  

Financial Analytics

  

Operations & Supply Chain Analytics

•   Sourcing and procurement analytics

•   Spend / payables analytics

•   Supplier capability profiling

•   Revenue assurance analytics

  

•   Capital asset pricing modeling

•   Actuarial and collections analytics

•   Budgeting and forecasting

•   Working capital analytics

  

•   Contact center analytics

•   Customer satisfaction / NPS analytics

•   Demand and inventory analytics

•   Sales and operations planning

Market Research Services

      

•   Competitive research

•   Financial research

•   Survey programming

•   Business intelligence dashboards and reporting

    

 

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Industry-specific Analytics

Insurance Analytics

  

Travel & Leisure Analytics

  

Banking & Financial Analytics

Claims analytics, subrogation analytics, fraud analytics, customer analytics  Loyalty analytics, customer interaction service analytics, commercial intelligence, flight operations, pricing and revenue management, ancillary revenue enhancement analytics, hyper-personalization, affinity and propensity modeling  Data mining and data management: Analysis of structured and unstructured data across the banking and finance sector; reporting, dashboarding and visualization; financial model development and recalibration

Utilities Analytics

  

Shipping and Logistics Analytics

  

Healthcare (Pharma & Consumer Health)

                             Analytics                             

Data mining, decision support services, collections optimization, customer analytics – segmentation, lifetime value analysis, NPS analysis, predictive analytics, text analytics  

Pricing and promotion analytics,

market mix modeling, trade promotion optimization, lifetime value & taxonomy assessment, hyper-personalization, customer analytics

  Competitive intelligence, pipeline analysis, product profiling, KPI reporting, epidemiology analysis, market opportunity assessment, social media analysis, KOL research, modeling and tool building support, pricing analytics, patient data analytics

Technology Services

“WNS TRAC™,” our consolidated suite of comprehensive digital BPM solutions, is differentiated by our deep domain expertise in strategic verticals and processknow-how in key horizontal domains that equip us with an ability to understand and identify suitable technology for our clients’ business outcomes. The WNS TRAC TM solutions are available in the form of(a) all-inclusive and comprehensive enterprise platforms that are a combination of our own IP with key partner products, and (b) as plug and play solutions that seamlessly integrate with the client’s existing technology environment without the need for a complete overhaul. Also, the solutions arepre-configured with best practices and industrialized accelerators to drive implementation around social, mobility, analytics, cloud, robotics and intelligent automation, with a host of deployment options and commercial models to choose from. We are also working on several next-generation technologies such as cognitive automation, artificial intelligence, blockchain and IoT, to address emerging client demands.

From consulting to application management and operations, WNS TRACTM drives seamless technology deployment across the business process lifecycle with a view to achieving sustained growth and profitability.

As at March 31, 2019, we had 311 employees in this horizontal unit. In fiscal 2019 and 2018, this horizontal unit accounted for 1.6% and 2.1% of our revenue, and 1.6% and 2.1% of our revenue less repair payments(non-GAAP), respectively.

The following table illustrates our industry-specific and cross-industry solutions available as part of WNS TRACTM:

 

WNS TRACTM

Industry-specific solutions

Travel

  

Insurance

  

Healthcare

  

Shipping and Logistics

  

Utilities

 

CPG & Retail

•   “Verifare” – Fare audit solution

•   Interline proration Queue management

•   Commercial planning suite

  

•   Broker connect

•   “eAdjudicator” – adjudication automation solution

•   Actuarial proprietary platform

•   Claims solution

•   Policy administration solution

  

•   Order-to-cash (“O2C”) for medical device manufacturing

•   Pharma analytics

•   Clinical care management

  

•   Enterprise solution for shipping and logistics

•   Less-than-truckload billing transformation

  

•   Meter-to-cash solution

•   Smart metering solution

 

•   Deductions and warranty management

 

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WNS TRACTM

Cross-industry solutions

Solutions for Chief Financial

                   Officers                  

  

Solutions for Chief

Procurement Officers

  

Analytics

  

Digital Customer Interaction

                   Services                  

•   WNSprocure-to-pay solution

•   WNSorder-to-cash solution

•   WNSrecord-to-report solution

•   WNS reporting and analytics

  

•   Source-to-contract

•   WNS Procurement Card solution

•   WNS supplier portal

•   WNS spend analytics

  

•   SocioSEERTM

•   BrandttitudeTM

•   Big data solutions

  

•   WNS interaction analytics

•   WNS omni-channel solution

•   WNS chatbot

 

WNS TRACTM

RPA & Intelligent Automation

Robotics Process

    Automation    

  

Cognitive / AI

  

Natural Language
  Processing / ML  

  

Blockchain

  

IoT

•   RPA consulting andRPA-as-a-service

•   RPA implementation and support

  

•   Unstructured document processing

•   Infringement identification for media

•   Robo-advisors in customer interactions

  

•   Credit risk assessment

•   Driver behavior analytics in logistics

•   Fraud detection in insurance

  

•   Freight brokerage and forwarding for shipping and logistics

•   Claims processing for insurance

  

•   Proactive asset maintenance in utilities and manufacturing

•   Smart sensors in healthcare

Sales and Marketing

The sales cycle for business process management services is time-consuming and complex in nature. The extended sales cycle generally includes initiating client contact, submitting requests for information and requests for proposals for client business, hosting client visits to our delivery centers, and performing analysis (including diagnostic studies,proofs-of-concept, and pilot implementations) to demonstrate our delivery capabilities, and entering into a contract with the client. Due to the complex nature of the sales cycle, we have aligned our sales teams to our vertical business units and staffed them with “hunting” or new relationship sales professionals (“hunters”), as well as “farming” or existing client relationship professionals (“farmers”). Our hunters and farmers have specialized industry knowledge and experience, which enable them to better understand prospective and existing client’s business needs and to offer appropriate domain-specific solutions.

Our sales and sales support professionals are based in Australia, the UAE, Eastern Europe, India, Singapore, South Africa, the UK and the US. Our sales teams work closely with our global sales support team, which provides critical analytical support throughout the sales cycle. Other key capabilities offered by our sales support team include consulting, generating leads for potential business opportunities and research support. As at March 31, 2019, our front-line sales teams consisted of 101 members including hunters and farmers. Our teams of farmers are responsible for identifying and initiating discussions with and selling services in new areas to existing clients. We assign dedicated client partners and / or account managers to our key clients. These managers work with their clients toco-create cutting-edge solutions that help our clients embrace changing business models and improve their competitive position. In addition, they are the conduit to our service delivery teams addressing clients’ needs. More importantly, by leveraging their detailed understanding of the client’s business objectives gained through this close interaction, our farmers actively identify and target additional processes that can be managed by us to provide better efficiency, effectiveness and control. Through this methodology, we have developed a strong track record of increasing our salesyear-on-year as well as growing our business from existing clients.

Clients

As at March 31, 2019, we had a diverse client base of 403 clients (with each client generating more than $0.01 million in revenue in fiscal 2019) across a variety of industries and service types, including companies that we believe are among the leading players in their respective industries.

We believe the diversity in our client profile differentiates us from our competitors. See “Part I – Item 5. Operating and Financial Review and Prospects – Revenue” for additional information on our client base.

 

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The table below sets forth the number of our clients by revenue for the periods indicated. We believe that the large number of clients who generate more than $1 million of annual revenue indicates our ability to extend the depth of our relationships with existing clients over time.

 

   Year ended March 31, 
   2019   2018 

Below $1.0 million

   278    262 

$1.0 million to $5.0 million

   93    93 

$5.0 million to $10.0 million

   17    17 

More than $10.0 million

   15    14 

Competition

Competition in the BPM services industry is intense and growing steadily. See “Part I — Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — We face competition from onshore and offshore business process management companies and from information technology companies that also offer business process management services. Our clients may also choose to run their business processes themselves, either in their home countries or through captive units located offshore.”

We compete primarily with:

 

  

Focused BPM service companies with presence in offshore locations (primarily India), such as EXL Service Holdings, Inc., Firstsource Solutions Limited and Genpact Limited;

 

  

BPM divisions of numerous information technology service companies operating out of India, such as Cognizant Technology Solutions, Infosys Technologies Limited, Tata Consultancy Services Limited and Wipro Technologies Limited;

 

  

Global companies such as Accenture Limited, Capgemini, Electronic Data Systems Corporation, a division of Hewlett-Packard, and International Business Machines Corporation, which provide an array of products and services, including broad-based information technology, software, consulting and business process outsourcing services; and

 

  

Global financial services and consulting firms such as Deloitte Private Limited, industry-focused niche technology players such as InterGlobe Enterprises and Accelya, and specialty analytics service providers such as Mu Sigma Inc.

In addition, departments of certain companies may choose to perform their business processesin-house, in some cases via an owned and operated facility in an offshore location such as India. Their employees provide these services as part of their regular business operations.

Intellectual Property

We use a combination of our clients’ software systems, third party software platforms and systems, and our own proprietary software platforms and systems to provide our BPM and technology services. Our proprietary solutions and licensed software allows us to market our services as integrated solutions under our WNS TRAC TM suite, which combines technology solutions together with our core BPM service offerings. Our principal proprietary software solutions include:

 

 (1)

WNS TRACTM industry-specific solutions, including the following:

 

 a)

Insurance TRACTM solutions including digital claims platform, insurance BPaaS, “iPAS,” and “eAdjudicator” which we use in our insurance business unit;

 

 b)

Travel TRACTM solutions including revenue accounting platform, fare audit platform (“Verifare”), farepro-ration solution, revenue integrity solution (“BIDT”) which we use in our travel and leisure business unit; and

 

 c)

Other industry-specific solutions used in our shipping and logistics business unit, utilities business unit and other business units.

 

 (2)

WNS auto claims software platform, which we use in our WNS Assistance business;

 

 (3)

WNS TRACTM cross-industry solutions, including the following:

 

 a)

CFO TRACTM solutions for our finance and accounting services;

 

 b)

Digital CIS TRACTM solutions for our client interactions; and

 

 c)

Other proprietary software, point solutions and platform solutions developed on third party software used for cross-industry services including our research and analytics business unit.

 

 (4)

WNS TRACTM robotics and intelligent automation solutions, including our proprietary automation solutions and solutions developed on third party software like RPA and cognitive / AI systems for delivering automation and transformation services to our clients.

 

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We customarily enter into licensing andnon-disclosure agreements with our clients with respect to the use of their software platforms and systems. We maintain intellectual property rights in our proprietary software platforms and systems, and license the use of third party software platforms and systems from their respective owners. Under our contracts with third-party software platform providers, any solutions developed by us on top of such third party software platforms, using our domain knowledge, are our intellectual property (unless qualified otherwise). Our client contracts usually provide that all customized intellectual property created specifically for the use of our clients will be assigned to them, unless it is clearly identified as our intellectual property.

Our employees are also required to sign confidentiality agreements as a condition to their employment. These agreements include confidentiality undertakings regarding our company’s and the client’s intellectual property that bind our employees even after they cease to work with us. These agreements also ensure that all intellectual property created or developed by our employees in the course of their employment is assigned to us.

We have registered the trademarks “WNS,”“WNS-Extending Your Enterprise” and “WNS TRAC” in most of the countries where we have global presence.

Technology

We have a dedicated team of technology experts who support clients at every stage of their engagement with us. The team designs, implements and supports technology solutions to enable delivery of business processes for our clients.

Wide-area-network — We have designed and built a highly redundant and resilient global multi-protocol label switching (“MPLS”) network, connecting all of our delivery centers and client datacenters. We run data, voice and video services on this global MPLS network to serve our clients.

Customer interaction services technology infrastructure — We have deployed omni-channel contact center platforms with voice, web chat,e-mail, social media, and interactive voice response channels across all our delivery centers, designed to improve customer experience. These customized platforms orchestrate omni-channel customer journeys across digital channels including self-service and payment card industry data security standard compliance.

Data centers — We have built highly secure, redundant data centers for hosting our omni-channel contact center platforms, automation tools, corporate infrastructure and application services.

Cloud computing — We have adopted cloud computing services such as office productivity tools, virtual servers, virtual storage, and web ande-mail security, for some of our clients and our corporate use.

Technology service management methodology — Our technology service delivery management is based on an information technology infrastructure library framework (that is, an information technology service management standard). We assist over 200 clients with technology implementation, service delivery and support for end user computing, wide area network, local area network telecommunications, customer interaction management platform, IT security, datacenter systems and cloud computing technology platforms.

Process and Quality Assurance and Risk Management

Our process and quality assurance compliance programs are critical for the success of our operations. We have an independent quality team to monitor, analyze, provide feedback and report process performance and compliance. Our company-wide quality management system focuses on effectively managing our client processes on an ongoing basis. Our process delivery is managed by independent empowered teams and is measured regularly againstpre-defined operational metrics. We have over 950 employees that help us meet quality assurance and ISO 9001 standards for Quality Management Systems and ensure continued compliance. We apply Lean Six Sigma methodologies, which are statistical and process-focused methodologies to improve and deliver consistent quality to customers. We apply well-defined quality management principles to improve and provide consistent levels of service quality to our clients. In fiscal 2019, more than 465 different projects were completed using Lean Six Sigma methodologies and over 769 additional projects are in progress. We have also trained over 12,700 employees in ISO 9001 and Lean Six Sigma principles in fiscal 2019.

 

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We have been honored with the following awards for our achievements in quality assurance in fiscal 2019:

 

  

Golden Peacock Business Excellence Award 2018

 

  

NASSCOM Customer Service Excellence Awards 2018 in the category “Return on Investment”

 

  

Sri Lanka - SLASSCOM Innovation Awards, FirstRunners-up “Best Client Delivery Innovation”

 

  

Stevie Silver Award for Innovation in Customer Service – All Other Industries

 

  

Stevie Bronze Award for Innovation in Customer Service – Other Service Industries

 

  

Stevie Bronze Award for Best Customer Satisfaction Strategy

Our Board of Directors is primarily responsible for overseeing our risk management processes. The Board of Directors receives and reviews reports from the Chief Risk Officer as considered appropriate regarding our company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks taken by our company are consistent with the Board’s appetite for risk.

Our risk management framework also focuses on three important elements: business continuity planning, information security and operations risk management.

Our approach to business continuity planning involves implementation of an organization-wide business continuity management framework which includes continual self-assessment, strategy formulation, execution and review. Our business continuity strategy leverages our expanding network of delivery centers for operational and technological risk mitigation in the event of a disaster. To manage our business continuity planning program, we employ a dedicated team of experienced professionals. A customized business continuity strategy is developed for key clients, depending on their specific requirements. For mission-critical processes, operations are typically split across multiple delivery centers in accordance with client-approved customized business continuity plans.

 

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Our approach to information security involves implementation of an organization-wide information security management system, which complies with the ISO 27001:2013 to manage organizational information security risks. These measures seek to ensure that sensitive information pertaining to our company or our clients remains secure. Currently, information security systems at 44 delivery centers are ISO 27001:2013 certified, and we expect to seek similar certifications for our newer delivery centers. We also comply with the Payment Card Industry Data Security Standard (“PCI DSS”) which is a security standard aimed at helping companies proactively protect cardholder data and sensitive authentication data. In addition, we also undergo Statement on Standards for Attestation Engagements No. 18 / International Standard on Assurance Engagements (“ISAE”) No. 3402, “Reporting on Controls at a Service Organization (“SOC”) 1 Type 2” audits with respect to our general control environment supporting operational delivery and with respect to security, availability and confidentiality in accordance with ISAE on an annual basis.

Our approach to operations risk management involves the implementation of a “three lines of defense” framework for our clients’ offshored business processes. Under this framework, the quality assurance teams embedded within the business units act as the first line of defense, an independent and centralized risk management team acts as the second line of defense andclient-end internal audit teams act as the third line of defense. Our lines of defense are designed to identify potential risks, evaluate design efficiency and operating effectiveness of controls embedded within the outsourced business processes that we manage for our clients, and propose additional controls as appropriate for mitigation of the identified risks.

In addition, our clients may be governed by regulations specific to their industries or in the jurisdictions where they operate or where their customers are domiciled which may require them to comply with certain process-specific requirements. As we serve a large number of clients globally and across various industries, we rely on our clients to identify the process-specific compliance requirements and the measures that must be implemented in order to comply with their regulatory obligations. We assist our clients to maintain and enforce compliance in their business processes by implementing control and monitoring procedures and providing training to our employees serving specific client programs. These control and monitoring procedures are separate from and in addition to our periodic internal audits.

Human Capital

As at March 31, 2019, we had 39,898 employees, of whom 25,498 are based in India, 7,788 are based in the Philippines, 3,477 are based in South Africa, 895 are based in the US, 545 are based in Sri Lanka, 456 are based in Romania, 397 are based in China, 332 are based in the UK, 189 are based in Poland, 146 are based in Spain, 100 are based in Costa Rica, 18 are based in Australia, 18 are based in Turkey, 18 are based in France, 15 are based in Germany, three are based in Switzerland, two are based in Singapore, and one is based in the United Arab Emirates. Most of our associates hold university degrees. As at March 31, 2018, we had 36,540 employees. Our employees are not unionized. We believe that our employee relations are good. We focus heavily on recruiting, training and retaining our employees.

Recruiting and Retention

We believe that talent acquisition is an integral part our overall organizational strategy. We have developed effective human resource strategies and demonstrated a strong track record in recruitment specific to the needs of our business units to optimize the training and development of our employees. As we continue to grow, we look to improve and enhance our candidate pool, which is sourced from recruitment agencies, job portals, advertisements, college campuses (where we focus on recruiting talented individuals) andwalk-in applications. In addition, a significant number of our applicants are referred to us by existing employees. We recruit an average of 1,612 employees per month. We have also initiated a hiring program, whereby we employ apprentices under the India government scheme, National Employability Enhancement Mission, pursuant to which they undergo a three to36-month apprenticeship to enhance their employability. There is no guarantee of employment with us following the completion of the apprenticeship.

During fiscal 2019, 2018 and 2017, the attrition rate for our employees who had completed six months of employment with us was 31%, 29% and 34% respectively.

Training and Development

We devote significant resources to the training and development of our associates. We have established the WNS Learning Academy, where we offer specialized skills development, such as leadership and management development, skills and behavioral programs for employees across all employee levels. The WNS Learning Academy is focused on developing initiatives and programmes that are designed to enable high-impact leadership and potential across all employee levels and geographies, and also on building internal capability to create a digitally savvy workforce ready for the future. One of the best practices and biggest strengths of the WNS Learning Academy is its structure enables our employees to deliver relevant learning solutions that provide people with the knowledge and skills they need to enhance their performance and achieve organizational goals.

 

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The following chart illustrates the structure of the WNS Learning Academy which is designed to facilitate effective learning solutions and focus on critical functional areas.

 

LOGO

We have established a consulting team, design team and a content delivery team. The consulting team and the design team determine the learning requirements for each business unit, with each team member aligned to a specific business unit. These team members are referred to as our business unit learning partners. The learning partner acts as a learning consultant for the relevant business unit and creates a learning strategy and develops solutions which are designed to help the business unit achieve its goals. The content delivery team is responsible for creating and delivering learning content for the respective teams. In addition, we have specific teams which develop organization level programs for leadership, education (comprising structured curriculum-based programs across different employee levels in the organization) and technology (leveraging technology to complement our initiatives and create a world class learning organization).

While we continue to focus on building organization level capability, the consulting design and delivery model allows us to proactively identify and create focused developmental strategies for each business unit. The technology function promotes and increases the use of digital learning, manages the learning management system and strives to create a self-learning ecosystem which is designed to help respond to new opportunities arising from digital technologies.

The WNS Learning Academy has over 300 unique programs for various employee levels within the organization and behavioral skills that are conducted across locations based on defined competency-based roadmaps.

Talent Development Center of Excellence – Flagship programs

WNS has a “Centre of Excellence” (“COE”) that focuses on nurturing and developing the future leaders of the organization. The COE actively engages with HR and our business leaders to design business relevant people programs that align with the strategy and vision of the organization.Some of the programs designed and implemented by this team are focused on building a strong and gender diverse leadership pipeline. Given below are the details of two such programs:

(a)Aspire Plus – Launched in 2016, the “ASPIRE” initiative mapped critical roles and future talent needs with competencies and identified and nurtured high-potential employees in the organization to succeed. In 2017, we launched “Aspire+”, a platform where the “Aspire” participants were provided an opportunity to apply their knowledge, skills and business acumen in practical business situations. Through the Aspire+ program, we endeavor to create a consulting task force that will be responsible for strategic account management ofsmall/mid-sized accounts with envisaged growth potential.

(b)Centurion – “Centurion” is a talent development program for future women leaders. It is an initiative to proactively identify and nurture women employees from the frontline manager level to enhance their capabilities and create an enabling environment for career opportunities. In 2017, we selected 24 candidates for our first Centurion program across the following locations: India, South Africa, Sri Lanka, Romania and the Philippines.

 

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Culture Building and Transformation

The organization is working towards the goal of “one WNS”, “one value system”. It drives the following organization-wide initiatives to create an inclusive culture, build awareness, and create champions within operations teams to maintain the rigor:

(a)Millennial Council: The Millennial Council is an initiative where the youngest minds at WNS get the opportunity to work shoulder to shoulder with the senior leaders in the company to truly make a difference. The council members are tasked to help the WNS brand stay in alignment with changing trends. They also develop action plans for the organization in their chosen fields, including employee engagement, corporate social responsibility, technology and enhancing the company’s brand presence.

(b)Diversity and Inclusion: As an organization, we recognize the benefits to be gained from inclusivity of women and the diversity of skills, perspectives, and experiences they contribute in making WNS business practices more efficient and innovative. For us, this is a shift in culture rather than stand-alone programs. It is about feeling included and essential since productivity improves in an inclusive environment. WNS has a policy of equal opportunity for employees and candidates from varied cultures, genders, backgrounds and geographies. WNS’ commitment to inclusion spans the entire organization and is intertwined with our vision, values, culture and strategy. We are continuously able to attract and retain best in class female talent in the industry in all the regions in which we have delivery locations and the proportion of our female employees has grown from 36% in 2015 to about 44% in 2019. Developing talented women at WNS is not just about increasing the number of women we recruit. It focuses on supporting and developing women across the entire span of their career.

(c)Respectful Workplace:Our respectful workplace program is based on the premise that all employees need to be treated fairly and differences should be acknowledged and valued. The program promotes a work environment that is collaborative with respectful relationships based on a humane and an ethicalmind-set. It is an initiative of the people, for the people and by the people. The premise of this module is inclusion – irrespective of gender, ethnicities, sexual orientations or any other dividing forces that may hinder the respect towards another. It also covers in detail the various aspects of “POSH” (that is, the prevention of sexual harassment) and drives awareness of our organization’s policy and approach in the arena.

Digital Transformation

The WNS education initiative is aimed at achieving the following:

 

  

Building capabilities to lead digital transformation in the BPM space;

 

  

Increasing the use of digital learning;

 

  

Enhancing our workforce’s digital competencies and;

 

  

Upskilling our workforce, as BPM specific education is not available in the ecosystem.

We have launched two certification programs for our employees—WNS Certified BPM Professional and WNS Certified Digital BPM Professional and plan to launch five more certification programs for ourmid-level employees and senior management.

The training organization at WNS offers developmental programs to all employee levels in the organization, in all business units and all enabling units comprising support functions. It comprises:

 

  

The WNS Learning Academy which focuses on potential development and provides leadership programs across various levels of management in the organization;

 

  

Process and domain training team, which focuses on enabling and improving performance;

 

  

Education team which is a specialized arm of the WNS Learning Academy that focuses on building internal digital capability through structured certification courses; and

 

  

Business process excellence and transformation team, which focuses on training and certifying employees in yellow belt and green belt certifications under the Lean Six Sigma framework.

The Learning Academy team carries out an intensive training need analysis every year with each business unit, and vertical and at each location to ensure that its programs are in line with our business objectives. The final plan/development plan is reviewed by the team at a strategic level to ensure alignment with our organization’s strategy. Following the training need analysis, trainings are conducted for all employee levels and across business verticals and locations, and the key emerging needs/themes are consolidated and analyzed.

 

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Regulations

Due to the industry and geographic diversity of our operations and services, our operations are subject to a variety of rules and regulations, and several federal and state agencies in Australia, China, Costa Rica, France, Germany, India, Ireland, Mauritius, the Netherlands, New Zealand, the Philippines, Poland, Romania, Singapore, South Africa, Spain, Sri Lanka, Switzerland, Turkey, United Arab Emirates, the UK and the US that regulate various aspects of our business. See “Part I — Item 3. Key Information — D. Risk Factors — Risks Related to our Business — Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements. Failure to adhere to the laws and regulations that govern our business or our clients’ businesses that we are required to comply with in performing our services could harm our business.” We have benefitted from, and continue to benefit from, certain tax holidays and exemptions in various jurisdictions in which we have operations.

In fiscal 2019, our tax rate in India and the Philippines impacted our effective tax rate. In fiscal 2018 and fiscal 2017, our tax rate in India, the Philippines and Sri Lanka impacted our effective tax rate. We would have incurred approximately $15.7 million, $9.4 million and $5.2 million in additional income tax expense on our combined operations in our SEZ operations in India, the Philippines and Sri Lanka for fiscal 2019, 2018 and 2017, respectively, if the tax holidays or exemptions as described below had not been available for the respective periods.

We expect our tax rate in India and the Philippines to continue to impact our effective tax rate. Our tax rate in India has been impacted by the reduction in the tax exemption enjoyed by our delivery center operating under the SEZ scheme as discussed below. Our tax rate in Sri Lanka has been impacted by the withdrawal of tax exemption on export income in Sri Lanka with effect from April 1, 2018, following which the income from export of service has been subject to tax at 14% on net basis, as more fully described below.

India

In the past, the majority of our Indian operations were eligible to claim income tax exemption with respect to profits earned from export revenue from operating units registered under the STPI. The benefit was available for a period of 10 years from the date of commencement of operations, but not beyond March 31, 2011. Effective April 1, 2011, upon the expiration of this tax exemption, income derived from our operations in India became subject to the prevailing annual tax rate, which is currently, and was in fiscal 2019, 34.95%, and was in fiscal 2018 and fiscal 2017 34.61%.

In 2005, the Government of India implemented the SEZ legislation, with the effect that taxable income of new operations established in designated SEZs may be eligible for a15-year tax holiday scheme consisting of a complete tax holiday for the initial five years and a partial tax holiday for the subsequent ten years, subject to the satisfaction of certain capital investment conditions. During fiscal 2012, we started operations in delivery centers in Pune, Mumbai and Chennai, India registered under the SEZ scheme. These operations are eligible for a 50.0% income tax exemption from fiscal 2017 to fiscal 2026. During fiscal 2015, we commenced operations in new delivery centers in Gurgaon and Pune, India, which are registered under the SEZ scheme. These operations were eligible for a 100.0% income tax exemption until fiscal 2019, and are eligible for a 50.0% income tax exemption from fiscal 2020 to fiscal 2029. During fiscal 2018, we started operations in new delivery centers in Pune and Gurgaon, India registered under the SEZ scheme that are eligible for a 100.0% income tax exemption until fiscal 2022, and a 50.0% income tax exemption from fiscal 2023 to fiscal 2032. During fiscal 2019, we started operations in new delivery centers in Noida and Pune, India registered under the SEZ scheme that are eligible for a 100.0% income tax exemption until fiscal 2023 and are eligible for a 50.0% income tax exemption from fiscal 2024 to 2033.

 

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The SEZ legislation has been criticized on economic grounds by the International Monetary Fund and the SEZ legislation may be challenged by certainnon-governmental organizations. It is possible that, as a result of such political pressures, the procedure for obtaining benefits under the SEZ legislation may become more onerous, the types of land eligible for SEZ status may be further restricted or the SEZ legislation may be amended or repealed.

In addition to these tax holidays, our Indian subsidiaries are also entitled to certain benefits under relevant state legislation and regulations. These benefits include rebates and waivers in relation to payment for transfer of property and registration (including for purchase or lease of premises) and commercial usage of electricity.

The Government of India may enact new tax legislation that could impact the way we are taxed in the future. For example, the Government of India has issued guidelines on the GAAR, which came into effect on April 1, 2017, and which is intended to curb sophisticated tax avoidance. Under the GAAR, a business arrangement will be deemed an “impermissible avoidance arrangement” if the main purpose of the arrangement is to obtain tax benefits. Although the full implications of the GAAR are presently still unclear, if we are deemed to have violated any of its provisions, we may face an increase to our tax liability. However, we do not expect the GAAR to have a material adverse impact on our operations. The Government of India has passed the Goods and Service Tax Act (“GST Act”), which came into effect on July 1, 2017. The majority of the various existing indirect tax levies have since been subsumed by the goods and services tax payable under the GST Act. Based on the current GST law and the rules, we do not expect a significant impact on our operations. See “Part I — Item 3. Key Information — D. Risk Factors — Risks Related to Key Delivery Locations — New tax legislation and the results of actions by taxing authorities may have an adverse effect on our operations and our overall tax rate.”

Philippines

From fiscal 2016 until fiscal 2019, we started operations in various delivery centers in the Philippines that are eligible for tax exemption benefits expiring between fiscal 2020 and fiscal 2023. Following the expiry of the tax benefits, income generated by the Philippines subsidiary will be taxed at the prevailing special tax rate, which currently is 5.0% on gross profit.

Sri Lanka

Our operations in Sri Lanka were eligible to claim income tax exemption with respect to the profits earned from export revenue until fiscal 2018 and are taxed at 14% on net basis with effect from April 1, 2018.

Costa Rica

Our subsidiary in Costa Rica was eligible for a 100.0% income tax exemption from fiscal 2010 until fiscal 2017 and is eligible for a 50.0% income tax exemption from fiscal 2018 to fiscal 2021.

 

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Enforcement of Civil Liabilities

We are incorporated in Jersey, Channel Islands. Most of our directors and executive officers reside outside of the US. Substantially all of the assets of these persons and substantially all of our assets are located outside the US. As a result, it may not be possible for investors to effect service of process on these persons or us within the US, or to enforce against these persons or us, either inside or outside the US, a judgment obtained in a US court predicated upon the civil liability provisions of the federal securities or other laws of the US or any state thereof. A judgment of a US court is not directly enforceable in Jersey, but constitutes a cause of action which will be enforced by Jersey courts provided that:

 

  

the court which pronounced the judgment has jurisdiction to entertain the case according to the principles recognized by Jersey law with reference to the jurisdiction of the US courts;

 

  

the judgment is given on the merits and is final and conclusive — it cannot be altered by the courts which pronounced it;

 

  

there is payable pursuant to the judgment a sum of money, not being a sum payable in respect of tax or other charges of a like nature or in respect of a fine or other penalty;

 

  

the courts of the US have jurisdiction in the circumstances of the case;

 

  

the judgment can be enforced by execution in the jurisdiction in which the judgment is given;

 

  

the person against whom the judgment is given does not benefit from immunity under the principles of public international law;

 

  

there is no earlier judgment in another court between the same parties on the same issues as are dealt with in the judgment to be enforced;

 

  

the judgment was not obtained by fraud, duress and was not based on a clear mistake of fact; and

 

  

the recognition and enforcement of the judgment is not contrary to public policy in Jersey, including observance of the principles of natural justice which require that documents in the US proceeding were properly served on the defendant and that the defendant was given the right to be heard and represented by counsel in a free and fair trial before an impartial tribunal.

It is the policy of Jersey courts to award compensation for the loss or damage actually sustained by the person to whom the compensation is awarded. Although the award of punitive damages is generally unknown to the Jersey legal system, there is no prohibition on them either by statute or by customary law. Whether a judgment is contrary to public policy depends on the facts of each case. Exorbitant, unconscionable, or excessive awards will generally be contrary to public policy. Moreover, if a US court gives a judgment for multiple damages against a qualifying defendant, the Protection of Trading Interests Act 1980, an Act of the UK extended to Jersey by the Protection of Trading Interests Act 1980 (Jersey) Order 1983 (“the Order”), provides that such judgment would not be enforceable in Jersey and the amount which may be payable by such defendant may be limited. The Order provides, among others, that such qualifying defendant may be able to recover such amount paid by it as represents the excess of such multiple damages over the sum assessed as compensation by the court that gave the judgment. A “qualifying defendant” for these purposes is a citizen of the UK and Colonies, a body corporate incorporated in the UK, Jersey or other territory for whose international relations the UK is responsible or a person carrying on business in Jersey.

 

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Jersey courts cannot enter into the merits of the foreign judgment and cannot act as a court of appeal or review over the foreign courts. It is doubtful whether an original action based on US federal securities laws can be brought before Jersey courts. A plaintiff who is not resident in Jersey may be required to provide security for costs in the event of proceedings being initiated in Jersey. There is uncertainty as to whether the courts of Jersey would:

 

  

recognize or enforce judgments of US courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the US or any state in the US; or

 

  

entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the federal securities laws of the US or any state in the US.

In India, recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the Code of Civil Procedure, 1908 (India) (the “Civil Code”), as amended. Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court in any country or territory outside India which the Indian government has by notification declared to be a reciprocating territory, such foreign judgment may be enforced in India by proceedings in execution as if the judgment had been rendered by a competent court in India. However, Section 44A of the Civil Code is applicable only to monetary decrees not being in the nature of amounts payable in respect of taxes or other charges of a similar nature or in respect of fines or other penalties and does not include arbitration awards. The US has not been declared by the Indian government to be a reciprocating territory for the purposes of Section 44A of the Civil Code. Accordingly, a judgment of a foreign court, which is not a court in a reciprocating territory, may be enforced in India only by a fresh suit instituted in a court of India and not by proceedings in execution. Furthermore, the execution of the foreign decree under Section 44A of the Civil Code is also subject to the exception under Section 13 of the Civil Code, as discussed below.

Section 13 of the Civil Code, states that a foreign judgment is conclusive as to any matter directly adjudicated upon except:

 

  

where the judgment has not been pronounced by a court of competent jurisdiction;

 

  

where the judgment has not been given on the merits of the case;

 

  

where it appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognize the law of India in cases where such law is applicable;

 

  

where the proceedings in which the judgment was obtained were opposed to natural justice;

 

  

where the judgment has been obtained by fraud; or

 

  

where the judgment sustains a claim founded on a breach of any law in force in India.

The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with public policy in India. A party seeking to enforce a foreign judgment in India is required to obtain prior approval from the Reserve Bank of India under the Indian Foreign Exchange Management Act, 1999, to repatriate any amount recovered pursuant to such execution and such amount may be subject to tax in accordance with applicable laws. Any judgment in a foreign currency would be converted into Indian rupees on the date of judgment and not on the date of payment. We cannot predict whether a suit brought in a court in India will be disposed of in a timely manner.

 

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C. Organizational Structure

The following diagram illustrates our company’s organizational structure and the place of organization of each of our subsidiaries as of the date hereof. Unless otherwise indicated, each of our subsidiaries is wholly-owned, directly or indirectly, by WNS (Holdings) Limited. Directly owned subsidiaries of WNS are represented by shaded boxes.

 

LOGO

Notes:

 

(1) 

All the shares except one share of WNS Business Consulting Services Private Limited are held by WNS North America Inc. The remaining one share is held by a nominee shareholder on behalf of WNS North America Inc. to satisfy the regulatory requirement to have a minimum of two shareholders.

(2)

WNS (Holdings) Limited has made a 99.99% capital contribution in WNS Global Services Netherlands Cooperatief U.A. (the“Co-op”). The remaining 0.01% capital contribution in theCo-op was made by WNS North America Inc. to satisfy the regulatory requirement to have a minimum of two members.

(3) 

WNS HealthHelp Philippines Inc. was incorporated on December 21, 2018.

(4)

WNS Global Services (UK) International Limited was incorporated on September 17, 2018.

(5) 

WNS Cares Foundation is a “not for profit organization” registered under the former Section 25 of the Indian Companies Act, 1956 (which has become Section 8 of the Indian Companies Act, 2013), formed for the purpose of promoting corporate social responsibilities. As a result, it is not considered for the purpose of preparing our consolidated financial statements.

(6)

WNS Global Services North Americas Inc. was incorporated on October 4, 2018.

(7) 

The full name of the branch is WNS Global Services (UK) Limited (Spółka Z Ograniczoną Odpowiedzialnością) Oddział W Polsce, Gdansk.

(8) 

WNS SA Domestic (Pty) Limited was incorporated on December 19, 2018.

(9) 

The full name of the branch is WNS Global Services (UK) Limited Londra Sucursala Bucuresti.

(10) 

WNS Global Services (UK) Limited, Sucursal En España branch was incorporated on October 25, 2018.

 

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D. Property, Plants and Equipment

As at March 31, 2019, we have an installed capacity of 32,764 production workstations, or seats, that can operate on an uninterrupted 24/7 basis and can be staffed on a three-shift per day basis. The majority of our properties are leased by us, as described in the table below, and most of our leases are renewable at our option, as described below. The following table describes each of our delivery centers and sales offices, including centers under construction, and sets forth our lease expiration dates.

 

Location  

Total Space

(square feet)

   

Total number of

work stations

   Lease Expiration Date   Extendable Until (1) 

India:

        

Mumbai

   364,627    3,074     

Godrej Plant 10

       February 15, 2021    N/A 

Godrej Plant 11

       February 15, 2021    N/A 

Godrej Plant 5

       February 15, 2021    N/A 

Raheja (SEZ), Airoli

       May 31, 2029    N/A 

Gurgaon

   299,171    3,172     

World Tech parkBlock-B2 9th Floor

       May 25, 2022    May 25, 2027 

World Tech parkBlock-B3 9th Floor

       May 14, 2022    May 14, 2027 

World TechPark-8th, 9th, 10th & part 11th Floor(2)

       April 27, 2019    April 27, 2024 

World Tech Park- Remaining part of 11th Floor

       November 2, 2019    April 27, 2024 

World Tech Park- Block A3, 11th floor(2)

       April 27, 2019    April 27, 2024 

World Tech Park- Block B3 10th Floor

       January 19, 2024    January 19,2029 

World Tech Park- Block B2 10th Floor

       June 19, 2024    June 19,2029 

Pune

   746,565    8,219     

Magarpatta(3)

       N/A    N/A 

Weikfield—Phase I

       February 14, 2023    N/A 

Weikfield—Phase II

       April 30, 2023    N/A 

Weikfield—Phase III

       June 14, 2023    N/A 

MantriEstate-2nd Floor

       May 27, 2020    N/A 

MantriEstate-4th Floor

       May 27, 2020    N/A 

Magarpatta (SEZ) – Level 5

       February 14, 2026    N/A 

Magarpatta (SEZ) – Level 6

       October 26, 2026    N/A 

Magarpatta (SEZ) – Level 7

       February 28, 2027    N/A 

Giga Space

       January 17, 2021    N/A 

Magarpatta – Tower 9

       February 28, 2029    N/A 

Pune Info city – 5th Floor

       May 30, 2022    N/A 

Pune Info city – 4th Floor

       June 14, 2023    N/A 

Pune Info city – 3rd Floor

       September 30, 2023    N/A 

Nashik

   88,356    1,378     

Shreeniketan

       June 30, 2023    N/A 

Vascon

       October 13, 2023    N/A 

Bangalore

   191,890    1,996     

RMZ Centennial – Ground Floor & Level 1

       June 14, 2021    June 14, 2025 

RMZ Centennial – Level 2 & 3

       October 31, 2021    October 31, 2025 

RMZ Centennial – Terrace

       July 31, 2021    July 31, 2025 

Chennai

   110,792    944     

RMZ Millenia—Ground & 1st Floor

       March 31, 2021    March 31, 2045 

DLF (SEZ)—Phase 1

       March 31, 2021    March 31, 2026 

DLF (SEZ)—Phase 2

       March 31, 2021    March 31, 2026 

Vishakhapatnam

   71,633    1,107     

MPS Plaza

       March 4, 2022    March 4, 2027 

ApeitaTech-hub

       March 31, 2026    March 31, 2029 

Tiruchirappalli

   217,800    N/A     

Plot of land(4)

       November 15, 2111    November 15, 2210 

Noida

   22,111    267     

Brookefield

       January 22, 2023    January 22, 2033 

Hyderabad

   N/A    12     

Growork, Kapil Towers(5)

       September 30, 2019    N/A 

 

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Sri Lanka:

   54,675    769     

Colombo (HNB) – Level 12 & 13

       July 31, 2028    N/A 

Colombo (Orion City)

       August 24, 2023    August 24, 2028 

UK:

   26,156    372     

Ipswich (Museum Street)

       May 23, 2028    N/A 

Cheadle (Hercules Office Park)

       July 21, 2020    N/A 

Piccadilly (Malta House)

       February 10, 2027    N/A 

Hayes (Hyde Park)

       February 28, 2021    N/A 

US:

   138,495    896     

NJ (Exchange Place)

       July 30, 2020    N/A 

SC (The State Building)

       July 31, 2020    July 31, 2023 

Bellevue (Sterling Plaza)- 5th & 6th Floor

       May 31, 2024    May 31, 2027 

Bellevue (Cascade Building)

       October 31, 2019    N/A 

Pittsburg (One Waterfront Place)

       January 31, 2022    January 31, 2027 

NY (East Greenbush)

       February 28, 2020    N/A 

Houston (Corporate Drive)

       December 31, 2020    December 31,2025 

Houston (Northchase Drive)

       March 31, 2026    March 31, 2036 

Turkey:

   N/A    20     

Istanbul (MeydanK Plaza)(5)

       April 30, 2020    N/A 

Switzerland:

   2,077    —      

Zurich (Bahnhofstrasse)(6)

       Not specified    N/A 

Romania:

   53,201    642     

Bucharest (West Gate)- 2nd & 3rd Floor

       January 19, 2023    January 19, 2026 

Constanta (Euro Construct)

       January 15, 2022    N/A 

Philippines:

        

Manila

   473,381    5,312     

Eastwood—10th floor

       June 30, 2021    June 30, 2031 

Eastwood—9th floor

       June 30, 2021    June 30, 2031 

Techno Plaza II

       April 30, 2026    N/A 

Zeta Tower—10th Floor

       May 14, 2024    May 14, 2029 

Exxa tower—15th Floor

       March 19, 2023    March 19, 2028 

Exxa Tower—16th Floor

       June 14, 2023    June 14, 2028 

Exxa Tower—17th Floor

       November 30, 2023    November 30, 2028 

Ilo Ilo

        

One Global Centre

       January 15, 2021    N/A 

Three Techno Place – 4th Floor

       March 15, 2022    N/A 

Two Techno Place

       April 30, 2024    April 30, 2029 

Alabang

        

Vector2- 9th & 10th floor

       February 28, 2022    N/A 

Capella- 15th & 16th Floor

       June 30, 2022    June 30, 2027 

FiliInvest Axis—21st Floor

       August 14, 2023    August 14, 2028 

FiliInvest Axis—22nd Floor

       November 30,2023    November 30,2028 

Costa Rica:

   12,592    200     

San Jose (Forum H)

       April 30, 2021    N/A 

United Arab Emirates:

   510    N/A     

Dubai Airport Free Trade Zone

       November 22, 2020    N/A 

South Africa:

   285,747    3,546     

Cape Town

        

Knowledge Park

       March 31, 2025    March 31, 2030 

Claremont- Level 4

       June 30, 2022    June 30, 2026 

Claremont- Level 5

       June 30, 2022    June 30, 2026 

Bellavile

        

Ambition House- 4th Floor

       September 30, 2019    N/A 

Johannesburg

        

DownSouth Ridge Park

       August 31, 2021    August 31, 2026 

Port Elizabeth (COEGA)

       July 31, 2020    July 31, 2025 

Durban

        

Hippopark Avenue - Section #1 & 2

       May 30, 2020    N/A 

Grid Eye

       June 30, 2021    June 30, 2026 

Poland:

   23,460    264     

Gdynia (Luzycka Office Park)- Bldg B,C & D

       August 31, 2022    N/A 

China:

   42,538    445     

Guangzhou (Zhongshan Street) – 30th Floor(2)

       April 30, 2019    N/A 

Dalian (Dalian Software Park) – Bldg 22

       May 15, 2020    N/A 

Beijing (YongAnDongLi) – 5th Floor

       August 31, 2019    August 31, 2021 

Shanghai (Huangu PL)(2)

       April 30, 2019    N/A 

Australia:

   1,216    N/A     

Sydney (Berry Street)

       March 27, 2023    N/A 

Spain

   8,384    129     

4A, Mira II, Balear – 1st Floor

       July 17, 2020    N/A 

5A, Mira II, Balear – 1st Floor

       July 31, 2020    N/A 

6A, Mira II, Balear – 1st Floor

       July 2, 2020    N/A 

7A, Mira II, Balear – 1st Floor

       December 31, 2019    N/A 

Notes:

N/A means not applicable.

 

(1) 

Reflects the expiration date if the applicable extension option is exercised.

(2) 

We are in the process of renewing the lease agreement and expect the lease renewal to be finalized by May 2019.

(3) 

Property owned by our subsidiary, WNS Global Services Private Limited.

(4) 

This is a SEZ plot in the ELCOT Navalpattu IT/ITES SEZ Park. We have submitted an application to the relevant authority for surrendering this plot of land and we are awaiting a reply to our application.

(5) 

The property is leased based on number of work stations.

(6) 

The lease may be terminated by the lessee or the lessor with three months’ notice.

Our delivery centers are equipped with fiber optic connectivity and have backups to their power supply designed to achieve uninterrupted operations. In fiscal 2020, we intend to establish additional delivery centers, as well as continue to streamline our operations by further consolidating production capacities in our delivery centers.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

 

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion on the financial condition and results of operations of our company should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. Some of the statements in the following discussion contain forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including, but not limited to, those described below and elsewhere in this annual report, particularly in the risk factors described in “Part I — Item 3 Key Information — D. Risk Factors.”

Overview

We are a leading global provider of BPM services, offering comprehensive data, voice, analytical and business transformation services with a blended onshore, near shore and offshore delivery model. We transfer the business processes of our clients to our delivery centers, located in China, Costa Rica, India, the Philippines, Poland, Romania, South Africa, Sri Lanka, Spain, Turkey, the UK, and the US, with a view to offer cost savings, operational flexibility, improved quality and actionable insights to our clients. We seek to help our clients “transform” their businesses by identifying business and process optimization opportunities through technology-enabled solutions, improvements to their processes, global delivery capabilities, analytics and an understanding of their business.

We win outsourcing engagements from our clients based on our domain knowledge of their business, our experience in managing the specific processes they seek to outsource and our customer-centric approach. Our company is organized into vertical business units in order to provide more specialized focus on each of the industries that we target, to more effectively manage our sales and marketing process and to developin-depth domain knowledge. The major industry verticals we currently target are the insurance; diversified businesses including manufacturing, retail, CPG, media and entertainment, and telecom; travel and leisure; healthcare; utilities; shipping and logistics; consulting and professional services; and banking and financial services industries.

Our portfolio of services includes vertical-specific processes that are tailored to address our clients’ specific business and industry practices. In addition, we offer a set of shared services that are common across multiple industries, including customer interaction services, finance and accounting, research and analytics, technology services, legal services, and human resources outsourcing.

Although we typically enter into long-term contractual arrangements with our clients, these contracts can usually be terminated with or without cause by our clients and often with short notice periods. Nevertheless, our client relationships tend to be long-term in nature given the scale and complexity of the services we provide coupled with risks and costs associated with switching processesin-house or to other service providers. We structure each contract to meet our clients’ specific business requirements and our target rate of return over the life of the contract. In addition, since the sales cycle for offshore business process management is long and complex, it is often difficult to predict the timing of new client engagements. As a result, we may experience fluctuations in growth rates and profitability from quarter to quarter, depending on the timing and nature of new contracts. Our operating results may also differ significantly from quarter to quarter due to seasonal changes in the operations of our clients. For example, our clients in the travel and leisure industry typically experience seasonal changes in their operations in connection with the US summer holiday season, as well as episodic factors such as adverse weather conditions. Our focus, however, is on deepening our client relationships and maximizing shareholder value over the life of a client’s relationship with us.

The following table represents our revenue for the periods indicated:

 

   Year ended March 31, 
   2019   2018   2017 
   (US dollars in millions) 

Revenue

  $809.1   $758.0   $602.5 

Our revenue is generated primarily from providing business process management services. We have two reportable segments for financial statement reporting purposes — WNS Global BPM and WNS Auto Claims BPM. In our WNS Auto Claims BPM segment, we provide both “fault” and“non-fault” repairs. For “fault” repairs, we provide claims handling and repair management services, where we arrange for automobile repairs through a network of third party repair centers. In our repair management services, where we act as the principal in our dealings with the third party repair centers and our clients, the amounts which we invoice to our clients for payments made by us to third party repair centers are reported as revenue. Where we are not the principal in providing the services, we record revenue from repair services net of repair cost. See Note 2.s of the consolidated financial statements included elsewhere in this annual report. Since we wholly subcontract the repairs to the repair centers, we evaluate the financial performance of our “fault” repair business based on revenue less repair payments to third party repair centers, which is anon-GAAP financial measure. We believe that revenue less repair payments (anon-GAAP financial measure) for “fault” repairs reflects more accurately the value addition of the business process management services that we directly provide to our clients. Management believes that revenue less repair payments(non-GAAP) may be useful to investors as a more accurate reflection of our performance and operational results.

 

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For our“non-fault” repairs business, we generally provide a consolidated suite of accident management services including credit hire and credit repair, and we believe that measurement of such business on a basis that includes repair payments in revenue is appropriate. Revenue including repair payments is therefore used as a primary measure to allocate resources and measure operating performance for accident management services provided in our“non-fault” repairs business. Our“non-fault” repairs business where we provide accident management services accounts for a relatively small portion of our revenue for our WNS Auto Claims BPM segment.

Revenue less repair payments is anon-GAAP financial measure which is calculated as (a) revenue less (b) in our auto claims business, payments to repair centers for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients. Thisnon-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Our revenue less repair payments(non-GAAP) may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation.

The following table reconciles our revenue to revenue less repair payments (anon-GAAP financial measure) for the periods indicated:

 

   Year ended March 31, 
   2019   2018   2017 
   (US dollars in millions) 

Revenue

  $809.1   $758.0   $602.5 

Less: Payments to repair centers(1)

   15.2    17.0    24.1 
  

 

 

   

 

 

   

 

 

 

Revenue less repair payments(non-GAAP)

  $794.0   $741.0   $578.4 
  

 

 

   

 

 

   

 

 

 

Note:

 

(1)

Consists of payments to repair centers in our auto claims business for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients.

The following table sets forth our constant currency revenue less repair payments (anon-GAAP financial measure) for the periods indicated. Constant currency revenue less repair payments is anon-GAAP financial measure. We present constant currency revenue less repair payments(non-GAAP) so that revenue less repair payments(non-GAAP) may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitatingperiod-to-period comparisons of business performance. Constant currency revenue less repair payments(non-GAAP) is presented by recalculating prior periods’ revenue less repair payments(non-GAAP) denominated in currencies other than in US dollars using the foreign exchange rate used for the latest period, without taking into account the impact of hedging gains/losses. Ournon-US dollar denominated revenue includes, but is not limited to, revenue denominated in pound sterling, Australian dollars, South African rand and Euro. Management believes constant currency revenue less repair payments(non-GAAP) may be useful to investors in evaluating the underlying operating performance of our company. Thisnon-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Our constant currency revenue less repair payments(non-GAAP) may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation.

 

   Year ended March 31, 
   2019   2018   2017 
   (US dollars in millions) 

Revenue less repair payments(non-GAAP)

  $794.0   $741.0   $578.4 

Exchange rate impact

   (0.1   (18.2   (4.7
  

 

 

   

 

 

   

 

 

 

Constant currency revenue less repair payments(non-GAAP)

  $793.9   $722.8   $573.7 
  

 

 

   

 

 

   

 

 

 

 

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Global Economic Conditions

Global economic conditions continue to show signs of turbulence. Although some key indicators of sustainable economic growth show signs of improvement, volatility in the domestic politics of major markets may lead to changes in the institutional framework of the international economy.

In June 2016, a majority of voters in the UK elected to withdraw from the EU in a national referendum, commonly referred to as “Brexit.” The referendum was advisory, and the terms of any withdrawal are subject to atwo-year negotiation period (unless an extension is agreed), which commenced on March 29, 2017. The withdrawal of the UK from the EU was set to take place on March 29, 2019, however this date has been postponed to October 31, 2019 and ongoing uncertainty remains as to what kind of post-Brexit agreement between the UK and the EU, if any, may be approved by the UK parliament. There is the possibility that the UK will end up leaving the EU without having reached final agreement with the EU on the terms of its withdrawal. The referendum, and now the risk of a “no deal” between the UK and the EU, has created significant uncertainty regarding the future relationship between the UK and the EU, including with respect to the laws and regulations that will apply as the UK determines whichEU-derived laws to replace or replicate in the event of a withdrawal. Uncertainty regarding the terms of Brexit, and its eventual effects once implemented, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations.

In the US, economic growth is tempered by continuing concerns over the failure to achieve a long-term solution to the issues of government spending, the increasing US national debt, and their negative impact on the US economy as well as concerns over potential increases in the cost of borrowing and reduction in availability of credit as the US Federal Reserve has, until recently, continued to raise interest rates. The policies that may be pursued by the presidential administration in the US have added further uncertainty to the global economy, and the prevailing political climate may lead to more protectionist policies. Further, there is uncertainty regarding the impact of the escalating “trade war” between China and the United States on the global economy. Globally, countries may require additional financial support, sovereign credit ratings may continue to decline, and there may be default on sovereign debt obligations of certain countries. Any of these may increase the cost of borrowing and cause credit to become more limited, which could have a material adverse effect on our business, financial condition and results of operations.

Further, there continue to be signs of economic weakness, such as relatively high levels of unemployment, in major markets including Europe. Continuing conflicts and instability in various regions around the world may lead to additional acts of terrorism, and armed conflict around the world. The ongoing refugee crisis in Europe, North Africa and the Middle East may contribute to political and economic instability in those regions. A resurgence of isolationist and/or protectionist policies in North America, Europe and Asia may curtail global economic growth. China continues to have room for economic growth, but such growth opportunities remain subject to political developments, particularly with respect to aUS-China trade deal, and uncertainties in the regulatory framework of the economy.

These economic andgeo-political conditions may affect our business in a number of ways. The general level of economic activity, such as decreases in business and consumer spending, could result in a decrease in demand for our services, thus reducing our revenue. The cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Continued turbulence or uncertainty in the European, US, Asian and international financial markets and economies, and the political climate in the US and the UK, may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our clients. If these market conditions continue or worsen, they may limit our ability to access financing or increase our cost of financing to meet liquidity needs, and affect the ability of our clients to use credit to purchase our services or to make timely payments to us, resulting in adverse effects on our financial condition and results of operations.

Furthermore, a weakening of the rate of exchange for the pound sterling, the US dollar or, to a lesser extent, the Australian dollar and the Euro (in which our revenue is principally denominated) against the Indian rupee, or to a lesser extent, the Philippine Peso and the South African rand (in which a significant portion of our costs are denominated) would also adversely affect our results. Fluctuations between the pound sterling, the Indian rupee, the Australian dollar, the Euro, the Philippine Peso, or the South African rand, on the one hand, and the US dollar, on the other hand, also expose us to translation risk when transactions denominated in these currencies are translated into US dollars, our reporting currency. The exchange rates between each of the pound sterling, the Indian rupee, the Australian dollar, the Euro, the Philippine Peso, and South African rand, on the one hand, and the US dollar, on the other hand, have changed substantially in recent years and may fluctuate substantially in the future. For example, the pound sterling depreciated against the US dollar by an average of 0.9% in fiscal 2019, and appreciated by an average of 1.4% in fiscal 2018. The Indian rupee depreciated against the US dollar by an average 8.5% in fiscal 2019, and appreciated by an average of 3.9% in fiscal 2018. The Philippine Peso depreciated against the US dollar by an average of 4.2% in fiscal 2019, and by an average of 5.4% in fiscal 2018. The South African rand depreciated against the US dollar by an average of 6.0% in fiscal 2019, and appreciated by an average of 7.8% in fiscal 2018. The Australian dollar depreciated against the US dollar by an average of 5.8% in fiscal 2019, and appreciated by an average of 2.8% in fiscal 2018. The Euro depreciated against the US dollar by an average of 1.0% in fiscal 2019, and appreciated by an average of 6.7% in fiscal 2018. The depreciation of the pound sterling the Euro, and the Australian dollar against the US dollar in fiscal 2019 and the appreciation of Indian rupee and the South African rand against the US dollar in fiscal 2018, negatively impacted our results of operations in those years, whereas the depreciation of the Indian rupee and the South African rand against the US dollar in fiscal 2019, the appreciation of the pound sterling, the Euro and the Australian dollar against the US dollar in fiscal 2018 and the depreciation of the Philippine Peso against the US dollar in fiscal 2019 and 2018 positively impacted our results of operations in those years.

Uncertainty about current global economic conditions could also continue to increase the volatility of our share price. We cannot predict the timing or duration of an economic slowdown or the timing or strength of a subsequent economic recovery generally or in our targeted industries, including the travel and leisure and insurance industries. If macroeconomic conditions worsen or current global economic conditions continue for a prolonged period of time, we are not able to predict the impact that such worsening conditions will have on our targeted industries in general, and our results of operations specifically.

 

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Our History and Milestones

We began operations as anin-house unit of British Airways in 1996 and started focusing on providing business process management services to third parties in fiscal 2003. The following are the key milestones in our operating history since Warburg Pincus acquired a controlling stake in our company from British Airways in May 2002 and inducted a new senior management team:

 

  

In fiscal 2003, we acquired Town and Country Assistance Limited (which we subsequently rebranded as WNS Assistance and which is part of WNS Auto Claims BPM, our reportable segment for financial statement purposes), aUK-based automobile claims handling company, thereby extending our service portfolio beyond the travel and leisure industry to include insurance-based automobile claims processing.

 

  

In fiscal 2003 and 2004, we invested in our infrastructure to expand our service portfolio from data-oriented processing to include complex voice and blended data/voice service capabilities, and commenced offering comprehensive processes in the travel and leisure, banking and financial services and insurance industries.

 

  

In fiscal 2004, we acquired the health claims management business of Greensnow Inc.

 

  

In fiscal 2005, we opened facilities in Gurgaon, India and Colombo, Sri Lanka, thereby expanding our operating footprints across India and Sri Lanka.

 

  

In fiscal 2006, we acquired Trinity Partners Inc. (which we subsequently merged into our subsidiary, WNS North America Inc.), a provider of business process management services to financial institutions, focusing on mortgage banking.

 

  

In July 2006, we completed our initial public offering, whereupon our ADSs became listed on the NYSE under the symbol “WNS.”

 

  

In fiscal 2007, we expanded our facilities in Gurgaon, Mumbai and Pune, India, and we also acquired the fare audit services business of PRG Airlines and the financial accounting business of GHS.

 

  

In May 2007, we acquired Marketics, a provider of offshore analytics services.

 

  

In June 2007, we acquired Flovate, a company engaged in the development and maintenance of software products and solutions, which we subsequently renamed as WNS Workflow Technologies Limited.

 

  

In July 2007, we completed the transfer of our delivery center in Sri Lanka to Aviva Global.

 

  

In January 2008, we launched a133-seat facility in Bucharest, Romania. Also, in March 2008, we entered into a joint venture with ACS, a provider in BPM services and customer care in the Philippines, to form WNS Philippines Inc.

 

  

In April 2008, we opened a facility in Manila, the Philippines, and we also acquired Chang Limited, an auto insurance claims processing services provider in the UK, through its wholly-owned subsidiary, AHA (formerly known as Call24-7).

 

  

In June 2008, we acquired BizAps, a provider of SAP® solutions to optimize the enterprise resource planning functionality for our finance and accounting processes.

 

  

In July 2008, we acquired from Aviva all the shares of Aviva Global, which we renamed to WNS Global Singapore, and resumed ownership of the delivery center in Sri Lanka that was transferred to Aviva Global in July 2007, as mentioned above. In connection with our acquisition of Aviva Global, we also entered into the 2008 Aviva master services agreement (as varied by the variation agreement entered into in March 2009) with Aviva MS, pursuant to which we provided BPM services to Aviva’s UK business and Aviva’s Irish subsidiary, Hibernian Aviva Direct Limited, and certain of its affiliates. We replaced this 2008 Aviva master services agreement with the Aviva master services agreement in September 2014.

 

  

In November 2009, we opened a facility in San Jose, Costa Rica.

 

  

In January 2010, we moved from our existing facility to a new and expanded facility in Manila, the Philippines.

 

  

In October 2010, we moved from our existing facility in Marple to Manchester, UK and expanded our facility in Manila, the Philippines.

 

  

In November 2010, we expanded our sales office in London, UK.

 

  

In March 2011, we expanded our facility in Bucharest, Romania.

 

  

In November 2011, we acquired ACS’s shareholding in WNS Philippines Inc., which became our wholly-owned subsidiary.

 

  

In fiscal 2012, we expanded our facilities in Mumbai, Pune, Gurgaon, Chennai, India, the Philippines, Costa Rica and Romania.

 

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In February 2012, we completed afollow-on public offering of ADSs and raised approximately $50.0 million to fund our growth initiatives and enhance delivery capability.

 

  

In June 2012, we acquired Fusion, a provider of a range of management services, including contact center, customer care and business continuity services, to both South African and international clients, which we subsequently renamed as WNS Global Services SA (Pty) Ltd. We also opened a facility in Vizag, India.

 

  

In December 2012, we opened a facility in Gydnia, Poland.

 

  

In fiscal 2014, we added new facilities in Guangzhou, China; Colombo, Sri Lanka; and Mumbai, India.

 

  

In fiscal 2015, we added new facilities in Dalian, China; Cape Town, South Africa; and Pennsylvania, United States.

 

  

In fiscal 2016, we added new facilities in Durban and Port Elizabeth, South Africa; and Iloilo, the Philippines.

 

  

In June 2016, we acquired Value Edge, a leading provider of commercial research and analytics services to clients in the pharmaceutical and biopharmaceutical industries for a total consideration of $18.3 million, including adjustments for working capital of $0.8 million and contingent consideration of $5.1 million (which is held in escrow), subject to compliance with certain conditions, which is payable over three years. We funded this acquisition with cash on hand. Value Edge had 129 employees as at March 31, 2017 in India, the United States and Europe.

 

  

In January 2017, we acquired Denali, a leading provider of strategic procurement BPM services for a total consideration of $38.7 million, including contingent consideration of up to $6.2 million, dependent on the achievement of revenue targets over a period of three years and deferred consideration of $0.5 million payable in fiscal 2018, including adjustments for working capital. We funded this acquisition primarily with the proceeds from our $34.0 million secured three year term loan facility described under “—Liquidity and Capital Resources” below. Denali had 269 employees as at March 31, 2017 in the United States, Turkey, China and India.

 

  

In March 2017, we acquired HealthHelp, an industry leader in care management, for a total consideration of $68.9 million, including contingent consideration of up to $8.5 million, payable over a period of two years and dependent on the achievement of revenue targets and the continuation of a specified client contract and working capital adjustments. We funded this acquisition primarily with the proceeds from our $84.0 million secured five year term loan facility described under “—Liquidity and Capital Resources” below. HealthHelp had 406 employees as at March 31, 2017 in the United States.

 

  

In fiscal 2017, we added new facilities in Durban and Centurion, South Africa. We also added new facilities in Pune and Noida, India; Bellevue, Pittsburgh, New York City and Houston, USA; and Istanbul, Turkey. We also expanded our facility in Gurgaon, India.

 

  

In fiscal 2018, we added new facilities in the Philippines; Romania; Pune and Vishakhapatnam, India and Shanghai, China. We also expanded our facilities in Nashik and Pune, India and Guangzhou, China.

 

  

In fiscal 2019, we added new facilities in the Philippines; Spain and Vizag, India. We also expanded our facilities in Bangalore, Gurgaon, Nashik and Pune, India.

 

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Revenue

We generate revenue by providing business process management services to our clients. The following table shows our revenue and revenue less repair payments (anon-GAAP financial measure) for the periods indicated:

 

   Year ended March 31,   Change 
   2019   2018   $   % 
   (US dollars in millions)     

Revenue

  $809.1   $758.0    51.2    6.8

Revenue less repair payments(non-GAAP)

  $794.0   $741.0    53.0    7.1

We have a large client base diversified across industries and geographies. Our client base grew from 386 clients as at March 31, 2018 to 403 clients as at March 31, 2019 (with each client generating more than $0.01 million in revenue in respective fiscal).

Our revenue is characterized by client, industry, service type, geographic and contract type diversity, as the analysis below indicates.

Revenue by Top Clients

For fiscal 2019, 2018 and 2017, the percentage of revenue and revenue less repair payments(non-GAAP) that we derived from our largest clients were in the proportions set forth in the following table:

 

   Revenue  Revenue less repair payments
(non-GAAP)
 
   Year ended March 31,  Year ended March 31, 
   2019  2018  2017  2019  2018  2017 

Top client

   6.9  6.8  9.0  7.1  7.0  9.4

Top five clients

   27.1  29.4  32.1  27.6  30.1  33.5

Top ten clients

   43.9  43.0  43.6  44.8  43.9  45.4

Top twenty clients

   56.8  55.1  55.7  57.9  56.4  58.0

 

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Revenue by Industry

For financial statement reporting purposes, we aggregate our operating segments, except for the WNS Auto Claims BPM (which we market under the WNS Assistance brand) as it does not meet the aggregation criteria under IFRS. See “— Results by Reportable Segment.”

We organize our company into the following industry-focused business units to provide more specialized focus on each of these industries: insurance; diversified businesses including manufacturing, retail, CPG, media and entertainment, and telecom; travel and leisure; healthcare; utilities; shipping and logistics; consulting and professional services and banking and financial services.

For fiscal 2019, 2018 and 2017, our revenue and revenue less repair payments(non-GAAP) were diversified across our industry-focused business units in the proportions set forth in the following table:

 

   As a percentage of revenue  As a percentage of revenue less
repair payments (non-GAAP)
 
   Year ended March 31,  Year ended March 31, 

Business Unit

  2019  2018  2017  2019  2018  2017 

Insurance

   26.6  25.7  29.6  25.2  24.0  26.6

Diversified businesses including manufacturing, retail, CPG, media and entertainment, and telecom

   17.6  18.1  17.5  17.9  18.5  18.2

Travel and leisure

   17.4  18.7  21.3  17.8  19.2  22.1

Healthcare

   15.3  14.7  6.8  15.6  15.1  7.1

Utilities

   7.0  8.7  9.3  7.1  8.9  9.7

Shipping and logistics

   6.2  4.5  4.3  6.3  4.6  4.4

Consulting and professional services

   5.5  5.2  6.9  5.6  5.4  7.2

Banking and financial services

   4.5  4.4  4.4  4.6  4.5  4.6
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   100.0  100.0  100.0  100.0  100.0  100.0
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Certain services that we provide to our clients are subject to the seasonality of our clients’ business. Accordingly, we typically see an increase in transaction related services within the travel and leisure industry during holiday seasons, such as during the US summer holidays (our fiscal second quarter); an increase in business in the insurance industry during the beginning and end of the fiscal year (our fiscal first and last quarters) and during the US peak winter season (our fiscal third quarter); and an increase in business in the consumer product industry during the US festive season towards the end of the calendar year when new product launches and campaigns typically happen (our fiscal third quarter).

 

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Revenue by Service Type

For fiscal 2019, 2018 and 2017, our revenue and revenue less repair payments(non-GAAP) were diversified across service types in the proportions set forth in the following table:

 

   As a percentage of revenue  As a percentage of revenue less
repair payments (non-GAAP)
 
   Year ended March 31,  Year ended March 31, 

Service Type

  2019  2018  2017  2019  2018  2017 

Industry-specific

   38.0  34.1  28.2  38.7  34.8  29.4

Customer interaction services(1)

   22.6  25.5  27.9  23.1  26.1  29.1

Finance and accounting

   21.7  21.4  20.6  22.1  21.9  21.5

Research and analytics

   11.3  11.8  13.3  11.6  12.1  13.8

Auto claims

   4.3  4.7  7.4  2.5  2.5  3.6

Others(2)

   2.1  2.5  2.6  2.1  2.6  2.7
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   100.0  100.0  100.0  100.0  100.0  100.0
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Notes:

 

(1)

We have renamed our “contact center” horizontal unit as “customer interaction services” with effect from April 1, 2016, as we have expanded the services offered in that horizontal unit to include more value-added services beyond the customary contact center services.

(2)

Others includes revenue from technology services, legal services and human resources outsourcing services.

Since the fourth quarter of fiscal 2017, we have experienced a decrease in volume of and loss of business from certain clients of our traditional repair services in our WNS Auto Claims BPM segment. While we expect our business in our WNS Auto Claims BPM segment to improve in fiscal 2020, there’s no assurance that it will improve to our expected level of performance or at all.

 

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Revenue by Geography

For fiscal 2019, 2018 and 2017, our revenue and revenue less repair payments(non-GAAP) were derived from the following geographies (based on the location of our clients) in the proportions set forth below in the following table:

 

   As a percentage of revenue  As a percentage of revenue less
repair payments (non-GAAP)
 
   Year ended March 31,  Year ended March 31, 

Geography

  2019  2018  2017  2019  2018  2017 

North America (primarily the US)

   41.5  40.7  32.6  42.3  41.6  33.9

UK

   31.4  34.2  41.3  30.1  32.6  38.8

Australia

   9.5  8.8  8.1  9.7  9.0  8.5

Europe (excluding the UK)

   7.0  6.2  6.2  7.1  6.4  6.5

South Africa

   4.8  5.7  7.1  4.9  5.8  7.4

Rest of world

   5.8  4.5  4.7  5.9  4.6  4.9
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   100.0  100.0  100.0  100.0  100.0  100.0
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Our business in South Africa is evaluated for compliance with the South African government’s BBBEE legislation against a BBBEE scorecard, which has different levels based on various criteria. South African government grants are available to businesses that meet specified conditions, including achieving a specified minimum BBBEE rating. A level one BBBEE rating has the most rigorous criteria. Additionally, many South African companies require their service providers to maintain a minimum BBBEE rating, and many of our South African client contracts contain clauses that allow our clients to terminate their contracts with us or impose specified penalties on us if we do not maintain a minimum BBBEE rating.

We have been conducting our domestic business (serving clients based in South Africa) and international business (serving clients based outside South Africa) in South Africa through our South Africa subsidiary, WNS Global Services SA (Pty) Limited. Our program developed for the purpose of meeting the criteria to achieve the requisite BBBEE rating in respect of WNS Global Services SA (Pty) Limited includes, among other measures, divesting some of our interests in such subsidiary to address the criterion relating to the percentage of ownership of an entity by “black people” (as defined under the applicable legislation). We achieved a level three rating in respect of WNS Global Services SA (Pty) Limited in our BBBEE verification audit in May 2018 which is valid until May 2019. Based on the results of an interim BBBEE audit, we expect that we will achieve the required rating in our next BBBEE verification audit in May 2019 which, if achieved, would be valid until May 2020. In December 2018, we established WNS SA Domestic (Pty) Ltd, a wholly owned subsidiary of WNS Global Services SA (Pty) Limited, for the purposes of conducting our domestic business in South Africa. As part of the plan to achieve a level two BBBEE rating in respect of this new subsidiary, our Board of Directors has approved the divestment of 51.0% of our interests in WNS SA Domestic (Pty) Ltd to black people in accordance with the objectives and requirements of the Codes of Good Practice on Black Economic Empowerment (“BEE Code”), which we plan to complete in fiscal 2020. We expect to undertake a BBBEE verification audit in respect of WNS SA Domestic (Pty) Ltd in May 2020. However, there is no assurance that we will successfully achieve the requisite BBEEE rating in respect of WNS SA Domestic (Pty) Ltd or maintain our existing BBBEE rating with respect to WNS Global Services SA (Pty) Limited in our next annual BBBEE verification audit or thereafter. If we fail to achieve the required minimum BBBEE rating, we will cease to be eligible for government grants, will be disqualified from bidding for certain business, and certain of our clients may terminate their contracts with us or impose penalties on us. These outcomes would have an adverse effect on our business, results of operations, financial condition and cash flows.

 

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Revenue by Location of Delivery Centers

For fiscal 2019, 2018 and 2017, our revenue and revenue less repair payments(non-GAAP) were derived from the following geographies (based on the location of our delivery centers) in the proportions set forth in the following table:

 

   As a percentage of revenue  As a percentage of revenue less
repair payments (non-GAAP)
 
   Year ended March 31,  Year ended March 31, 

Location of Delivery Center

  2019  2018  2017  2019  2018  2017 

India

   51.8  51.6  58.5  52.8  52.8  60.9

United States

   14.4  14.9  3.9  14.7  15.2  4.1

Philippines

   13.7  11.5  10.7  14.0  11.8  11.2

South Africa

   8.3  9.9  11.1  8.5  10.1  11.6

UK(1)

   5.5  5.7  8.7  3.7  3.6  4.9

Romania

   1.7  1.6  1.8  1.8  1.7  1.9

Sri Lanka

   1.6  1.9  2.5  1.6  1.9  2.6

China

   1.5  1.3  1.3  1.5  1.4  1.4

Poland

   0.8  1.0  0.9  0.8  1.0  0.9

Costa Rica

   0.4  0.5  0.6  0.4  0.5  0.7

Spain

   0.3  —     —     0.3  —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   100.0  100.0  100.0  100.0  100.0  100.0
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Note:

 

(1)

Includes revenue and revenue less repair payments(non-GAAP) derived from Turkey, which was not significant.

 

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Our Contracts

We provide our services under contracts with our clients, which typically range from three to five years, with some being rolling contracts with no end dates. Typically, these contracts can be terminated by our clients with or without cause and with short notice periods. However, we tend to have long-term relationships with our clients given the complex and comprehensive nature of the business processes executed by us, coupled with the switching costs and risks associated with relocating these processesin-house or to other service providers.

Each client contract has different terms and conditions based on the scope of services to be delivered and the requirements of that client. Occasionally, we may incur significant costs on certain contracts in the early stages of implementation, with the expectation that these costs will be recouped over the life of the contract to achieve our targeted returns. Each client contract has corresponding service level agreements that define certain operational metrics based on which our performance is measured. Some of our contracts specify penalties or damages payable by us in the event of failure to meet certain key service level standards within an agreed upon time frame.

When we are engaged by a client, we typically transfer that client’s processes to our delivery centers over a six month period. This transfer process is subject to a number of potential delays. Therefore, we may not recognize significant revenue until several months after commencing a client engagement.

In the WNS Global BPM segment, we charge for our services based on the following pricing models:

 

 1)

per full-time-equivalent arrangements, which typically involve billings based on the number of full-time employees (or equivalent) deployed on the execution of the business process outsourced;

 

 2)

per transaction arrangements, which typically involve billings based on the number of transactions processed (such as the number ofe-mail responses, or airline coupons or insurance claims processed);

 

 3)

subscription arrangements, which typically involve billings based on per member per month, based on contractually agreed rates;

 

 4)

fixed-price arrangements, which typically involve billings based on achievements ofpre-defined deliverables or milestones;

 

 5)

outcome-based arrangements, which typically involve billings based on the business result achieved by our clients through our service efforts (such as measured based on a reduction in days sales outstanding, improvement in working capital, increase in collections or a reduction in operating expenses); or

 

 6)

other pricing arrangements, including cost-plus arrangements, which typically involve billing the contractually agreed direct and indirect costs and a fee based on the number of employees deployed under the arrangement.

Apart from the above-mentioned pricing methods, a small portion of our revenue is comprised of reimbursements ofout-of-pocket expenses incurred by us in providing services to our clients.

Outcome-based arrangements are examples ofnon-linear pricing models where revenues from platforms and solutions and the services we provide are linked to usage or savings by clients rather than the efforts deployed to provide these services. We intend to focus on increasing our service offerings that are based onnon-linear pricing models that allow us to price our services based on the value we deliver to our clients rather than the headcount deployed to deliver the services to them. We believe thatnon-linear pricing models help us to grow our revenue without increasing our headcount. Accordingly, we expect increased use ofnon-linear pricing models to result in higher revenue per employee and improved margins.Non-linear revenues may be subject to short term pressure on margins, however, as initiatives in developing the products and services take time to deliver. Moreover, in outcome-based arrangements, we bear the risk of failure to achieve clients’ business objectives in connection with these projects. For more information, see “Part I — Item 3. Key Information — D. Risk Factors — If our pricing structures do not accurately anticipate the cost and complexity of performing our work, our profitability may be negatively affected.”

In our WNS Auto Claims BPM segment, we earn revenue from claims handling and repair management services. For claims handling, we charge on a per claim basis or a fixed fee per vehicle over a contract period. For automobile repair management services, where we arrange for the repairs through a network of repair centers that we have established, we invoice the client for the amount of the repair. When we direct a vehicle to a specific repair center, we receive a referral fee from that repair center. We also provide a consolidated suite of services towards accident management including credit hire and credit repair for“non-fault” repairs business. Further, we also provide legal services relating to personal injury claims through our subsidiary WNS Legal Assistance LLP.

 

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Revenue by Contract Type

For fiscal 2019, 2018 and 2017, our revenue and revenue less repair payments(non-GAAP) were diversified by contract type in the proportions set forth in the following table:

 

   As a percentage of revenue  As a percentage of revenue less
repair payments (non-GAAP)
 
   Year ended March 31,  Year ended March 31, 
   2019  2018  2017  2019  2018  2017 

Full-time-equivalent

   64.6  62.5  71.8  65.8  64.0  74.8

Transaction

   17.0  18.7  17.7  15.4  16.8  14.2

Subscription(1)

   8.2  7.8  1.3  8.4  8.0  1.4

Fixed price

   5.3  5.2  4.5  5.4  5.4  4.7

Others(1)

   5.0  5.8  4.6  5.1  5.9  4.8
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

   100.0  100.0  100.0  100.0  100.0  100.0
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Note:

 

1)

Commencing fiscal 2018, we are disclosing our revenue and revenue less repair payments(non-GAAP) derived from subscription arrangements separately given the increase in such revenue and including our revenue and revenue less repair payments(non-GAAP) derived from outcome-based arrangements under “Others” given the decrease in such revenue. We have presented a similar breakdown of our revenue and revenue less repair payments(non-GAAP) for fiscal 2017 in the table above for comparative purposes. Previously, we included revenue and revenue less repair payments(non-GAAP) from subscription arrangements under “Others” and disclosed revenue and revenue less repair payments(non-GAAP) derived from outcome-based arrangements separately.

In September 2014, we continued our thenten-year relationship with Aviva MS by entering into the Aviva master services agreement with Aviva MS for a term of eight years, effective April 1, 2014 and expiring on March 31, 2022. The Aviva master services agreement replaced our 2008 Aviva master services agreement with the client that was due to expire in November 2016. The agreement continues to provide us with the exclusive right to provide the client with the services we currently provide, and in the same geographic regions, subject to the rights and obligations of the Aviva group under their existing contracts with other providers of similar services. Aviva MS has agreed, and further agreed to procure other members of the Aviva group, not to renew or extend such existing contracts unless they are contractually bound to do so. We are also regarded as a preferred supplier with respect to any new services or any new geographic regions in which the client seeks BPM services, subject to our meeting certain conditions of the client’s supplier tender process.

Our clients customarily provide one to three month rolling forecasts of their service requirements. Our contracts with our clients do not generally provide for a committed minimum volume of business or committed amounts of revenue, with the exception of the Aviva master services agreement. The Aviva master services agreement required Aviva MS to provide us with a minimum volume of business until October 31, 2016 (the last complete month prior to the expiration of the 2008 Aviva master services agreement). The minimum volume commitment is calculated as 3,000 billable full time employees, where one billable full time employee is the equivalent of a production employee engaged by us to perform our obligations under the contract for one working day at least nine hours for 250 days a year. The revised contract is priced on an FTE pricing model for certain types of outsourced processes and anon-FTE based pricing model for other types of outsourced processes. In the event the mean average monthly volume of business in any rolling three-month period does not reach the minimum volume commitment, Aviva MS has agreed to pay us a minimum commitment fee as liquidated damages. Notwithstanding the minimum volume commitment, there are termination at will provisions which permit Aviva MS to terminate the Aviva master services agreement without cause, with six months’ notice upon payment of a termination fee. The annual minimum volume commitment under this contract was not met, due to decreased volumes on the client’s end, in fiscal 2017 (until October 31, 2016), 2016 and 2015, and Aviva MS paid us the minimum commitment fee for fiscal 2017 (until October 31, 2016), 2016 and 2015.

The revised pricing arrangements under the Aviva master services agreement provide for productivity-related discounts associated with FTE andnon-FTE models. Some of these discounts are mandatorily applied through the term of the contract. Pricing also varies based on degree of complexity of the outsourced processes. The revised pricing arrangements under the Aviva master services agreement, including the termination of the minimum commitment fee on October 31, 2016, resulted in lower revenue for fiscal 2017 as compared to fiscal 2016 and 2015. Aviva MS accounted for 6.2%, 6.8% and 9.0% of our revenue and 6.3%, 7.0% and 9.4% of our revenue less repair payments(non-GAAP) in fiscal 2019, 2018 and 2017, respectively.

 

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Expenses

The majority of our expenses consist of cost of revenue and operating expenses. The key components of our cost of revenue are employee costs, facilities costs, payments to repair centers, depreciation, travel expenses, and legal and professional costs. Our operating expenses include selling and marketing expenses, general and administrative expenses, foreign exchange gains and losses and amortization of intangible assets. Ournon-operating expenses include finance expenses as well as other expenses recorded under “other income, net.”

Cost of Revenue

Employee costs represent the largest component of cost of revenue. In addition to employee salaries, employee costs include costs related to recruitment, training and retention, and share-based compensation expense. Historically, our employee costs have increased primarily due to the increases in number of employees to support our growth and, to a lesser extent, to recruit, train and retain employees. Salary levels in India and our ability to efficiently manage and retain our employees significantly influence our cost of revenue. See “Part I — Item 4. Information on the Company — B. Business Overview — Human Capital.” Regulatory developments may, however, result in wage increases in India and increase our cost of revenue. For example, the Government of India has proposed the Code on Wages Bill, 2017, which, if passed, would replace four central labor laws, including the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976, and would introduce a national minimum wage for all employees to be administered by the central government. The Indian Supreme Court recently clarified that certain allowances paid by an employer to an employee should be included in the definition of “basic wage” for the purposes of computing employee provident fund contributions. As a result, our wage costs in India may increase. See “Part I — Item. 3. Key Information. — D. Risk Factors — Risks Related to Our Business — Wage increases may prevent us from sustaining our competitive advantage and may reduce our profit margin.” We seek to mitigate these cost increases through improvements in employee productivity, employee retention and asset utilization.

Our WNS Auto Claims BPM segment includes repair management services, where we arrange for automobile repairs through a network of third party repair centers. This cost is primarily driven by the volume of accidents and the amount of the repair costs related to such accidents. It also includes incremental and direct costs incurred to contract with claimants by WNS Legal Assistance LLP.

Our facilities costs comprise lease rentals, utilities cost, facilities management and telecommunication network cost. Most of our leases for our facilities are long-term agreements and have escalation clauses which provide for increases in rent at periodic intervals. Most of these agreements have clauses that have fixed escalation of lease rentals.

We create capacity in our operational infrastructure ahead of anticipated demand as it takes six to nine months to build up a new site. Hence, our cost of revenue as a percentage of revenue may be higher during periods in which we carry such additional capacity.

Once we are engaged by a client in a new contract, we normally have a transition period to transfer the client’s processes to our delivery centers and accordingly incur costs related to such transfer.

Selling and Marketing Expenses

Our selling and marketing expenses comprise primarily employee costs for sales and marketing personnel, travel expenses, legal and professional fees, share-based compensation expense, brand building expenses and other general expenses relating to selling and marketing.

Selling and marketing expenses as a proportion of revenue was 5.5% in fiscal 2019 and 2018 and 5.4% for fiscal 2017. Selling and marketing expenses as a proportion of revenue less repair payments(non-GAAP) was 5.6% in each of fiscal 2019, 2018 and 2017. We expect our selling and marketing expenses to increase in fiscal 2020 as we invest in our sales team to better serve our clients and in branding but at a lower rate than the increase in our revenue less repair payments(non-GAAP). See “Part I — Item 4. Information on the Company — B. Business Overview — Business Strategy — Enhance awareness of the WNS brand name.” Our sales team is compensated based on achievement of business targets set at the beginning of each fiscal year. Accordingly, we expect this variable component of the sales team costs to increase in line with overall business growth.

 

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General and Administrative Expenses

Our general and administrative expenses comprise primarily employee costs for senior management and other support personnel, travel expenses, legal and professional fees, share-based compensation expense and other general expenses not related to cost of revenue and selling and marketing.

General and administrative expenses as a proportion of revenue was 14.2% in fiscal 2019 as compared with 15.5% and 15.2% for fiscal 2018 and 2017, respectively. General and administrative expenses as a proportion of revenue less repair payments(non-GAAP) was 14.5% in fiscal 2019 as compared with 15.9% each for fiscal 2018 and 2017. General and administrative expenses decreased both in absolute terms and as a proportion of revenue and revenue less repair payments(non-GAAP) in fiscal 2019 as compared to fiscal 2018 primarily due to lower share-based compensation expense and the impact of foreign exchange movements in fiscal 2019. See “— Results of Operations — Fiscal 2019 Compared to Fiscal 2018 — General and Administrative Expenses.”We expect our general and administrative expenses to increase in fiscal 2020 as we continue to strengthen our support and enabling functions and invest in leadership development but at a lower rate than the increase in our revenue less repair payments(non-GAAP).

Foreign Exchange Loss / (Gains), Net

Foreign exchange gains or losses, net include:

 

  

marked to market gains or losses on derivative instruments that do not qualify for “hedge” accounting and are deemed ineffective;

 

  

realized foreign currency exchange gains or losses on settlement of transactions in foreign currency and derivative instruments; and

 

  

unrealized foreign currency exchange gains or losses on revaluation of other assets and liabilities.

We had a foreign exchange gain of $4.5 million in fiscal 2019 as compared to $15.0 million and $14.5 million in fiscal 2018 and 2017, respectively. On adoption of IFRS 9 with effect from April 1, 2018, cash flow hedging gains and losses, which were previously reported in foreign exchange gains or losses, net, are now reported in revenue.

Impairment of Goodwill

During the fourth quarter of fiscal 2017, proposed changes to the laws of the UK governing personal injury claims generated uncertainty regarding the future earnings trajectory of our legal services business in our WNS Auto Claims BPM segment, as a result of which we had expected that we would eventually exit from providing legal services in relation to personal injury claims. We also experienced a decrease in volume of and loss of business from certain clients of our traditional repair services in our WNS Auto Claims BPM segment in fiscal 2017. As a result, we had in fiscal 2017 expected the future performance of our WNS Auto Claims BPM segment to decline significantly and therefore significantly reduced our financial projections and estimates of our WNS Auto Claims BPM segment. Accordingly, we performed an impairment review of the goodwill associated with the companies we had acquired for our auto claims business and recorded an impairment charge of $21.7 million to our results of operations for fiscal 2017. There is no impairment charge recognized in fiscal 2019 and 2018.

Amortization of Intangible Assets

Amortization of intangible assets is primarily associated with our acquisitions of Aviva Global in July 2008 (included up to November 2016), Fusion in June 2012, Value Edge and its subsidiaries in June 2016, Denali in January 2017, HealthHelp in March 2017 and the acquisition of a customer contract from Telkom SA SOC LIMITED (“Telkom”) in May 2015.

Other Income, net

Other income, net comprises interest income, income from investments, gain or loss on sale of assets and other miscellaneous income and expenses.

Finance Expense

Finance expense primarily relates to interest charges payable on our term loans and short term borrowings, transaction costs and the gains/losses on settlement of our related derivative instruments. We expect our interest payable on our term loans to be lower in fiscal 2020 as compared to fiscal 2019 on account of repayment of loans that were obtained to fund our acquisitions of Denali and HealthHelp.

 

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Operating Data

Our profit margin is largely a function of our asset utilization and the rates we are able to recover for our services. One of the most significant components of our asset utilization is our seat utilization rate which is the average number of work shifts per day, out of a maximum of three, for which we are able to utilize our seats. Generally, an improvement in seat utilization rate will improve our profitability unless there are other factors which increase our costs such as an increase in lease rentals, largeramp-ups to build new seats, and increases in costs related to repairs and renovations to our existing or used seats. In addition, an increase in seat utilization rate as a result of an increase in the volume of work will generally result in a lower cost per seat and a higher profit margin as the total fixed costs of our built up seats remain the same while each seat is generating more revenue.

The following table presents certain operating data as at the dates indicated:

 

   As at March 31, 
   2019   2018   2017 

Total headcount(1)

   39,898    36,540    34,547 

Built up seats(2)

   32,764    30,390    28,008 

Used seats(2)

   25,978    22,550    20,795 

Seat utilization rate(3)

   1.21    1.22    1.23 

Notes:

 

(1)

Commencing fiscal 2018, we are including in our disclosed total headcount the number of apprentices employed under the India government scheme, National Employability Enhancement Mission, pursuant to which apprentices undergo a three to 36 month apprenticeship to enhance their employability. There is no guarantee of employment with WNS following the completion of the apprenticeship. Our previously disclosed total headcount does not include apprentices. The total headcount and seat utilization rate presented for prior periods in the table above have beenre-computed to include apprentices for comparative purposes.

(2)

Built up seats refer to the total number of production seats (excluding support functions like finance, human resources, administration and seats dedicated for business continuity planning) that are set up in any premises. Used seats refer to the number of built up seats that are being used by employees. The remainder would be termed “vacant seats.” The vacant seats would get converted into used seats when we increase headcount.

(3)

The seat utilization rate is calculated by dividing the average total headcount by the average number of built up seats to show the rate at which we are able to utilize our built up seats. Average total headcount and average number of built up seats are calculated by dividing the aggregate of the total headcount or number of built up seats, as the case may be, as at the beginning and end of the fiscal year by two.

We expect our total headcount in fiscal 2020 to increase as compared to fiscal 2019 as the impact of an increased flow of business from new and existing clients is expected to continue to increase our hiring requirements in fiscal 2020.

Foreign Exchange

Exchange Rates

We report our financial results in US dollars and our results of operations would be adversely affected if the pound sterling or, to a lesser extent, the Australian dollar depreciates against the US dollar, or if the Indian rupee or, to a lesser extent, the South African rand or the Philippine peso appreciates against the US dollar. Although a substantial portion of our revenue and revenue less repair payments(non-GAAP) is denominated in US dollars (48.1% and 49.0%, respectively, in fiscal 2019, 46.5% and 47.6%, respectively, in fiscal 2018 and 38.7% and 40.3%, respectively, in fiscal 2017), pound sterling (29.0% and 27.6%, respectively, in fiscal 2019, 31.8% and 30.2%, respectively, in fiscal 2018 and 39.6% and 37.0%, respectively, in fiscal 2017), and, to a lesser extent, Australian dollars (9.4% and 9.5%, respectively, in fiscal 2019, 8.0% and 8.1%, respectively, in fiscal 2018 and 7.2% and 7.5%, respectively, in fiscal 2017), and South African rand (4.8% and 4.9%, respectively, in fiscal 2019, 5.6% and 5.8%, respectively, in fiscal 2018 and 6.8% and 7.0%, respectively, in fiscal 2017), most of our expenses (net of payments to repair centers) are incurred and paid in Indian rupees (43.8% in fiscal 2019, 43.6% in fiscal 2018 and 51.1% in fiscal 2017) and, to a lesser extent, in Philippine peso (10.9% in fiscal 2019, 9.5% in fiscal 2018 and 9.4% in fiscal 2017) and South African rand (9.0% in fiscal 2019, 10.2% in fiscal 2018 and 11.1% in fiscal 2017) . The exchange rates between these currencies and the US dollar have changed substantially in recent years and may fluctuate substantially in the future.

 

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The average Indian rupee to US dollar exchange rate was approximately69.92 per $1.00 in fiscal 2019, which represented a depreciation of the Indian rupee of 8.5% as compared with the average exchange rate of64.46 per $1.00 in fiscal 2018, which in turn represented an appreciation of the Indian rupee of 3.9% as compared with the average exchange rate of approximately67.10 per $1.00 in fiscal 2017. The average pound sterling to US dollar exchange rate was approximately £0.76 per $1.00 in fiscal 2019, which represented a depreciation of the pound sterling of 0.9% as compared with the average exchange rate of approximately £0.75 per $1.00 in fiscal 2018, which in turn represented an appreciation of the pound sterling of 1.4% as compared with the average exchange rate of approximately £0.77 per $1.00 in fiscal 2017. The average Australian dollar to US dollar exchange rate was approximately A$1.37 per $1.00 in fiscal 2019, which represented a depreciation of the Australian dollar of 5.8% as compared with the average exchange rate of approximately A$1.29 per $1.00 in fiscal 2018, which in turn represented an appreciation of the Australian dollar of 2.8% as compared with the average exchange rate of approximately A$1.33 per $1.00 in fiscal 2017. The average South African rand to US dollar exchange rate was approximately R13.76 per $1.00 in fiscal 2019, which represented a depreciation of the South African rand of 6.0% as compared with the average exchange rate of approximately R12.98 per $1.00 in fiscal 2018, which in turn represented an appreciation of the South African rand of 7.8% as compared with the average exchange rate of approximately R14.07 per $1.00 in fiscal 2017.

The depreciation of the Indian rupee against the US dollar by 8.5% in fiscal 2019 as compared to the average exchange rate in fiscal 2018 had a positive impact on our expenses in fiscal 2019 while the appreciation of the Indian rupee against the US dollar by 3.9% in fiscal 2018 as compared to the average exchange rate in fiscal 2017 had a negative impact on our expenses in fiscal 2018. As a result, increases in our cost of revenue, and to a lesser extent, our general and administrative expenses were partially offset by the impact of the depreciation of Indian rupee in fiscal 2019 whereas the increase in these expenses, was partially due to the appreciation of Indian rupee in fiscal 2018. The depreciation of the South African rand in fiscal 2019 against the US dollar and the appreciation of the Australian dollar in fiscal 2018 against the US dollar positively impacted our results of operations in those years whereas the depreciation of the Australian dollar in fiscal 2019 and the appreciation of the South African rand in fiscal 2018 against the US dollar negatively impacted our results of operations in those years. The depreciation of the pound sterling in fiscal 2019 against the US dollar negatively impacted our results of operations in fiscal 2019 and the appreciation of the pound sterling in fiscal 2018 against the US dollar positively impacted our results of operations in that year. Such foreign exchange movement has significantly reduced our expenses in fiscal 2019. See “Part I — Item 11. Quantitative and Qualitative Disclosures About Market Risk — B. Risk Management Procedures — Components of Market Risk — Exchange Rate Risk.”

We have subsidiaries in several countries and hence, the functional currencies of these entities differ from our reporting currency, the US dollar. The financial statements of these entities are translated to the reporting currency as at the balance sheet date. Adjustments resulting from the translation of these financial statements from functional currency to reporting currency are accumulated and reported as other comprehensive income/(loss), which is a separate component of equity and such exchange differences are recognized in the consolidated statement of income in the period in which such subsidiaries are disposed. Foreign currency transaction gains and losses are recorded as other income or expense.

 

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Currency Regulation

Our Indian subsidiaries are registered as exporters of business process management services with STPI or SEZ. According to the prevailing foreign exchange regulations in India, an exporter of business process management services registered with STPI or SEZ is required to receive its export proceeds in India within a period of 9 months from the date of such exports in order to avail itself of the tax and other benefits. In the event that such a registered exporter has received any advance against exports in foreign exchange from its overseas customers, it is required to render the requisite services so that such advances are earned within a period of 12 months from the date of such receipt. If such a registered exporter does not meet these conditions, it will be required to obtain permission from the Reserve Bank of India to receive and realize such foreign currency earnings.

A majority of the payments we receive from our clients are denominated in pound sterling and US dollars. For most of our clients, our subsidiaries in Mauritius, the Netherlands, Australia, the UK and the US enter into contractual agreements directly with our clients for the provision of business process management services by our Indian subsidiaries, which hold the foreign currency receipts in an export earners’ foreign currency account. All foreign exchange requirements, such as for the import of capital goods, expenses incurred during overseas travel by employees and discharge of foreign exchange expenses or liabilities, can be met using the foreign currency in the export earners’ foreign currency account in India. As and when funds are required by us, the funds in the export earners’ foreign currency account may be transferred to an ordinary rupee-denominated account in India.

There are currently no Jersey, UK or US foreign exchange control restrictions on the payment of dividends on our ordinary shares or on the conduct of our operations.

Income Taxes

We operate in multiple tax jurisdictions including Australia, China, Costa Rica, France, Germany, India, Ireland, Mauritius, the Netherlands, New Zealand, the Philippines, Poland, Romania, Singapore, South Africa, Spain, Sri Lanka, Switzerland, Turkey, United Arab Emirates, the UK and the US. As a result, our effective tax rate changes from year to year based on recurring factors such as the geographical mix of income before taxes, state and local taxes, the ratio of permanent items topre-tax book income and the implementation of various global tax strategies, as well asnon-recurring events.

In fiscal 2019, our tax rate in India and the Philippines impacted our effective tax rate. In fiscal 2018 and 2017, our tax rate in India, the Philippines and Sri Lanka impacted our effective tax rate. We would have incurred approximately $15.7 million, $9.4 million and $5.2 million in additional income tax expense on our combined operations in our SEZ operations in India, the Philippines and Sri Lanka for fiscal 2019, 2018 and 2017, respectively, if the tax holidays or exemptions as described below had not been available for the respective periods.

Further, in fiscal 2018 our effective tax rate was impacted by aone-time tax benefit of $1.7 million arising from a corporate legal restructuring and a netone-time tax benefit of $5.2 million resulting from the adjustments to the deferred tax balances due to a reduction in the US corporate tax rate and a transition tax charge on undistributed income of a foreign subsidiary (pursuant to the Tax Cuts and Jobs Act of 2017 (the “2017 US Tax Reforms”)), partially offset by higher taxable profits during the year.

We expect our tax rate in India and the Philippines to continue to impact our effective tax rate. Our tax rate in India has been impacted by the reduction in the tax exemption enjoyed by our delivery center operating under the SEZ scheme as discussed below. Sri Lanka has been impacted by the withdrawal of tax exemption on export income in Sri Lanka with effect from April 1, 2018, following which the income from export of service has been subject to tax at 14% on net basis, as more fully described below.

India

In the past, the majority of our Indian operations were eligible to claim income tax exemption with respect to profits earned from export revenue from operating units registered under the STPI. The benefit was available for a period of 10 years from the date of commencement of operations, but not beyond March 31, 2011. Effective April 1, 2011, upon the expiration of this tax exemption, income derived from our operations in India became subject to the prevailing annual tax rate, which is currently, and was in fiscal 2019, 34.95%, and in fiscal 2018 and fiscal 2017 was 34.61%.

In 2005, the Government of India implemented the SEZ legislation, with the effect that taxable income of new operations established in designated SEZs may be eligible for a15-year tax holiday scheme consisting of a complete tax holiday for the initial five years and a partial tax holiday for the subsequent ten years, subject to the satisfaction of certain capital investment conditions. During fiscal 2012, we started operations in delivery centers in Pune, Mumbai and Chennai, India registered under the SEZ scheme. These operations are eligible for a 50.0% income tax exemption from fiscal 2017 to fiscal 2026. During fiscal 2015, we commenced operations at our new delivery centers in Gurgaon and Pune in India which are registered under the SEZ scheme. These operations were eligible for a 100.0% income tax exemption until fiscal 2019, and are eligible for a 50.0% income tax exemption from fiscal 2020 to fiscal 2029. During fiscal 2018, we started operations in our new delivery centers in Gurgaon and Pune, India which are registered under the SEZ scheme that are eligible for a 100.0% income tax exemption until fiscal 2022, and a 50.0% income tax exemption from fiscal 2023 to fiscal 2032. During fiscal 2019, we started operations in new delivery centers in Noida and Pune, India registered under the SEZ scheme that are eligible for a 100.0% income tax exemption until fiscal 2023 and are eligible for a 50.0% income tax exemption from fiscal 2024 to 2033.

 

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The SEZ legislation has been criticized on economic grounds by the International Monetary Fund and the SEZ legislation may be challenged by certainnon-governmental organizations. It is possible that, as a result of such political pressures, the procedure for obtaining benefits under the SEZ legislation may become more onerous, the types of land eligible for SEZ status may be further restricted or the SEZ legislation may be amended or repealed.

In addition to these tax holidays, our Indian subsidiaries are also entitled to certain benefits under relevant state legislation and regulations. These benefits include rebates and waivers in relation to payment for transfer of property and registration (including for purchase or lease of premises) and commercial usage of electricity.

The Government of India may enact new tax legislation that could impact the way we are taxed in the future. For example, the Government of India has issued guidelines on the GAAR which came into effect on April 1, 2017, and which is intended to curb sophisticated tax avoidance. Under the GAAR, a business arrangement will be deemed an “impermissible avoidance arrangement” if the main purpose of the arrangement is to obtain tax benefits. Although the full implications of the GAAR are presently still unclear, if we are deemed to have violated any of its provisions, we may face an increase to our tax liability. However, we do not expect the GAAR to have a material adverse impact on our operations. The Government of India has passed the GST Act, which came into effect on July 1, 2017. The majority of the various existing indirect tax levies have since been subsumed by the goods and services tax payable under the GST Act. Based on the current GST law and the rules, we do not expect a significant impact on our operations. See “Part I — Item 3. Key Information — D. Risk Factors — Risks Related to Key Delivery Locations — New tax legislation and the results of actions by taxing authorities may have an adverse effect on our operations and our overall tax rate.

Philippines

From fiscal 2016 until fiscal 2019, we started operations in various delivery centers in the Philippines that are eligible for tax exemption benefits expiring between fiscal 2020 and fiscal 2023. Following the expiry of the tax benefits, income generated by the Philippines subsidiary will be taxed at the prevailing special tax rate, which currently is 5.0% on gross profit.

Sri Lanka

Our operations in Sri Lanka were eligible to claim income tax exemption with respect to the profits earned from export revenue until fiscal 2018 and are taxed at 14% on net basis with effect from April 1, 2018.

Costa Rica

Our subsidiary in Costa Rica was eligible for a 100.0% income tax exemption from fiscal 2010 until fiscal 2017 and is eligible for 50.0% income tax exemption from fiscal 2018 to fiscal 2021.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements included elsewhere in this annual report which have been prepared in accordance with IFRS, as issued by the IASB. Note 2 to our consolidated financial statements included elsewhere in this annual report describes our significant accounting policies and is an essential part of our consolidated financial statements.

We believe the following to be critical accounting policies. By “critical accounting policies,” we mean policies that are both important to the portrayal of our financial condition and financial results and require critical management judgments and estimates. Although we believe that our judgments and estimates are appropriate, actual future results may differ from our estimates.

 

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Revenue Recognition

We derive revenue from providing BPM services, comprising back office administration, data management, client interaction services management, and auto claims handling services.

Revenue from rendering services is recognized on an accrual basis when the promised services are performed for an amount that reflects the consideration to which we expect to be entitled in exchange for those services. Revenue earned from the end of last billing to the reporting date is recognized as unbilled revenue. Unbilled revenue for certain contracts is classified as contract assets, as the right to consideration is conditional on factors other than the passage of time. Revenue is net of value-added taxes and includes reimbursements ofout-of-pocket expenses.

Back office administration, data management and client interaction services contracts are based on the following pricing models:

a)    per full-time-equivalent arrangements, which typically involve billings based on the number of full-time employees (or equivalent) deployed on the execution of the business process outsourced;

b)    per transaction arrangements, which typically involve billings based on the number of transactions processed (such as the number ofe-mail responses, or airline coupons or insurance claims processed);

c)    subscription arrangements, which typically involve billings based on per member per month, based on contractually agreed rates;

d)    fixed-price arrangements, which typically involve billings based on achievements ofpre-defined deliverables or milestones;

e)    outcome-based arrangements, which typically involve billings based on the business result achieved by our clients through our service efforts (such as measured based on a reduction in days sales outstanding, improvement in working capital, increase in collections or a reduction in operating expenses); or

f)    other pricing arrangements, including cost-plus arrangements, which typically involve billing the contractually agreed direct and indirect costs and a fee based on the number of employees deployed under the arrangement.

Revenues undertime-and-material contracts and subscription arrangements are recognized as the related services are provided in accordance with the client contract. Revenues are recognized on cost-plus contracts on the basis of contractually agreed direct and indirect costs incurred on a client contract plus an agreed upon profitmark-up. Revenues are recognized on unit-price based contracts based on the number of specified units of work delivered to a client.

Revenue for performance obligations that are satisfied over time is recognized in accordance with the methods prescribed for measuring the progress. The input method (cost or efforts expended) has been used to measure progress towards completion as there is a direct relationship between inputs and productivity.

In respect of arrangements involvingsub-contracting, in part or whole of the assigned work, we evaluate revenues to be recognized under criteria established by the IFRS 15, application guidance in paragraphs B34 to B38 “Principal versus agent considerations.”

Contracts with clients include variability in transaction price primarily due to service level agreements, gain share, minimum commitment and volume discounts. Revenues relating to such arrangements are accounted for as variable consideration when the amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

Amounts billed or payments received, where revenue recognition criteria have not been met, are recorded as deferred revenue and classified as contract liabilities. These are recognized as revenue when all the recognition criteria have been met. The costs related to the performance of BPM services unrelated to transition services (discussed below) are fulfilment costs classified as contract assets and recognized in the consolidated statement of income when the conditions for revenue recognition have been met. Any upfront payment received towards future services is classified as a contract liability and is recognized in the consolidated statement of income over the period when such services are provided.

All incremental and direct costs incurred for acquiring contracts, such as certain sales commission, are classified as contract assets. Such costs are amortized over the expected life of the contract.

Other upfront fees paid to clients are classified as contract assets. Such costs are amortized over the life of the contract and recorded as an adjustment to the transaction price and reduced from revenue.

For certain BPM clients, we perform transition activities at the outset of entering into a new contract. We have determined these transition activities do not meet the criteria of IFRS 15 to be accounted for as a separate performance obligation and has deferred revenue attributable to these activities. Accordingly, transition revenues are classified as contract liabilities and are subsequently recognized ratably over the period in which the BPM services are performed. Costs related to such transition services are fulfillment costs which are directly related to the contract and result in generation or enhancement of resources and are expected to be recoverable under the contract and thereby classified as contract assets and are recognized ratably over the estimated life of the contract. Further, the deferral of costs is limited to the amount of the deferred revenue. Any costs in excess of the deferred transition revenue are recognized in the period they are incurred.

 

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All contracts entered into by us specify the payment terms. Usual payment terms range between 30 to 60 days.

Auto claims handling services include claims handling and administration, car hire and accident management services. With respect to claims handling and administration, we receive either aper-claim fee or a fixed fee. Revenue for per claim fee is recognized over the estimated processing period of the claim, which currently ranges from one to two months and revenue for fixed fee is recognized on a straight line basis over the period of the contract. In certain cases, the fee is contingent upon the successful recovery of a claim on behalf of the client. In these circumstances, the revenue is deferred until the contingency is resolved. Revenue in respect of car hire is recognized over the car hire term.

In order to provide accident management services, we arrange for the repair through a network of repair centers. The repair costs are invoiced to clients. In determining whether the receipt from the clients related to payments to repair centers should be recognized as revenue, we consider the criteria established by the IFRS 15 application guidance in paragraphs B34 to B38 “Principal versus agent considerations.” When we determine that we are the principal in providing accident management services, amounts received from clients are recognized and presented as third-party revenue and the payments to repair centers are recognized as cost of revenue in the consolidated statement of income. Factors considered in determining whether we are the principal in the transaction include whether:

a)    we have the primary responsibility for providing the services,

b)    we negotiate labor rates with repair centers, and

c)    we are responsible for timely and satisfactory completion of repairs.

If there are circumstances where the above criteria are not met and therefore we are not the principal in providing accident management services, amounts received from clients are recognized and presented net of payments to repair centers in the consolidated statement of income. Revenue from accident management services is recorded net of the repairer referral fees passed on to clients.

Revenue from legal services in the Auto Claims BPM segment is recognized on the admission of liability by the third party to the extent of fixed fees earned at each stage and any further income on the successful settlement of the claim.

Incremental and direct costs incurred to contract with a claimant are classified as contract assets and amortized over the expected period of benefit, not exceeding 15 months. All other costs to us are expensed as incurred.

 

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Share-based Compensation

We provide share-based awards such as share options and RSUs to our employees, directors and executive officers through various equity compensation plans. We account for share-based compensation expense relating to share-based payments using a fair-value method in accordance with IFRS 2 “Share-based Payments”(“IFRS 2”) addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments.

Equity instruments granted is measured by reference to the fair value of the instrument at the date of grant. The grants vest in a graded manner. Under the fair value method, the estimated fair value of awards is charged to income over the requisite service period, which is generally the vesting period of the award, for each separately vesting portion of the award as if the award was, in substance, multiple awards. We include a forfeiture estimate in the amount of compensation expense being recognized based on our estimate of equity instrument that will eventually vest.

IFRS 2 requires the use of a valuation model to calculate the fair value of share-based awards. Based on our judgment, we have elected to use the Black-Scholes-Merton pricing model to determine the fair value of share-based awards on the date of grant. RSUs are measured based on the fair market value of the underlying shares on the date of grant. Further, each of the 2006 Incentive Award Plan and the 2016 Incentive Award Plan also allows for the grant of RSUs based on the market price of our shares achieving a specified target over a period of time. The fair value of market-based share awards is determined using Monte-Carlo simulation. In fiscal 2017, certain RSUs based on the market price of our shares were modified to vest on a longer timeframe. The additional cost as a result of such modification in respect of modified share awards amounted to $1.2 million. The additional cost is amortized over the period from the modification date until the vesting date of the modified award, which differs from the vesting date of the original award.

We believe the Black-Scholes-Merton model to be the most appropriate model for determination of fair value of the share-based awards. In determining the fair value of share-based awards using the Black-Scholes-Merton option pricing model, we are required to make certain estimates of the key assumptions that include expected term, expected volatility of our shares, dividend yield and risk free interest rate. Estimating these key assumptions involves judgment regarding subjective future expectations of market prices and trends. The assumptions for expected term and expected volatility have the most significant effect on calculating the fair value of our share options. We use the historical volatility of our ADSs in order to estimate future share price trends. In order to determine the estimated period of time that we expect employees to hold their share-based options, we have used historical exercise pattern of employees. The aforementioned inputs entered into the option valuation model that we use to determine the fair value of our share awards are subjective estimates and changes to these estimates will cause the fair value of our share-based awards and related share-based compensation expense we record to vary.

Our South African subsidiary has issued share appreciation rights to certain employees to be settled with our shares. As part of the settlement, we granted certain RSUs during fiscal 2019 and fiscal 2018, which are scheduled to vest on the third and fourth anniversaries, respectively, from the grant date, subject to such grantee’s continued employment with us through the applicable vesting date.The grant date fair value of these RSUs was estimated using a binomial lattice model.

We are required to estimate the share-based awards that we expect to vest and to reduce share-based compensation expense for the effects of estimated forfeitures of awards over the expense recognition period. Although we estimate forfeitures based on historical experience and other factors, actual forfeitures in the future may differ. To the extent our actual forfeitures are different than our estimates, we record atrue-up for the difference in the period in which the awards vest, and suchtrue-ups could materially affect our operating results.

We record deferred tax assets for share-based awards based on the future tax deduction which will be based on our ADS price at the reporting date. If the amount of the future tax deduction exceeds the cumulative amount of share-based compensation expense, the excess deferred tax is directly recognized in equity.

 

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Business Combinations, Goodwill and Intangible Assets

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred at the date of acquisition. The cost of the acquisition also includes the fair value of any contingent consideration. As a part of acquisition accounting, we allocate the purchase price of acquired companies to the identified tangible and intangible assets based on the estimated fair values on the date of the acquisition. The purchase price allocation process requires management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets, income taxes, contingent consideration and estimated restructuring liabilities. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to the appropriate method of valuation, future cash flow projections, weighted average cost of capital, discount rates, risk-free rates, market rate of return and risk premiums.

Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

Goodwill is initially measured at cost, being the excess of the cost of the acquisition of the acquiree over our share of the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities on the date of the acquisition. If the cost of acquisition is less than the fair value of the net assets of the business acquired, the difference is recognized immediately in the income statement. Goodwill is tested for impairment at least annually and when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than its carrying value. The goodwill impairment test is performed at the level of cash-generating unit or groups of cash-generating units which represent the lowest level at which goodwill is monitored for internal management purposes.

We use market related information and estimates (generally risk adjusted discounted cash flows) to determine the fair values. Cash flow projections take into account past experience and represents management’s best estimate about future developments. Key assumptions on which management has based its determination of fair value less costs of disposal and value in use include estimated growth rates, weighted average cost of capital and tax rates. These estimates, including the methodology used, can have a material impact on the respective values and ultimately the amount of any goodwill impairment. See also the discussion on impairment testing under “—Impairment of Goodwill and Intangible Assets” below.

Intangible assets are recognized only when it is probable that the expected future economic benefits attributable to the assets will accrue to us and the cost can be reliably measured. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition determined using generally accepted valuation methods appropriate for the type of intangible asset. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets with finite lives are amortized over the estimated useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization of an intangible asset with a finite useful life reflects the manner in which the economic benefit is expected to be generated and consumed. These estimates are reviewed at least at each fiscal year end. Intangible assets with indefinite lives are not amortized, but instead are tested for impairment at least annually and written down to the fair value as required. See also the discussion on impairment testing under “— Impairment of Goodwill and Intangible Assets” below.

Software Development Costs

Costs incurred for developing software or enhancements to the existing software products to be sold and/or used for internal use are capitalized once the research phase is complete, technological feasibility and commercial feasibility have been established, future economic benefits are probable, we have an intention and ability to complete and use or sell the software and the costs can be measured reliably. Technological feasibility is established upon completion of a detailed design program or, in its absence, completion of a working model. Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established, as well as in the ongoing assessment of the recoverability of capitalized costs. Costs that qualify as software development costs include external direct costs of materials and services utilized in developing or obtaining software and compensation and related benefits for employees who are directly associated with the software project. The capitalized costs are amortized on a straight-line basis over the estimated useful life. Costs associated with research phase activities, training, maintenance and all post-implementation stage activities are expensed as incurred.

 

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Impairment of Goodwill and Intangible Assets

Goodwill is not subject to amortization and is instead tested annually for impairment and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the cash generating unit level, which is the lowest level for which there are separately identifiable cash flows. Impairment losses recognized in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating units (or group of cash generating units) and then to reduce the carrying amount of the other assets in the cash generating unit (or group of cash generating units) on a pro rata basis. Intangible assets except goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

An impairment loss is recognized for the amount by which an asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. To determine the value in use, management estimates expected future cash flows from each asset or cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows management makes assumptions about future operating results. These assumptions relate to future events and circumstances. In arriving at our forecasts, we consider past experience, economic trends including underlying current dynamics of the business and inflation as well as industry and market trends. The projections also take into account factors such as the expected impact from new client contracts and expansion of business from existing clients, efficiency initiatives, and the maturity of the markets in which each business operates. To determine the fair value less costs of disposal the management uses Level 3 inputs under the “Income Approach — Discounted Cash Flow Analysis” method. See note 10 to our consolidated financial statements included elsewhere in this annual report. The actual results of recoverable amount may vary, and may cause significant adjustments to our assets within the next fiscal year. The calculation of impairment loss involves significant estimates and assumptions which include revenue and earnings multiples, inputs used by market participants, growth rates and net margins used to calculate projected future cash flows, risk-adjusted discount rate, and future economic and market conditions.

In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.

We cannot predict the occurrence of future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the environment on our client base, and material negative changes in relationships with significant clients.

Income Taxes

Income tax comprises current and deferred tax. Income tax expense is recognized in statements of income except to the extent it relates to items directly recognized in equity, in which case it is recognized in equity.

Current Income Tax

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We are subject to tax assessments in each of these jurisdictions. Current income taxes for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the taxable profit for the period. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date and applicable for the period. We offset current tax assets and current tax liabilities, where we have a legally enforceable right to set off the recognized amounts and where we intend either to settle on a net basis, or to realize the asset and liability simultaneously.

Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods. The recognition of taxes that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances. Though we have considered all these issues in estimating our income taxes, there could be an unfavorable resolution of such issues that may affect results of our operations.

 

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Deferred Income Tax

We recognize deferred income tax using the balance sheet approach. Deferred income tax assets and liabilities are recognized for all deductible temporary differences arising between the tax bases of assets and liabilities and their carrying amount in financial statements, except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profits or loss at the time of transaction.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred income tax assets in respect of carry forward of unused tax credits and unused tax losses are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

The measurement of deferred tax assets involves judgment regarding the deductibility of costs not yet subject to taxation and estimates regarding sufficient future taxable income to enable utilization of unused tax losses in different tax jurisdictions. We consider the expected reversal of deferred tax assets and projected future taxable income in making this assessment. All deferred tax assets are subject to review of probable utilization. The assessment of the probability of future taxable profit in various years in which deferred tax assets can be utilized is based on the latest approved budget forecast, which is adjusted for significantnon-taxable profit and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the various jurisdictions in which we operate are also carefully taken into consideration. If a positive forecast of taxable profit indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

We recognize deferred tax liabilities for all taxable temporary differences, except those associated with investments in subsidiaries and associates where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

As part of our accounting for business combinations, some of the purchase price is allocated to goodwill and intangible assets. Impairment charges associated with goodwill are generally not tax deductible and will result in an increased effective income tax rate in the quarter any impairment is recorded. Amortization expenses associated with acquired intangible assets are generally not tax deductible pursuant to our existing tax structure; however, deferred taxes have been recorded fornon-deductible amortization expenses as a part of the purchase price allocation process. We have taken into account the allocation of these identified intangibles among different taxing jurisdictions, including those with nominal or zero percent tax rates, in establishing the related deferred tax liabilities. Income tax contingencies existing as of the acquisition dates of the acquired companies are evaluated quarterly and any adjustments are recorded as adjustments to goodwill during the measurement period.

Uncertainties in income taxes are not addressed specifically in IAS12 “Income Taxes” and hence the general measurement principles in IAS12 are applied in measuring the uncertain tax positions. Uncertain tax positions are reflected at the amount likely to be paid to the taxation authorities. A liability is recognized in connection with each item that is not probable of being sustained on examination by the taxing authority. The liability is measured using single best estimate of the most likely outcome for each position taken in the tax return. Thus, the provision would be the aggregate liability in connection with all uncertain tax positions. We also include interest related to such uncertain tax positions within our provision for income tax expense.

Evaluation of tax positions and recognition of provisions, as discussed above, involves interpretation of tax laws, estimates of probabilities of tax positions being sustained and the amounts of payments to be made under various scenarios. Although we believe we are adequately reserved for our unresolved disputes with the taxation authorities, no assurance can be given with respect to the final outcome on these matters. To the extent that the final outcome on these matters is different to the amounts recorded, such differences will impact our provision for income taxes in the period in which such a determination is made.

 

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Derivative Financial Instruments and Hedge Accounting

We are exposed to foreign currency fluctuations on foreign currency assets, liabilities, net investment in foreign operations, forecasted cash flows denominated in foreign currency and fluctuation in interest rates. We limit the effect of foreign exchange rate fluctuation by following established risk management policies including the use of derivatives. We enter into derivative financial instruments where the counterparty is a bank. We use derivative financial instruments such as foreign exchange forward and option contracts, currency swaps and interest rate swaps to hedge certain foreign currency and interest rate exposures. Forward and option contracts on various foreign currencies are entered into to manage the foreign currency exchange rate risk on forecasted transactions denominated in foreign currencies and monetary assets and liabilities held innon-functional currencies. Interest rate swaps are entered into to manage interest rate risk associated with floating rate borrowings. Our primary exchange rate exposures are with the US dollar or the pound sterling against the Indian rupee.

Cash Flow Hedges

We recognize derivative instruments as either assets or liabilities in the statement of financial position at fair value. Derivative instruments qualify for hedge accounting when the instrument is designated as a hedge; the hedged item is specifically identifiable and exposes us to risk; and it is expected that a change in fair value of the derivative instrument and an opposite change in the fair value of the hedged item will have a high degree of correlation. Determining that there is a high degree of correlation between the change in fair value of the hedged item and the derivative instruments involves significant judgment including the probability of the occurrence of the forecasted transaction. Although our estimates of the forecasted transactions are based on historical experience and we believe that they are reasonable, the final occurrence of such transactions could be different as a result of external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts, which will have a material effect on our earnings.

For derivative instruments where hedge accounting is applied, we record the effective portion of derivative instruments that are designated as cash flow hedges in other comprehensive income/(loss) in the statement of comprehensive income, which is reclassified into earnings in the same period during which the hedged item affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (that is, the ineffective portion), or hedge components excluded from the assessment of effectiveness, and changes in fair value of other derivative instruments not designated as qualifying hedges are recorded as gains/losses, net in the consolidated statement of income. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in the cash flow hedging reserve (in other comprehensive income/(loss)) until the period the hedge was effective remains in the cash flow hedging reserve until the forecasted transaction occurs. Cash flow hedge on interest rate swaps is recorded under finance expense, net. Cash flows from the derivative instruments are classified within cash flows from operating activities in the statement of cash flows.

When it is highly probable that a forecasted transaction will not occur, we discontinue the hedge accounting and recognize immediately, in the consolidated statement of income, the gains and losses attributable to such derivative instrument that were accumulated in other comprehensive income/(loss).

Gains/losses on cash flow hedges on forecasted revenue transactions are recorded in foreign exchange gains/losses form part of revenue. Changes in fair value of foreign currency derivative instruments not designated as cash flow hedges are recognized in the consolidated statement of income and reported within foreign exchange gains, net within results from operating activities.

Fair Value Measurements

IFRS 13 “Fair Value Measurements” (“IFRS 13”) defines fair value as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations, without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit risk, foreign exchange rates, and forward and spot prices for currencies.

IFRS 7 “Financial Instruments: Disclosures” also requires the classification of fair value measurements using fair value hierarchy that reflects the significance of the inputs used in making the measurements as below:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 — other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

Level 3 — techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

The fair value is estimated using the discounted cash flow approach and market rates of interest. The valuation technique involves assumptions and judgments regarding risk characteristics of the instruments, discount rates and future cash flows.

Management uses valuation techniques in measuring the fair value of financial instruments, where active market quotes are not available. In applying the valuation techniques, management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.

 

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Other Estimates

Allowance for Expected Credit Losses

We apply the forward-looking expected credit loss (“ECL”) model for recognizing impairment loss on financial assets that are measured at amortized cost or at fair value through other comprehensive income. We apply the simplified approach for determining the lifetime ECL allowance using our historical credit loss experience adjusted for factors that are specific to the debtor. For all other financial assets, we recognize lifetime ECL when there has been a significant increase in credit risk since initial recognition.

Accounting for Defined Benefit Plans

In accounting for pension and post-retirement benefits, several statistical and other factors that attempt to anticipate future events are used to calculate plan expenses and liabilities. These factors include expected return on plan assets, discount rate assumptions and rate of future compensation increases. To estimate these factors, actuarial consultants also use estimates such as withdrawal, turnover, and mortality rates which require significant judgment. The actuarial assumptions used by us may differ materially from actual results in future periods due to changing market and economic conditions, regulatory events, judicial rulings, higher or lower withdrawal rates, or longer or shorter participant life spans.

Results of Operations

The following table sets forth certain financial information as a percentage of revenue and revenue less repair payments(non-GAAP) for the periods indicated:

 

   As a percentage of 
   Revenue  Revenue less repair payments
(non-GAAP)
 
   Year ended March 31,  Year ended March 31, 
   2019  2018  2017  2019  2018  2017 

Cost of revenue

   64.0  66.4  66.9  63.4  65.6  65.6

Gross profit

   36.0  33.6  33.1  36.6  34.4  34.4

Operating expenses:

       

Selling and marketing expenses

   5.5  5.5  5.4  5.6  5.6  5.6

General and administrative expenses

   14.2  15.5  15.2  14.5  15.9  15.9

Foreign exchange gains, net

   (0.6)%   (2.0)%   (2.4)%   (0.6)%   (2.0)%   (2.5)% 

Impairment of goodwill

   —     —    3.6  —     —     3.7

Amortization of intangible assets

   2.0  2.0  3.4  2.0  2.1  3.6

Operating profit

   14.8  12.5  7.8  15.1  12.8  8.2

Other income, net

   (1.8)%   (1.5)%   (1.4)%   (1.8)%   (1.5)%   (1.5)% 

Finance expense

   0.4  0.6  0.1  0.4  0.6  0.1

Income tax expense

   3.2  2.0  2.9  3.2  2.1  3.0

Profit after tax

   13.0  11.4  6.3  13.3  11.7  6.5

The following table reconciles revenue to revenue less repair payments (anon-GAAP financial measure) and sets forth payments to repair centers and revenue less repair payments(non-GAAP) as a percentage of revenue for the periods indicated:

 

   Year ended March 31, 
   2019   2018   2017   2019  2018  2017 
   (US dollars in millions)           

Revenue

  $809.1   $758.0   $602.5    100.0  100.0  100.0

Less: Payments to repair centers

   15.2    17.0    24.1    1.9  2.2  4.0

Revenue less repair payments(non-GAAP)

  $794.0   $741.0   $578.4    98.1  97.8  96.0

 

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The following table presents our results of operations for the periods indicated:

 

   Year ended March 31, 
   2019   2018   2017 
   (US dollars in millions) 

Revenue(1)

  $809.1   $758.0   $602.5 

Cost of revenue(2)

   518.2    503.1    403.3 
  

 

 

   

 

 

   

 

 

 

Gross profit

   290.9    254.8    199.2 

Operating expenses:

      

Selling and marketing expenses(3)

   44.6    41.8    32.6 

General and administrative expenses(4)

   115.3    117.6    91.7 

Foreign exchange loss / (gains), net(1)

   (4.5   (15.0   (14.5

Impairment of goodwill

   —      —      21.7 

Amortization of intangible assets

   15.8    15.5    20.5 
  

 

 

   

 

 

   

 

 

 

Operating profit

   119.8    94.9    47.2 

Other income, net

   (14.6   (11.2   (8.7

Finance expense

   3.2    4.3    0.5 
  

 

 

   

 

 

   

 

 

 

Profit before income taxes

   131.2    101.9    55.3 

Income tax expense

   25.7    15.4    17.5 
  

 

 

   

 

 

   

 

 

 

Profit after tax

  $105.4   $86.4   $37.8 
  

 

 

   

 

 

   

 

 

 

Notes:

 

(1)

On adoption of IFRS 9 with effect from April 1, 2018, cash flow hedging gains and losses, which were previously reported in foreign exchange gains or losses, net, are now reported in revenue. The comparative information has not been restated and continues to be reported in accordance with the principles of IAS 39 –“Financial Instruments: Recognition and Measurement”.

(2)

Includes share-based compensation expense of $4.3 million for fiscal 2019, $3.8 million for fiscal 2018 and $2.8 million for fiscal 2017.

(3)

Includes share-based compensation expense of $4.0 million for fiscal 2019, $2.6 million for fiscal 2018 and $1.7 million for fiscal 2017.

(4)

Includes share-based compensation expense of $22.0 million for fiscal 2019, $24.2 million for fiscal 2018 and $18.5 million for fiscal 2017.

 

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Fiscal 2019 Compared to Fiscal 2018

Revenue

The following table sets forth our revenue and percentage change in revenue for the periods indicated:

 

   Year ended March 31,         
   2019   2018   Change   % Change 
   (US dollars in millions)     

Revenue

  $809.1   $758.0   $51.2    6.8

The increase in revenue of $51.2 million was primarily attributable to (i) an increase in revenue from existing clients of $43.1 million, and (ii) revenue from new clients of $17.3 million, partially offset by a decrease in hedging gain on our revenue by $9.1 million to $0.1 million in fiscal 2019 (on adoption of IFRS 9) from $9.2 million in fiscal 2018. The increase in revenue was primarily due to higher volumes in our insurance, shipping and logistics, healthcare, diversified businesses, consulting and professional services and banking and financial services verticals. The increase in revenue was partially offset by lower volumes in our utilities and travel verticals. The increase was also partially offset by a depreciation of the pound sterling, AUD and South African rand against the US dollar by an average of 0.9%, 5.8% and 6.0%, respectively, as compared to the respective average exchange rates in fiscal 2018.

Revenue by Geography

The following table sets forth the composition of our revenue based on the location of our clients in our key geographies for the periods indicated:

 

   Revenue   As a percentage of
Revenue
 
   Year ended March 31, 
   2019   2018   2019  2018 
   (US dollars in millions)        

North America (primarily the US)

  $335.9   $308.4    41.5  40.7

UK

   254.0    258.9    31.4  34.2

Australia

   77.2    66.6    9.5  8.8

Europe (excluding the UK)

   56.4    47.2    7.0  6.2

South Africa

   38.9    42.8    4.8  5.7

Rest of world

   46.8    34.0    5.8  4.5
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $809.1   $758.0    100.0  100.0
  

 

 

   

 

 

   

 

 

  

 

 

 

The increase in revenue in the North America (primarily the US) region was primarily attributable to higher volumes in our healthcare, diversified businesses, insurance, shipping and logistics, consulting and professional services, and banking and financial services verticals, partially offset by lower volumes in our travel, and utilities verticals. The increase in revenue from the Rest of world region was primarily attributable to higher volumes in our shipping and logistics, healthcare, and insurance verticals, partially offset by lower volumes in our travel, and banking and financial services verticals. The increase in revenue from the Australia region was primarily attributable to higher volumes in our insurance, and diversified businesses verticals, partially offset by a lower volume in our travel vertical and a depreciation of the Australian dollar against the US dollar by an average of 5.8%, as compared to the average exchange rate in fiscal 2018. The increase in revenue from the Europe (excluding the UK) region was primarily attributable to higher volumes in our travel, banking and financial services, diversified businesses verticals, utilities, and shipping and logistics verticals, partially offset by lower volumes in our insurance, and healthcare verticals and a depreciation of the pound sterling against the US dollar by an average of 0.9%, as compared to the average exchange rate in fiscal 2018. The decrease in revenue from the UK region was primarily attributable to lower volumes in our utilities, travel, and shipping and logistics verticals, partially offset by higher volumes in our insurance, diversified businesses, consulting and professional services, and healthcare verticals. The decrease in revenue from the South Africa region was primarily attributable to lower volumes in our diversified businesses, and consulting and professional services verticals and a depreciation of the South African rand against the US dollar by an average of 6.0%, as compared to the average exchange rate in fiscal 2018, partially offset by higher volumes in our banking and financial services, and utilities verticals.

Revenue Less Repair Payments(non-GAAP)

The following table sets forth our revenue less repair payments(non-GAAP) and percentage change in revenue less repair payments(non-GAAP) for the periods indicated:

 

   Year ended March 31,         
   2019   2018   Change   % Change 
   (US dollars in million)     

Revenue less repair payments(non-GAAP)

  $794.0   $741.0   $53.0    7.1

 

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The increase in revenue less repair payments(non-GAAP) of $53.0 million was primarily attributable to (i) an increase in revenue less repair payments(non-GAAP) from existing clients of $45.5 million, (ii) revenue less repair payments(non-GAAP) from new clients of $16.6 million, and (iii) a decrease in hedging gain on our revenue less repair payments(non-GAAP) by $9.1 million to $0.1 million in fiscal 2019 from $9.2 million in fiscal 2018. The increase in revenue was primarily due to higher volumes in our insurance, shipping and logistics, healthcare, diversified businesses, consulting and professional services, and banking and financial services verticals. The increase in revenue was partially offset by lower volumes in our utilities, and travel verticals. The increase was also partially offset by a depreciation of the pound sterling, AUD and South African rand against the US dollar by an average of 0.9%, 5.8% and 6.0%, respectively, as compared to the respective average exchange rates in fiscal 2018.

Revenue Less Repair Payments(non-GAAP) by Geography

The following table sets forth the composition of our revenue less repair payments(non-GAAP) based on the location of our clients in our key geographies for the periods indicated:

 

   Revenue less repair payments
(non-GAAP)
   As a percentage of
revenue less repair
payments  (non-GAAP)
 
   Year ended March 31, 
   2019   2018   2019  2018 
   (US dollars in millions)        

North America (primarily the US)

  $335.9   $308.4    42.3  41.6

UK

   238.8    241.9    30.1  32.6

Australia

   77.2    66.6    9.7  9.0

Europe (excluding the UK)

   56.4    47.2    7.1  6.4

South Africa

   38.9    42.8    4.9  5.8

Rest of world

   46.8    34.0    5.9  4.6
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $794.0   $741.0    100  100
  

 

 

   

 

 

   

 

 

  

 

 

 

The increase in revenue less repair payments(non-GAAP) from the North America (primarily the US) region was primarily attributable to higher volumes in our healthcare, diversified businesses, insurance, shipping and logistics, consulting and professional services, and banking and financial services verticals, partially offset by lower volumes in our travel, and utilities verticals. The increase in revenue less repair payments(non-GAAP) from the Rest of world region was primarily attributable to higher volumes in our shipping and logistics, healthcare, and insurance verticals, partially offset by lower volumes in our travel, and banking and financial services verticals. The increase in revenue less repair payments(non-GAAP) from the Australia region was primarily attributable to higher volumes in our insurance, and diversified businesses verticals, partially offset by a lower volume in our travel vertical and a depreciation of the Australian dollar against the US dollar by an average of 5.8%, as compared to the average exchange rate in fiscal 2018. The increase in revenue less repair payments(non-GAAP) from the Europe (excluding the UK) region was primarily attributable to higher volumes in our travel, banking and financial services, diversified businesses, utilities, and shipping and logistics verticals, partially offset by lower volumes in our insurance, and healthcare verticals and a depreciation of the pound sterling against the US dollar by an average of 0.9%, as compared to the average exchange rate in fiscal 2018. The decrease in revenue less repair payments(non-GAAP) from the UK region was primarily attributable to lower volumes in our utilities, travel, and shipping and logistics verticals; partially offset by higher volumes in our insurance, diversified businesses, consulting and professional services, and healthcare verticals. The decrease in revenue less repair payments(non-GAAP) from the South Africa region was primarily attributable to lower volumes in our diversified businesses, and consulting and professional services verticals and a depreciation of the South African rand against the US dollar by an average of 6.0%, as compared to the average exchange rate in fiscal 2018, partially offset by higher volumes in our banking and financial services, and utilities verticals.

Cost of Revenue

The following table sets forth the composition of our cost of revenue for the periods indicated:

 

   Year ended March 31,    
   2019  2018  Change 
   (US dollars in millions) 

Employee costs

  $346.9  $329.3  $17.6 

Facilities costs

   87.8   86.1   1.7 

Depreciation

   19.9   19.5   0.4 

Repair payments

   15.2   17.0   (1.8

Travel costs

   11.8   12.9   (1.1

Legal and professional costs

   10.3   11.9   (1.7

Other costs

   26.4   26.4   0.0 
  

 

 

  

 

 

  

 

 

 

Total cost of revenue

  $518.2  $503.1  $15.1 
  

 

 

  

 

 

  

 

 

 

As a percentage of revenue

   64.0  66.4 

 

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The increase in cost of revenue was primarily due to higher employee cost on account of higher headcount, wage inflation and an increase in share-based compensation expense; higher facilities costs on account of the expansion of existing facilities and the addition of new facilities in the Philippines, Spain, and India; and higher depreciation costs. These increases were partially offset by lower repair payments; lower legal and professional costs; and lower travel costs. Further, the depreciation of the Indian rupee, South African rand and the Philippine peso against the US dollar by an average of 8.5%, 6.0% and 4.2%, respectively, in fiscal 2019, as compared to the average exchange rates in fiscal 2018. Our cost of revenue increased notwithstanding that such foreign exchange impact reduced our cost of revenue by approximately $22.2 million in fiscal 2019.

Gross Profit

The following table sets forth our gross profit for the periods indicated:

 

   Year ended March 31,    
   2019  2018  Change 
   (US dollars in millions) 

Gross profit

  $290.9  $254.8  $36.1 

As a percentage of revenue

   36.0  33.6 

As a percentage of revenue less repair payments(non-GAAP)

   36.6  34.4 

Gross profit as a percentage of revenue and revenue less repair payments(non-GAAP) increased primarily due to higher revenues, and lower cost of revenue as a percentage of revenue and revenue less repair payments(non-GAAP) as discussed above, partially offset by a decrease in hedging gain on our revenue and revenue less repair payments(non-GAAP) by $9.1 million to $0.1 million in fiscal 2019 from $9.2 million in fiscal 2018. Cost of revenue as a percentage of revenue and revenue less repair payments(non-GAAP) was lower due to the depreciation of the Indian rupee, South African rand and Philippine peso against the US dollar by an average of 8.5%, 6.0% and 4.2%, respectively, in fiscal 2019, as compared to the average exchange rates for fiscal 2018, which resulted in a decrease of approximately $22.2 million in the cost of revenue in fiscal 2019.

During fiscal 2019, our built up seats increased by 7.8% from 30,390 as at the end of fiscal 2018 to 32,764 as at the end of fiscal 2019 as we added new facilities in the Philippines, Spain, and Vizag, India. We also expanded our facilities in Bangalore, Gurgaon, Nashik and Pune, India. Our total headcount increased by 9.2% from 36,540 to 39,898 during the same period. The increase in builtup seats was greater than the increase in headcount, resulting in a decrease in our seat utilization rate from 1.22 in fiscal 2018 to 1.21 in fiscal 2019. This 0.01 decrease in our seat utilization rate decreased our gross profit as a percentage of revenue and revenue less repair payments(non-GAAP) by approximately 0.1%.

Selling and Marketing Expenses

The following table sets forth the composition of our selling and marketing expenses for the periods indicated:

 

   Year ended March 31,    
   2019  2018  Change 
   (US dollars in millions) 

Employee costs

  $34.1  $31.4  $2.7 

Other costs

   10.5   10.4   0.1 
  

 

 

  

 

 

  

 

 

 

Total selling and marketing expenses

  $44.6  $41.8  $2.8 
  

 

 

  

 

 

  

 

 

 

As a percentage of revenue

   5.5  5.5 

As a percentage of revenue less repair payments(non-GAAP)

   5.6  5.6 

The increase in selling and marketing expenses was primarily due to an increase in employee costs as a result of wage inflation, and higher share-based compensation, higher travel costs and higher marketing costs. Further, the depreciation of the Indian rupee, Australian dollar and the pound sterling against the US dollar by an average of 8.5%, 5.8% and 0.9%, respectively, in fiscal 2019, as compared to the average exchange rate for fiscal 2018, resulted in a decrease of approximately $0.6 million of selling and marketing expenses.

 

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General and Administrative Expenses

The following table sets forth the composition of our general and administrative expenses for the periods indicated:

 

   Year ended March 31,    
   2019  2018  Change 
   (US dollars in millions) 

Employee costs

  $87.2  $90.3  $(3.1

Other costs

   28.1   27.3   0.8 
  

 

 

  

 

 

  

 

 

 

Total general and administrative expenses

  $115.3  $117.6  $(2.4
  

 

 

  

 

 

  

 

 

 

As a percentage of revenue

   14.2  15.5 

As a percentage of revenue less repair payments(non-GAAP)

   14.5  15.9 

The decrease in general and administrative expenses was primarily due to a decrease in employee costs as a result of lower salaries primarily on account of lower share-based compensation expenses; and lower legal and professional costs and lower travel costs. The depreciation of the Indian rupee, South African rand and Philippine peso against the US dollar by an average of 8.5%, 6.0% and 4.2%, respectively, for fiscal 2019, as compared to the respective average exchange rates for fiscal 2018, resulted in a decrease of approximately $4.3 million in general and administrative expenses. This decrease in general and administrative expenses was partially offset by higher miscellaneous costs.

Foreign Exchange Loss / (Gains), Net

The following table sets forth our foreign exchange loss / (gains), net for the periods indicated:

 

   Year ended March 31,     
   2019   2018   Change 
   (US dollars in millions) 

Foreign exchange gains, net

  $(4.5  $(15.0  $10.5 

The foreign exchange gains were lower primarily due to a higher loss of $22.7 million from our US dollar denominated hedges as a result of a depreciation of the pound sterling against the US dollar and our rupee denominated hedges as a result of a depreciation of the Indian rupee against the US dollar, partially offset by a higher foreign currency revaluation gain of $12.2 million arising from a gain of $8.1 million for fiscal 2019 as against a loss of $4.1 million for fiscal 2018.

Further, foreign exchange gains of $4.5 million for fiscal 2019 is lower by $2.2 million due to the adoption of IFRS 9.

Impairment of Goodwill

There is no impairment charge recognized in fiscal 2019 and 2018.

 

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Amortization of Intangible Assets

The following table sets forth our amortization of intangible assets for the periods indicated:

 

   Year ended March 31,     
   2019   2018   Change 
   (US dollars in millions) 

Amortization of intangible assets

  $15.8   $15.5   $0.3 

The increase in amortization of intangible assets was primarily attributable to higher amortization on software costs.

Operating Profit

The following table sets forth our operating profit for the periods indicated:

 

   Year ended March 31,    
   2019  2018  Change 
   (US dollars in millions) 

Operating profit

  $119.8  $94.9  $24.9 

As a percentage of revenue

   14.8  12.5 

As a percentage of revenue less repair payments(non-GAAP)

   15.1  12.8 

Operating profit as a percentage of revenue and revenue less repair payments(non-GAAP) is higher due to higher revenue, lower cost of revenue as a percentage of revenue and revenue less repair payments(non-GAAP), lower general and administrative expenses as a percentage of revenue and revenue less repair payments(non-GAAP), and lower amortization expenses as a percentage of revenue and revenue less repair payments(non-GAAP), partially offset by lower foreign exchange gains.

 

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Other Income, net

The following table sets forth our other income, net for the periods indicated:

 

   Year ended March 31,     
   2019   2018   Change 
   (US dollars in millions) 

Other income, net

  $(14.6  $(11.2  $(3.4

Other income is higher in fiscal 2019 as compared with fiscal 2018 due to higher yield on account of moving our liquid mutual fund investments from a dividend scheme to a growth scheme and higher yield on our cash and cash equivalents and investments.

Finance Expense

The following table sets forth our finance expense for the periods indicated:

 

   Year ended March 31,     
   2019   2018   Change 
   (US dollars in millions) 

Finance expense

  $3.2   $4.3   $(1.1

Finance expense decreased primarily on account of principal repayment of loans resulting in lower interest on the amounts outstanding on long term loans obtained to fund our acquisition of Denali and HealthHelp.

Income Tax Expense

The following table sets forth our income tax expense for the periods indicated:

 

   Year ended March 31,     
   2019   2018   Change 
   (US dollars in millions) 

Income tax expense

  $25.7   $15.4   $10.3 

The increase in income tax expense was primarily due to (i) higher taxable profits in fiscal 2019, (ii) a lowernon-recurring tax benefit of $0.4 million for fiscal 2019 as against the provisional amount of $5.2 million recorded for fiscal 2018 arising from the 2017 US Tax Reforms which reduced the US corporate tax rate on the deferred tax balances, and (iii) anon-recurring tax benefit of $1.7 million resulting from a corporate restructuring for fiscal 2018. This increase was partially offset by aone-time tax credit of $0.9 million on account of recognition of deferred tax assets on past tax losses for fiscal 2019.

The 2017 US Tax Reforms were enacted on December 22, 2017 with an effective date of January 1, 2018. The reduction in the corporate tax rate from 35% to 21% has an impact on the various current and deferred tax items recorded by our subsidiaries. We had recorded a provisional amount of $5.2 million for the effects of the change in law in our financial results for fiscal 2018, with the amount to be updated during the measurement period as additional information is obtained, prepared and analyzed. During fiscal 2019, we analyzed the impacts of the effects of the change in law on our financial results and recorded a finalone-time tax benefit of $0.4 million, primarily resulting from the adjustments to our deferred tax balances arising from business combinations, share-based compensation, losses and accruals and transition tax, thereby reducing our effective tax rate by 0.3% for fiscal 2019.

Profit After Tax

The following table sets forth our profit after tax for the periods indicated:

 

   Year ended March 31,    
   2019  2018  Change 
   (US dollars in millions) 

Profit after tax

  $105.4  $86.4  $19.0 

As a percentage of revenue

   13.0  11.4 

As a percentage of revenue less repair payments(non-GAAP)

   13.3  11.7 

The increase in profit after tax was primarily on account of higher operating profit, higher other income and a decrease in finance expenses, partially offset by an increase in income tax expense, as explained above.

 

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Fiscal 2018 Compared to Fiscal 2017

Revenue

The following table sets forth our revenue and percentage change in revenue for the periods indicated:

 

   Year ended March 31,         
   2018   2017   Change   % Change 
   (US dollars in millions)     

Revenue

  $758.0   $602.5   $155.4    25.8

The increase in revenue of $155.4 million was primarily attributable to (i) an increase in revenue from existing clients of $122.9 million, (ii) revenue from new clients of $30.1 million, and (iii) an increase in hedging gain on our revenue by $2.4 million to $9.2 million in fiscal 2018 from $6.8 million in fiscal 2017. The increase in revenue was primarily due to higher volumes in our healthcare (including due to HealthHelp which we acquired in March 2017), diversified businesses (including due to Denali which we acquired in January 2017), insurance, travel, utilities, shipping and logistics and banking and financial services verticals. The increase was contributed by an appreciation of the pound sterling, AUD and South African rand against the US dollar by an average of 1.4%, 2.8% and 7.8%, respectively, as compared to the respective average exchange rates in fiscal 2017. The increase in revenue was partially offset by a lower volume in our consulting and professional services vertical.

Revenue by Geography

The following table sets forth the composition of our revenue based on the location of our clients in our key geographies for the periods indicated:

 

   Revenue   As a percentage of
Revenue
 
   Year ended March 31, 
   2018   2017   2018  2017 
   (US dollars in millions)        

North America (primarily the US)

  $308.4   $196.2    40.7  32.6

UK

   258.9    248.6    34.2  41.3

Australia

   66.6    49.1    8.8  8.1

Europe (excluding the UK)

   47.2    37.5    6.2  6.2

South Africa

   42.8    42.7    5.7  7.1

Rest of world

   34.0    28.5    4.5  4.7
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $758.0   $602.5    100.0  100.0
  

 

 

   

 

 

   

 

 

  

 

 

 

The increase in revenue in North America (primarily the US) region was primarily attributable to higher volumes in our healthcare (including due to HealthHelp which we acquired in March 2017), diversified businesses (including due to Denali which we acquired in January 2017), insurance, travel, banking and financial services, utilities, shipping and logistics, and consulting and professional services verticals. The increase in revenue from the Australia region was primarily attributable to higher volumes in our insurance, and travel verticals, and an appreciation of the Australian dollar against the US dollar by an average of 2.8%, as compared to the average exchange rates in fiscal 2017, partially offset by a lower volume in our utilities vertical. The increase in revenue from the UK region was primarily attributable to higher volumes in our utilities, healthcare, travel, banking and financial services and diversified businesses verticals, and an appreciation of the pound sterling against the US dollar by an average of 1.4%, as compared to the average exchange rates in fiscal 2017, partially offset by lower volumes in our insurance, and consulting and professional services verticals. The increase in revenue from the Europe (excluding the UK) region was primarily attributable to higher volumes in our healthcare, travel, diversified businesses, and banking and financial services verticals, partially offset by a lower volume in our insurance vertical. The increase in revenue from the South Africa region was primarily attributable to higher volumes in our diversified businesses, and shipping and logistics verticals, and an appreciation of the South African rand against the US dollar by an average of 7.8%, as compared to the average exchange rates in fiscal 2017, partially offset by lower volumes in our utilities, consulting and professional services and banking and financial services verticals. The increase in revenue from the Rest of world region was primarily attributable to higher volumes in our shipping and logistics, and travel verticals, partially offset by a lower volume in our diversified businesses vertical.

Revenue Less Repair Payments(non-GAAP)

The following table sets forth our revenue less repair payments(non-GAAP) and percentage change in revenue less repair payments(non-GAAP) for the periods indicated:

 

   Year ended March 31,         
   2018   2017   Change   % Change 
   (US dollars in million)     

Revenue less repair payments(non-GAAP)

  $741.0   $578.4   $162.5    28.1

 

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The increase in revenue less repair payments(non-GAAP) of $162.5 million was primarily attributable to (i) an increase in revenue less repair payments(non-GAAP) from existing clients of $130.4 million, (ii) revenue less repair payments(non-GAAP) from new clients of $29.8 million, and (iii) an increase in hedging gain on our revenue less repair payments(non-GAAP) by $2.4 million to $9.2 million in fiscal 2018 from $6.8 million in fiscal 2017. The increase in revenue was primarily due to higher volumes in our healthcare (including due to HealthHelp which we acquired in March 2017), diversified businesses (including due to Denali which we acquired in January 2017), insurance, travel, utilities, shipping and logistics and banking and financial services verticals. Further, the increase was also contributed by an appreciation of the pound sterling, AUD and South African rand against the US dollar by an average of 1.4%, 2.8% and 7.8%, respectively, as compared to the respective average exchange rates in fiscal 2017. The increase in revenue was partially offset by a lower volume in our consulting and professional services vertical.

Revenue Less Repair Payments(non-GAAP) by Geography

The following table sets forth the composition of our revenue less repair payments(non-GAAP) based on the location of our clients in our key geographies for the periods indicated:

 

   Revenue less repair payments
(non-GAAP)
   As a percentage of
revenue less repair
payments  (non-GAAP)
 
   Year ended March 31, 
   2018   2017   2018  2017 
   (US dollars in millions)        

North America (primarily the US)

  $308.4   $196.2    41.6  33.9

UK

   241.9    224.5    32.6  38.8

Australia

   66.6    49.1    9.0  8.5

Europe (excluding the UK)

   47.2    37.5    6.4  6.5

South Africa

   42.8    42.7    5.8  7.4

Rest of world

   34.0    28.5    4.6  4.9
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $741.0   $578.4    100  100
  

 

 

   

 

 

   

 

 

  

 

 

 

The increase in revenue less repair payments(non-GAAP) from North America (primarily the US) region was primarily attributable to higher volumes in our healthcare, diversified businesses, insurance, travel, banking and financial services, utilities, shipping and logistics, and consulting and professional services verticals. The increase in revenue less repair payments(non-GAAP) from the Australia region was primarily attributable to higher volumes in our insurance, and travel verticals and an appreciation of the Australian dollar against the US dollar by an average of 2.8%, as compared to the average exchange rates in fiscal 2017, partially offset by a lower volume in our utilities vertical. The increase in revenue less repair payments(non-GAAP) from the UK region was primarily attributable to higher volumes in our utilities, healthcare, travel, banking and financial services and diversified businesses verticals and an appreciation of the pound sterling against the US dollar by an average of 1.4% as compared to the average exchange rate in fiscal 2017, partially offset by a lower volume in our consulting and professional services vertical. The increase in revenue less repair payments(non-GAAP) from the Europe (excluding the UK) region was primarily attributable to higher volumes in our healthcare, travel, diversified businesses verticals, and banking and financial services verticals, partially offset by a lower volume in our insurance vertical. The increase in revenue less repair payments(non-GAAP) from the South Africa region was primarily attributable to higher volumes in our diversified businesses and shipping and logistics verticals, and an appreciation of the South African rand against the US dollar by an average of 7.8% as compared to the average exchange rates in fiscal 2017, partially offset by lower volumes in our utilities, consulting and professional services and banking and financial services verticals. The increase in revenue less repair payments(non-GAAP) from the Rest of world region was primarily attributable to higher volumes in our shipping and logistics, and travel verticals, partially offset by a lower volume in our diversified businesses vertical.

Cost of Revenue

The following table sets forth the composition of our cost of revenue for the periods indicated:

 

   Year ended March 31,    
   2018  2017  Change 
   (US dollars in millions) 

Employee costs

  $329.3  $249.7  $79.6 

Facilities costs

   86.1   72.6   13.5 

Depreciation

   19.5   16.4   3.1 

Repair payments

   17.0   24.1   (7.1

Travel costs

   12.9   10.6   2.4 

Legal and professional costs

   11.9   6.5   5.4 

Other costs

   26.4   23.4   3.0 
  

 

 

  

 

 

  

 

 

 

Total cost of revenue

  $503.1  $403.3  $99.8 
  

 

 

  

 

 

  

 

 

 

As a percentage of revenue

   66.4  66.9 

 

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The increase in cost of revenue was primarily due to higher employee cost on account of higher headcount (including headcount of businesses acquired during the fourth quarter of fiscal 2017), wage inflation and an increase in share-based compensation expense; higher facilities costs on account of the expansion of existing facilities, addition of new facilities in the Philippines, India, China and Romania and the addition of new facilities of acquired businesses; higher legal and professional costs; higher depreciation costs; and higher travel costs. Further, the appreciation of the Indian rupee and South African rand against the US dollar by an average of 3.9% and 7.8%, respectively, in fiscal 2018, as compared to the average exchange rate in fiscal 2017, resulted in an increase of approximately $12.1 million in the cost of revenue. These increases were partially offset by lower repair payments, on account of an overall decrease in revenue from the auto claims segment. Further, the depreciation of the Philippine peso against the US dollar by an average of 5.4% in fiscal 2018, as compared to the average exchange rate in fiscal 2017, resulted in a decrease of approximately $2.1 million in the cost of revenue.

Gross Profit

The following table sets forth our gross profit for the periods indicated:

 

   Year ended March 31,    
   2018  2017  Change 
   (US dollars in millions) 

Gross profit

  $254.8  $199.2  $55.6 

As a percentage of revenue

   33.6  33.1 

As a percentage of revenue less repair payments(non-GAAP)

   34.4  34.4 

Gross profit as a percentage of revenue increased marginally and gross profit as a percentage of revenue less repair payments(non-GAAP) remained constant primarily due to lower cost of revenue as a percentage of revenue and revenue less repair payments(non-GAAP) and an increase in hedging gain on our revenue by $2.4 million to $9.2 million in fiscal 2018 from $6.8 million in fiscal 2017. Cost of revenue as a percentage of revenue and revenue less repair payments(non-GAAP) were lower notwithstanding the appreciation of the Indian rupee and South African rand against the US dollar by an average of 3.9% and 7.8%, respectively, in fiscal 2018, as compared to the average exchange rate for fiscal 2017.

During fiscal 2018, our built up seats increased by 8.5% from 28,008 as at the end of fiscal 2017 to 30,390 as at the end of fiscal 2018 as we added new facilities in the Philippines; Romania; Pune, India and Shanghai, China. We also expanded our facilities in Nashik and Pune, India and Guangzhou, China. Our total headcount increased by 5.8% from 34,547 to 36,540 during the same period. The increase in builtup seats was greater than the increase in headcount, resulting in a decrease in our seat utilization rate from 1.23 in fiscal 2017 to 1.22 in fiscal 2018. This 0.01 decrease in our seat utilization rate decreased our gross profit as a percentage of revenue by approximately 0.1% and decreased our gross profit as a percentage of revenue less repair payments(non-GAAP) by approximately 0.2%.

Selling and Marketing Expenses

The following table sets forth the composition of our selling and marketing expenses for the periods indicated:

 

   Year ended March 31,    
   2018  2017  Change 
   (US dollars in millions) 

Employee costs

  $31.4  $24.7  $6.7 

Other costs

   10.4   7.9   2.5 
  

 

 

  

 

 

  

 

 

 

Total selling and marketing expenses

  $41.8  $32.6  $9.1 
  

 

 

  

 

 

  

 

 

 

As a percentage of revenue

   5.5  5.4 

As a percentage of revenue less repair payments(non-GAAP)

   5.6  5.6 

The increase in selling and marketing expenses was primarily due to an increase in employee costs as a result of an increase in sales headcount, wage inflation, and higher share-based compensation expense; higher travel costs; higher miscellaneous cost and higher marketing costs. Further, the appreciation of the pound sterling and Indian rupee against the US dollar by an average of 1.4% and 3.9% respectively, in fiscal 2018, as compared to the average exchange rate for fiscal 2017, resulted in an increase of approximately $0.3 million of selling and marketing expenses. Our selling and marketing expenses also increased as a result of our acquisitions during the fourth quarter of fiscal 2017.

 

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General and Administrative Expenses

The following table sets forth the composition of our general and administrative expenses for the periods indicated:

 

   Year ended March 31,    
   2018  2017  Change 
   (US dollars in millions) 

Employee costs

  $90.3  $68.9  $21.4 

Other costs

   27.3   22.8   4.5 
  

 

 

  

 

 

  

 

 

 

Total general and administrative expenses

  $117.6  $91.7  $25.9 
  

 

 

  

 

 

  

 

 

 

As a percentage of revenue

   15.5  15.2 

As a percentage of revenue less repair payments(non-GAAP)

   15.9  15.9 

The increase in general and administrative expenses was primarily due to an increase in employee costs as a result of higher salaries on account of a higher headcount, wage inflation and higher share-based compensation, and an increase in other cost as a result of higher travel costs, higher miscellaneous cost and higher legal and professional cost. Further, the appreciation of the Indian rupee and South African rand against the US dollar by an average of 3.9% and 7.8%, respectively, for fiscal 2018, as compared to the respective average exchange rates for fiscal 2017, resulted in an increase of approximately $2.2 million in general and administrative expenses. Our general and administrative expenses also increased as a result of acquisitions during the fourth quarter of fiscal 2017.

Foreign Exchange Loss / (Gains), Net

The following table sets forth our foreign exchange loss / (gains), net for the periods indicated:

 

   Year ended March 31,     
   2018   2017   Change 
   (US dollars in millions) 

Foreign exchange gains, net

  $(15.0  $(14.5  $(0.5

The foreign exchange gains were higher primarily due to higher gains of $8.5 million from our US dollar denominated hedges as a result of an appreciation of the pound sterling against the US dollar and our rupee denominated hedges as a result of an appreciation of the pound sterling against the Indian rupee, partially offset by a higher foreign currency revaluation loss of $8.0 million arising from a loss of $4.1 million for fiscal 2018 as against a gain of $3.9 million for fiscal 2017.

Impairment of Goodwill

 

   Year ended March 31,     
   2018   2017   Change 
   (US dollars in millions) 

Impairment of Goodwill

  $—     $21.7   $  (21.7

We performed an impairment review of the goodwill associated with the companies we had acquired for our auto claims business and recorded an impairment charge of $21.7 million to our results of operations for fiscal 2017. There is no impairment charge recognized in fiscal 2018.

 

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Amortization of Intangible Assets

The following table sets forth our amortization of intangible assets for the periods indicated:

 

   Year ended March 31,     
   2018   2017   Change 
   (US dollars in millions) 

Amortization of intangible assets

  $15.5   $20.5   $(5.0

The decrease in amortization of intangible assets was primarily attributable to the completion of amortization in November 2016 of intangible assets associated with our acquisition of Aviva Global made in July 2008, partially offset by the amortization of intangible assets arising out of our acquisitions of Denali and HealthHelp in January 2017 and March 2017, respectively.

Operating Profit

The following table sets forth our operating profit for the periods indicated:

 

   Year ended March 31,    
   2018  2017  Change 
   (US dollars in millions) 

Operating profit

  $94.9  $47.2  $47.7 

As a percentage of revenue

   12.5  7.8 

As a percentage of revenue less repair payments(non-GAAP)

   12.8  8.2 

Operating profit as a percentage of revenue and revenue less repair payments(non-GAAP) is higher due to higher revenue, no impairment of goodwill in fiscal 2018 as compared to the impairment of goodwill recorded in fiscal 2017, lower amortization expenses and higher foreign exchange gain, partially offset by higher cost of revenue, higher general and administrative expenses and higher selling and marketing expenses, each as described above.

 

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Other Income, Net

The following table sets forth our other income, net for the periods indicated:

 

   Year ended March 31,     
   2018   2017   Change 
   (US dollars in millions) 

Other income, net

  $(11.2  $(8.7  $(2.5

Other income, net is higher in fiscal 2018 as compared with fiscal 2017 due to higher cash and cash equivalents and investments, partially offset by lower interest yield.

Finance Expense

The following table sets forth our finance expense for the periods indicated:

 

   Year ended March 31,     
   2018   2017   Change 
   (US dollars in millions) 

Finance expense

  $4.3   $0.5   $3.7 

Finance expense increased primarily on account of interest on long term loans obtained during the fourth quarter of fiscal 2017 to fund our acquisition of Denali and HealthHelp.

Income Tax Expense

The following table sets forth our income tax expense for the periods indicated:

 

   Year ended March 31,     
   2018   2017   Change 
   (US dollars in millions) 

Income tax expense

  $15.4   $17.5   $(2.1

The decrease in income tax expense was primarily on account of anon-recurring tax benefit of $1.7 million arising from a corporate restructuring and a netnon-recurring tax benefit of $5.2 million resulting from the adjustments to the deferred tax balances due to a reduction in US corporate tax rate and transition tax charge on undistributed income of a foreign subsidiary (pursuant to the 2017 US Tax Reforms), partially offset by higher taxable profits during the year.

Profit After Tax

The following table sets forth our profit after tax for the periods indicated:

 

   Year ended March 31,    
   2018  2017  Change 
   (US dollars in millions) 

Profit after tax

  $86.4  $37.8  $48.7 

As a percentage of revenue

   11.4  6.3 

As a percentage of revenue less repair payments(non-GAAP)

   11.7  6.5 

The increase in profit after tax was primarily on account of higher operating profit, higher other income and a decrease in income tax expense partially offset by an increase in finance expense, as explained above.

 

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Results by Reportable Segment

For purposes of evaluating operating performance and allocating resources, we have organized our company by operating segments. See note 28 to our consolidated financial statements included elsewhere in this annual report. For financial statement reporting purposes, we aggregate the segments that meet the criteria for aggregation as set forth in IFRS 8 “Operating Segments” (“IFRS 8”). We have separately reported our Auto Claims BPM segment, as it does not meet the aggregation criteria under IFRS 8. Accordingly, pursuant to IFRS 8, we have two reportable segments: WNS Global BPM and WNS Auto Claims BPM.

WNS Global BPM is delivered out of our delivery centers in China, Costa Rica, India, the Philippines, Poland, Romania, South Africa, Spain, Sri Lanka, Turkey, the UK and the US. This segment includes all of our business activities with the exception of WNS Auto Claims BPM. WNS Auto Claims BPM is our automobile claims management business which is primarily based in the UK and is part of our insurance business unit. See “Part I — Item 4. Information on the Company — B. Business Overview — Business Process Management Service Offerings.” We report WNS Auto Claims BPM as a separate segment for financial statement reporting purposes since a substantial part of our reported revenue in this business consists of amounts invoiced to our clients for payments made by us to third party automobile repair centers, resulting in lower long-term gross margins when measured on the basis of revenue, relative to the WNS Global BPM segment.

Our revenue is generated primarily from providing business process management services.

 

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In our WNS Auto Claims BPM segment, we provide both “fault” and“non-fault” repairs. For “fault” repairs, we provide claims handling and repair management services, where we arrange for automobile repairs through a network of third party repair centers. In our repair management services, where we act as the principal in our dealings with the third party repair centers and our clients, the amounts which we invoice to our clients for payments made by us to third party repair centers are reported as revenue. Where we are not the principal in providing the services, we record revenue from repair services net of repair cost. Since we wholly subcontract the repairs to the repair centers, we evaluate the financial performance of our “fault” repair business based on revenue less repair payments(non-GAAP) to third party repair centers, which is anon-GAAP financial measure. We believe that revenue less repair payments(non-GAAP) for “fault” repairs reflects more accurately the value addition of the business process management services that we directly provide to our clients.

For our“non-fault” repairs business, we generally provide a consolidated suite of accident management services including credit hire and credit repair, and we believe that measurement of such business on a basis that includes repair payments in revenue is appropriate. Revenue including repair payments is therefore used as a primary measure to allocate resources and measure operating performance for accident management services provided in our“non-fault” repairs business. Our“non-fault” repairs business where we provide accident management services accounts for a relatively small portion of our revenue for our WNS Auto Claims BPM segment. In our WNS Auto Claims BPM segment, effective July 1, 2015, WNS Legal Assistance LLP, a subsidiary of WNS Assistance Limited, commenced providing legal services in relation to personal injury claims.

Revenue less repair payments is anon-GAAP financial measure which is calculated as (a) revenue less (b) in our auto claims business, payments to repair centers for “fault” repair cases where we act as the principal in our dealings with the third party repair centers and our clients. Thisnon-GAAP financial information is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Our revenue less repair payments(non-GAAP) may not be comparable to similarly titled measures reported by other companies due to potential differences in the method of calculation.

We allocate resources based on segment revenue less repair payments(non-GAAP) and measures segment performance based on revenue less repair payments(non-GAAP) and to a lesser extent on segment operating income. The accounting policies of our reportable segments are the same as those of our company. See “— Critical Accounting Policies.”

We may in the future change our reportable segments based on how our business evolves.

The following table shows revenue and revenue less repair payments(non-GAAP) for our two reportable segments for the periods indicated:

 

   Year ended March 31, 
   2019  2018  2017 
   WNS
Global
BPM
  WNS
Auto
claims
BPM
  WNS
Global
BPM
  WNS
Auto
claims
BPM
  WNS
Global
BPM
  WNS
Auto
claims
BPM
 

Segment revenue(1)

  $774.3  $34.9  $722.6  $35.4  $558.0  $44.6 

Less: Payments to repair centers

   —    15.2   —     17.0   —     24.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Revenue less repair payments(non-GAAP) (1)

   774.3   19.7   722.6   18.4   558.0   20.5 

Cost of revenue (excluding payments to repair centers) (2)

   483.5   15.3   468.0   14.4   361.0   15.6 

Impairment of Goodwill

   —     —    —     —     —     21.7 

Other costs(3)

   124.9   4.4   113.6   4.1   84.7   4.9 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Segment operating profit / (loss)

   165.9   (0.0  141.1   (0.1  112.3   (21.6

Other income, net

   (12.6  (2.0  (9.8  (1.5  (7.8  (0.9

Finance expense

   3.2   0.0   4.1   0.2   0.5   —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Segment profit before income taxes

   175.3   2.0   146.8   1.2   119.5   (20.7

Income tax expense

   25.5   0.2   15.3   0.1   17.4   0.1 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Segment profit / (loss)

  $149.8  $1.8  $131.5  $1.1  $102.1  $(20.8
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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Notes:

 

(1)

Segment revenue and revenue less repair payments(non-GAAP) include inter-segment revenue of $0.1 million for each of fiscal 2019, 2018 and 2017.

(2)

Cost of revenue includes inter-segment expenses of $0.1 million for each of fiscal 2019, 2018 and 2017, and excludes share-based compensation expense of $4.3 million for fiscal 2019, $3.8 million for fiscal 2018 and $2.8 million for fiscal 2017, which are not allocable between our segments.

(3)

Other costs include selling and marketing expenses, general and administrative expenses and foreign exchange gain/loss. Excludes share-based compensation expense of $26.0 million for fiscal 2019, $26.8 million for fiscal 2018 and $20.3 million for fiscal 2017, which are not allocable between our segments.

WNS Global BPM accounted for 95.7% of our revenue and 97.5% of our revenue less repair payments(non-GAAP) in fiscal 2019 as compared to 95.3% of our revenue and 97.5% of our revenue less repair payments(non-GAAP) in fiscal 2018 and 92.6% of our revenue and 96.4% of our revenue less repair payments(non-GAAP) in fiscal 2017.

WNS Global BPM

Segment Revenue

Fiscal 2019 Compared to Fiscal 2018

Revenue in the WNS Global BPM segment increased by 7.2% to $774.3 million in fiscal 2019 from $722.6 million in fiscal 2018. This increase was primarily attributable to the increase in the volume of transactions executed for existing and new clients, with $45.0 million being attributable to existing clients and $15.8 million being attributable to new clients. This increase was partially offset by decrease in hedging gain on our revenue by $9.1 million to $0.1 million in fiscal 2019 from $9.2 million in fiscal 2018. The increase was also partially offset by a depreciation of the pound sterling, AUD and South African rand against the US dollar by an average of 0.9%, 5.8% and 6.0%, respectively, as compared to the respective average exchange rates in fiscal 2018.

Fiscal 2018 Compared to Fiscal 2017

Revenue in the WNS Global BPM segment increased by 29.5% to $722.6 million in fiscal 2018 from $558.0 million in fiscal 2017. This increase was primarily attributable to the increase in the volume of transactions executed for existing and new clients, with $132.8 million being attributable to existing clients, including revenue from clients of acquired businesses and $29.4 million being attributable to new clients. In addition, we had an increase in hedging gain on our revenue by $2.4 million to $9.2 million in fiscal 2018 from $6.8 million in fiscal 2017. The increase was contributed by an appreciation of the pound sterling and South African rand against the US dollar by an average of 1.4% and 7.8%, respectively, as compared to the respective average exchange rates in fiscal 2017.

Segment Operating Profit

Fiscal 2019 Compared to Fiscal 2018

Segment operating profit in the WNS Global BPM segment increased by 17.6% to $165.9 million in fiscal 2019 from $141.0 million in fiscal 2018. The increase was primarily attributable to higher segment revenue and lower general and administrative expenses, partially offset by lower foreign exchange gains, higher cost of revenue, and higher selling and marketing expenses.

Our cost of revenue includes employee costs, facilities costs, depreciation, legal and professional costs, travel costs and other related costs. Employee related costs represent the largest component of our cost of revenue for the WNS Global BPM segment. Our cost of revenue increased by $15.6 million to $483.5 million in fiscal 2019 from $468.0 million in fiscal 2018, primarily on account of (i) an increase in employee costs by $16.6 million on account of higher headcount and (ii) an increase in depreciation cost by $0.5 million, partially offset by a decrease in travel costs by $1.1 million. Our cost of revenue increased notwithstanding that the depreciation of the Indian rupee, South African rand and Philippine peso against the US dollar by an average of 8.5%, 6.0% and 4.2%, respectively, in fiscal 2019, as compared to the respective average exchange rates in fiscal 2018, reduced our cost of revenue by approximately $22.2 million.

Our other costs include selling and marketing expenses, general and administrative expenses and foreign exchange loss or gain. Our other costs increased by $11.3 million to $124.9 million in fiscal 2019 from $113.6 million in fiscal 2018, primarily on account of (i) a decrease in foreign exchange gain by $10.2 million, and (ii) an increase in selling and marketing expenses by $1.5 million, partially offset by a decrease in general and administrative expenses by $0.4 million.

The foreign exchange gains were lower primarily due to higher loss of $22.7 million from our US dollar denominated hedges as a result of a depreciation of the pound sterling against the US dollar and our rupee denominated hedges as a result of a depreciation of the Indian rupee against the US dollar, partially offset by a higher foreign currency revaluation gain of $12.2 million arising from a gain of $8.1 million for fiscal 2019 as against a loss of $4.1 million for fiscal 2018.

Selling and marketing expenses increased by $1.5 million to $40.2 million in fiscal 2019 from $38.7 million in fiscal 2018, primarily due to an increase in employee costs and higher travel costs, partially offset by lower legal and professional costs. Further, the depreciation of the pound sterling, Australian dollar and Indian rupee against the US dollar by an average of 0.9%, 5.8% and 8.5% respectively, in fiscal 2019, as compared to the average exchange rates for fiscal 2018, resulted in a decrease in selling and marketing expenses.

General and administrative expenses decreased by $0.4 million to $89.2 million in fiscal 2019 from $89.6 million in fiscal 2018, primarily due to a decrease in employee costs, lower legal and professional expenses, higher other costs, and lower travel costs. Further, the depreciation of the Indian rupee, South African rand and Philippine peso against the US dollar by an average of 8.5%, 6.0% and 4.2%, respectively, for fiscal 2019, as compared to the respective average exchange rates for fiscal 2018, resulted in a decrease in general and administrative expenses.

 

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Fiscal 2018 Compared to Fiscal 2017

Segment operating profit in the WNS Global BPM segment increased by 25.6% to $141.0 million in fiscal 2018 from $112.3 million in fiscal 2017. The increase was primarily attributable to higher segment revenue and higher foreign exchange gains, partially offset by higher cost of revenue, higher general and administrative expenses and higher selling and marketing expense.

Our cost of revenue includes employee costs, facilities costs, depreciation, legal and professional costs, travel costs and other related costs. Employee related costs represent the largest component of our cost of revenue for the WNS Global BPM segment. Our cost of revenue increased by $106.9 million to $468.0 million in fiscal 2018 from $361.0 million in fiscal 2017, primarily on account of (i) an increase in employee costs by $78.4 million on account of higher headcount, (ii) an increase in facilities costs by $23.9 million due to an expansion of our existing facility in Pune, India, and the addition of new facilities in Pune and Vishakhapatnam, India and Philippines, (iii) an increase in depreciation cost by $3.1 million, and (iv) an increase in travel costs by $2.4 million. Also, the appreciation of the Indian rupee and South African rand against the US dollar by an average of 3.9% and 7.8%, respectively, in fiscal 2018, as compared to the respective average exchange rates in fiscal 2017, resulted in a higher cost of revenue of approximately $12.1 million.

Our other costs include selling and marketing expenses, general and administrative expenses and foreign exchange loss or gain. Our other costs increased by $28.8 million to $113.6 million in fiscal 2018 from $84.7 million in fiscal 2017, primarily on account of (i) an increase in general and administrative expenses by $20.7 million, and (ii) an increase in selling and marketing expenses by $8.2 million, partially offset by an increase in foreign exchange gain by $0.1 million.

General and administrative expenses increased by $20.7 million to $89.6 million in fiscal 2018 from $68.9 million in fiscal 2017, primarily due to an increase in employee costs as a result of higher salaries on account of a higher headcount and wage inflation, higher legal and professional expenses (including costs related to our acquisitions), higher other costs, and higher travel costs. Further, the appreciation of the Indian rupee and South African rand against the US dollar by an average of 3.9% and 7.8%, respectively, for fiscal 2018, as compared to the respective average exchange rates for fiscal 2017, resulted in an increase in general and administrative expenses.

 

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Selling and marketing expenses increased by $8.2 million to $38.7 million in fiscal 2018 from $30.5 million in fiscal 2017, primarily due to an increase in employee costs as a result of an increase in sales headcount and higher travel costs. Further, the appreciation of the pound sterling and Indian rupee against the US dollar by an average of 1.4% and 3.9% respectively, in fiscal 2018, as compared to the average exchange rate for fiscal 2017, resulted in an increase in selling and marketing expenses.

The foreign exchange gains were primarily due to higher gains of $8.5 million from our US dollar denominated hedges as a result of an appreciation of the pound sterling against the US dollar and our rupee denominated hedges as a result of an appreciation of the pound sterling against the Indian rupee, partially offset by a higher foreign currency revaluation loss of $8.0 million arising from a loss of $4.1 million for fiscal 2018 as against a gain of $3.9 million for fiscal 2017

Segment Profit

Fiscal 2019 Compared to Fiscal 2018

Segment profit in the WNS Global BPM segment increased by 14.0% to $149.8 million in fiscal 2019 from $131.4 million in fiscal 2018. The increase in profit was primarily attributable to higher operating profit, higher other income, net and lower finance expense, partially offset by higher income tax expense.

The other income, net increased by $2.8 million in fiscal 2019 to $12.6 million from $9.8 million in fiscal 2018 primarily due to higher yield on account of moving our liquid mutual fund investments from a dividend scheme to a growth scheme and higher yield on our cash and cash equivalents and investments.

The finance expense for fiscal 2019 was $3.2 million as compared to $4.1 million in fiscal 2018 primarily due to lower interest on reduced balance outstanding on our long term loans obtained to fund our acquisitions of Denali and HealthHelp as we pay down the loans.

The income tax expense in fiscal 2019 was $25.5 million as compared to $15.3 million in fiscal 2018. The increase in income tax expense was primarily due to (i) higher taxable profits in fiscal 2019, (ii) a lowernon-recurring tax benefit of $0.4 million for the fiscal 2019 as against the provisional amount of $5.2 million recorded for fiscal 2018 arising from the 2017 US Tax Reforms, which reduced the US corporate tax rate on the deferred tax balances, and (iii) anon-recurring tax benefit of $1.7 million resulting from a corporate restructuring for fiscal 2018. This increase was partially offset by aone-time tax credit of $0.9 million on account of recognition of deferred tax assets on past tax losses for fiscal 2019.

Fiscal 2018 Compared to Fiscal 2017

Segment profit in the WNS Global BPM segment increased by 28.7% to $131.4 million in fiscal 2018 from $102.1 million in fiscal 2017. The increase in profit was primarily attributable to higher operating profit, lower income tax expense and higher other income, net, partially offset by higher finance expense.

The other income, net increased by $2.0 million in fiscal 2018 to $9.8 million from $7.8 million in fiscal 2017 primarily due to higher cash and cash equivalents and investments, partially offset by lower interest yield and earnings due to funds utilized for our share repurchases in fiscal 2018.

The finance expense for fiscal 2018 was $4.1 million as compared to $0.5 million in fiscal 2017 primarily due to interest on long term loans obtained during the fourth quarter of fiscal 2017 to fund our acquisitions of Denali and HealthHelp.

Income tax expense in fiscal 2018 was $15.3 million as compared to $17.4 million in fiscal 2017. Income tax expense was lower primarily on account of aone-time tax benefit of $1.7 million arising from a corporate legal restructuring and a netone-time tax benefit $5.2 million resulting from the adjustments to the deferred tax balances due to a reduction in US corporate tax rate and transition tax charge on undistributed income of a foreign subsidiary (pursuant to the 2017 US Tax Reforms), partially offset by higher taxable profits during the year.

 

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WNS Auto Claims BPM

Segment Revenue

Fiscal 2019 Compared to Fiscal 2018

Revenue in the WNS Auto Claims BPM segment decreased by $0.5 million to $34.9 million in fiscal 2019 from $35.4 million in fiscal 2018. The decrease was primarily on account of a decrease in revenue from existing clients of $2.0 million, partially offset by an increase in revenue from new clients by $1.5 million. The decrease was also on account of a depreciation of the pound sterling against the US dollar by an average of 0.9% in fiscal 2019 as compared to the average exchange rate in fiscal 2018. Payments made to repair centers in fiscal 2019 decreased by $1.8 million to $15.2 million in fiscal 2019 from $17.0 million in fiscal 2018.

Revenue less repair payments(non-GAAP) in this segment increased by $1.3 million to $19.7 million in fiscal 2019 from $18.4 million in fiscal 2018. The increase was primarily on account of an increase in revenue from new clients by $0.8 million and an increase in revenue from existing clients of $0.5 million. The increase was partially offset by a depreciation of the pound sterling against the US dollar by an average of 0.9% in fiscal 2019 as compared to the average exchange rate in fiscal 2018.

Fiscal 2018 Compared to Fiscal 2017

Revenue in the WNS Auto Claims BPM segment decreased by $9.2 million to $35.4 million in fiscal 2018 from $44.6 million in fiscal 2017. The decrease was primarily on account of a decrease in revenue from existing clients of $9.9 million, partially offset by an increase in revenue from new clients by $0.7 million. The increase was also on account of an appreciation of the pound sterling against the US dollar by an average of 1.4% in fiscal 2018 as compared to the average exchange rate in fiscal 2017. Payments made to repair centers in fiscal 2018 decreased by $7.1 million to $17.0 million in fiscal 2018 from $24.1 million in fiscal 2017.

Revenue less repair payments(non-GAAP) in this segment decreased by $2.1 million to $18.4 million in fiscal 2018 from $20.5 million in fiscal 2017. The decrease was primarily on account of a decrease in revenue from existing clients of $2.5 million, partially offset by an increase in revenue from new clients by $0.4 million. The increase was also on account of an appreciation of the pound sterling against the US dollar by an average of 1.4% in fiscal 2018 as compared to the average exchange rate in fiscal 2017.

Segment Operating Profit

Fiscal 2019 Compared to Fiscal 2018

The segment reported an operating loss of $0.04 million in fiscal 2019 as compared to a loss of $0.08 million in fiscal 2018. The lower segment operating loss recorded in fiscal 2019 was primarily due to higher revenue less repair payments(non-GAAP) and lower selling and marketing costs, partially offset by higher cost of revenue (excluding payments to repair centers), lower foreign exchange gains and higher general and administrative expenses.

Our cost of revenue (excluding payments to repair centers) increased by $0.8 million to $15.3 million in fiscal 2019 from $14.4 million in fiscal 2018. The increase in cost of revenue (excluding payments made to repair centers) was primarily on account of an increase in our employee costs by $1.3 million, partially offset by a decrease in facilities cost by $0.3 million.

Our other costs include selling and marketing expenses, general and administrative expenses, and foreign exchange loss or gain. Our other costs increased by $0.4 million to $4.4 million in fiscal 2019 from $4.0 million in fiscal 2018, primarily on account of a decrease in foreign exchange gains by $0.3 million and an increase in general and administrative expenses by $0.2 million to $4.0 million in fiscal 2019 from $3.8 million in fiscal 2018, partially offset by a decrease in selling and marketing expenses by $0.1 million.

Fiscal 2018 Compared to Fiscal 2017

The segment reported an operating loss of $0.1 million in fiscal 2018 as compared to a loss of $21.6 million in fiscal 2017. The lower segment operating loss recorded in fiscal 2018 was primarily due to anon-recurring expense of impairment of goodwill recognized in fiscal 2017. The lower segment operating loss was also in part due to lower cost of revenue (excluding payments to repair centers), lower general and administrative expenses and higher foreign exchange gains, partially offset by lower revenue less repair payments(non-GAAP).

Our cost of revenue (excluding payments to repair centers) decreased by $1.2 million to $14.4 million in fiscal 2018 from $15.6 million in fiscal 2017. The decrease in cost of revenue (excluding payments made to repair centers) was primarily on account of a decrease in our employee costs by $0.8 million, and a decrease in facilities cost by $0.1 million.

 

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Our other costs include selling and marketing expenses, general and administrative expenses, and foreign exchange loss or gain. Our other costs decreased by $0.9 million to $4.0 million in fiscal 2018 from $4.9 million in fiscal 2017, primarily on account of a decrease in general and administrative expenses by $0.5 million to $3.8 million in fiscal 2018 from $4.3 million in fiscal 2017, partially offset by an increase in foreign exchange gains by $0.3 million.

Segment Profit

Fiscal 2019 Compared to Fiscal 2018

The segment reported a gain of $1.8 million in fiscal 2019 as compared to a gain of $1.1 million in fiscal 2018. This was primarily attributable to lower finance expenses and higher other income, net in fiscal 2019 of $2.0 million as compared to $1.5 million in fiscal 2018, partially offset by higher segmental operating losses and higher income tax expense in fiscal 2019 of $0.2 million as compared to $0.1 million in fiscal 2018.

Fiscal 2018 Compared to Fiscal 2017

The segment reported a gain of $1.1 million in fiscal 2018 as compared to a loss of $20.8 million in fiscal 2017. This was primarily attributable to lower segmental operating losses and higher other income, net in fiscal 2018 of $1.5 million as compared to $0.9 million in fiscal 2017. Income tax expense in fiscal 2018 remained flat at $0.1 million.

 

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Quarterly Results

The following table presents unaudited quarterly financial information for each of our last eight fiscal quarters on a historical basis. We believe the quarterly information contains all adjustments necessary to fairly present this information. As a business process management services provider, we anticipate and respond to demand from our clients. Accordingly, we have limited control over the timing and circumstances under which our services are provided. Typically, we show a decrease in our first quarter operating profit margins as a result of salary increases. For these and other reasons, we can experience variability in our operating results from quarter to quarter. The operating results for any quarter are not necessarily indicative of the results for any future period.

 

   Fiscal 2019  Fiscal 2018 
   Three months ended  Three months ended 
   March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
 
   (Unaudited, US dollars in millions) 

Revenue

  $210.5  $199.7  $199.1  $199.8  $202.7  $188.6  $186.5  $180.1 

Cost of revenue

   131.1   125.2   129.0   132.9   128.4   124.4   125.5   124.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

   79.4   74.5   70.1   66.9   74.3   64.1   61.0   55.4 

Operating expenses:

         

Selling and marketing expenses

   11.3   10.9   11.3   11.1   11.8   10.6   10.3   9.0 

General and administrative expenses

   31.3   28.2   27.9   27.9   30.5   28.3   31.3   27.5 

Foreign exchange loss / (gains), net

   0.5   (1.9  (1.9  (1.3  (1.4  (4.4  (4.4  (4.8

Amortization of intangible assets

   3.9   3.9   4.0   3.9   4.0   3.9   3.7   3.9 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating profit

   32.3   33.4   28.8   25.3   29.4   25.7   20.1   19.8 

Other income, net

   (4.6  (3.6  (3.0  (3.3  (3.6  (2.5  (2.4  (2.8

Finance expense

   0.7   0.8   0.8   0.8   1.1   1.0   1.0   1.1 

Income tax expense

   6.5   7.6   6.2   5.4   7.3   0.9   2.5   4.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit after tax

   29.7   28.6   24.8   22.4   24.5   26.3   18.9   16.7 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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The following table sets forth for the periods indicated selected consolidated financial data:

 

   Fiscal 2019  Fiscal 2018 
   Three months ended  Three months ended 
   March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
 
   (Unaudited) 

Gross profit as a percentage of revenue

   37.7  37.3  35.2  33.5  36.7  34.0  32.7  30.7

Operating profit as a percentage of revenue

   15.3  16.7  14.5  12.6  14.5  13.6  10.8  11.0

Gross profit as a percentage of revenue less repair payments(non-GAAP)

   38.4  38.1  35.9  34.1  37.5  34.6  33.5  31.6

Operating profit as a percentage of revenue less repair payments(non-GAAP)

   15.6  17.0  14.7  12.9  14.8  13.9  11.0  11.3

The following table reconciles our revenue to revenue less repair payments (anon-GAAP measure):

 

   Fiscal 2019   Fiscal 2018 
   Three months ended   Three months ended 
   March 31,
2019
   December 31,
2018
   September 30,
2018
   June 30,
2018
   March 31,
2018
   December 31,
2017
   September 30,
2017
   June 30,
2017
 
   (Unaudited, US dollars in millions) 

Revenue

  $210.5   $199.7   $199.1   $199.8   $202.7   $188.6   $186.5   $180.1 

Less: Payments to repair centers

   3.9    3.9    3.6    3.7    4.5    3.4    4.2    4.8 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue less repair payments(non-GAAP)

  $206.6   $195.9   $195.5   $196.0   $198.2   $185.2   $182.3   $175.3 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Contractual Obligations

Our principal commitments consist of expected principal cash payments relating to our obligations under debt and operating leases for office space, which represent minimum lease payments for office space, and purchase obligations for property and equipment. The following table sets out our total future contractual obligations as at March 31, 2019 on a consolidated basis:

 

   Payments Due By Period 
   Total   Less than
1 year
   1-3 years   3-5 years   More
than 5
years
 
   (US dollars in thousands) 

Long term debt (before netting off debt issuance costs)

   61,800    28,200    33,600    —      —  

Estimated interest payments(1)

   2,722    1,523    1,199    —      —  

Trade payables

   17,831    17,831    —     —      —  

Operating leases

   161,919    30,505    54,534    41,951    34,929 

Purchase obligations (net of capital advances)

   10,778    10,778    —     —     —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $255,050   $88,837   $<