Accenture Wins New Deal

Zacks

Accenture (ACN) will provide business process outsourcing and IT services to Janalakshmi Financial Services (:JFS), a microfinance company in India.

Per the five-year agreement, Accenture will manage JFS’ operations and help it to serve its customers better. Reportedly, JFS primarily operates in the urban areas and has INR 12 billion in assets under management. JFS’ operations are spread across 12 states in India and the company has approximately 1 million borrowers.

The microfinance market in India is expected to grow at a CAGR of 23.49% over the 2012–2016 period, according to Research and Markets. Moreover, these microfinance companies require operation upgrades for expansion and better client servicing. Consulting and outsourcing service providers, such as Accenture and Cognizant (CTSH), should be able to capitalize on the enormous growth opportunity.

Accenture is regularly enhancing its client base, which has helped the company to record strong bookings and witness robust growth performance across insurance, banking and healthcare segments.

Moreover, the company has resorted to strategic acquisitions to diversify its offerings and expand its operating markets. Its strong cash balance ($5.63 billion) and robust operating cash flow ($1.27 billion in the fourth quarter of 2013) enables the company to look for strategic acquisitions. Accenture has already acquired nine companies in 2013, the latest being Procurian for $375 million from ICG Group, Inc. (ICGE).

However, a constricted spending environment and Accenture’s broad European exposure may temper its growth prospects to some extent. Moreover, competition from Cognizant and International Business Machines (IBM) are expected to remain the headwinds for the company, going forward.

Currently, Accenture has a Zacks Rank #3 (Hold).

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