SINGAPORE - A Singaporean company that quietly supports some of the best-known digital tech brands enjoyed a moment in the limelight when it went public in New York this month, beating Grab, GoTo and other more visible Southeast Asian unicorns to a U.S. stock market debut.
TDCX, a provider of business process outsourcing, raised around $400 million in its initial public offering on the New York Stock Exchange on Oct. 1. It was the biggest IPO by a Singaporean company since the Singaporean e-commerce group Sea's 2017 debut, according to QUICK-FactSet.
Two weeks after trading, its share price is up more than 30% with the company valued at $3.7 billion now, a reflection of investor interest in firms supporting Southeast Asia's wave of digitization.
CEO Laurent Junique told Nikkei Asia that TDCX is set to attract more homegrown clients in Asia as corporate tech companies scale up their businesses on the back of rapid digitalization. There is a lot of momentum in the market we operate in, he said, especially in Southeast Asia. TDCX - short for transformative digital customer experiences - offers customer services on behalf of corporate clients. It had 43 clients as of June, including FACEbook and Airbnb holiday rental platform.
Outsourcing companies tend to be based in India or the Philippines where many low-cost English-speaking staff or IT technicians are available.
TDCX has a presence in the Philippines - approximately 5,400 of its 13,000 employees were there as of June - to serve North America and other English-speaking markets, but also operates in several other countries. Singapore, Malaysia and Thailand each have over 1,000 employees, while the company also has a footprint in Japan, China, India, Spain, Portugal and Colombia.
The company's broad reach allows it to handle complex jobs, such as those requiring traditional services, according to TDCX, a point of difference from multilingual call centers companies. For example, it helps Airbnb facilitate communication between guests and hosts who speak different languages.
Besides customer support, TDCX also offers content monitoring for social media platforms to help create a safe online environment.
TDCX has benefitted from the rapid growth of the region's consumer tech companies and their corresponding need for customer support. When they came to us, they always come a bit in a hurry to scale up their business, Junique said.
The explosive IPO and subsequent share price increases also reflect TDCX's financial performance, but also an organic investor interest in business-to-business tech companies. TDCX reported the net profit for at least three consecutive years through 2020, according to its IPO document. In the first half of 2021, it reported net revenue of $33 million, up 16% compared to last year.
In contrast, companies on the frontline of Southeast Asia's digital space are a tougher path to profitability, with heavy spending - especially on customer acquisition - needed to maintain growth. Grab reported a net loss of $856 million in the first half of 2021, while Singaporean superapp unicorn Grab reported a net loss of $1.46 billion for the same period.
Many of Southeast Asia's most prominent companies are now looking to enter the NYSE or Nasdaq to access global investors. Nonetheless, the only one to make a U.S. IPO is Sea which is now the region's most valuable listed company.
Junique, from Singapore and founded TDCX in 1995, said his company's IPO plan was delayed by the pandemic hitting the outsourcing industry. Clients in the tourism sector had travel restrictions, while BPO companies had to adapt to a new work-from-home model. However, TDCX reported higher revenue and profits in the last year due to demand from clients in other sectors.
With the world beginning to come out of the pandemic, the timing of an IPO is probably quite good, said the CEO, who holds 84.8% shares in the company after the listing.
Now that TDCX is publicly traded, it plans to expand further. Most of its clients come from Southeast Asia, but Junique said that more are coming from North America now. The region accounted for nine of the 15 new clients TDCX acquired in September 2015, including a fintech company. It's a regional trend that started about two years ago, he said of the new shift.
In 2027, the BPO market is forecast to grow to $284.9 billion at a compound annual growth rate of 4%, according to Krishna Baidya, a director from business consultancy Frost Sullivan.
Baidya pointed out two critical trends in the industry. As social distancing measures limited physical encounters, the relationship between brands and consumers became mostly remote, driving businesses to transform and be digital-first, increasing demand for digital and remote services, said he. Second, the pandemic brought new hurdles to run business and transform quickly, enable and manage remote operations, orchestrate several technologies to thrive in the environment, deliver high-quality customer experiences and strike a delicate balance of cash flow. Their ability to offer a wider range of business solutions would decide their ability to attract current or new clients and future success.