SINGAPORE -- A Singaporean company that quietly supports some of the world's 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 (BPO), raised around $400 million in its initial public offering on the New York Stock Exchange on Oct. 1. It was the biggest U.S. IPO by a Southeast Asian company since Singaporean e-commerce group Sea's 2017 debut, according to QUICK-FactSet.
Two weeks into trading, its share price is up more than 30% with the company now valued at about $3.7 billion, 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 corporate clients in Asia as homegrown 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 holiday rental platform Airbnb.
TDCX debuted on the New York Stock Exchange on Oct. 1. (Photo courtesy of TDCX)
Outsourcing companies tend to be based in the Philippines or India, where many low-cost English-speaking workers or IT technicians are available.
TDCX does have a presence in the Philippines -- about 5,400 of its 13,000 employees as of June were based there -- to serve North America and other English-speaking markets, but it 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, Romania and Colombia.
The company's broad reach allows it to handle complex jobs, such as those requiring multilingual services, according to TDCX, a point of difference from traditional call center businesses. For example, it helps Airbnb facilitate communication between guests and hosts who speak different languages.
Apart from customer service, 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-facing tech companies and their corresponding need for customer support. "When they come to us, they always come a bit in a hurry" to scale up their businesses, Junique said.
Meanwhile, its strong IPO and subsequent share price rise reflect not only TDCX's own healthy financial performance but also growing investor interest in business-to-business tech companies. TDCX has reported net profit for at least three consecutive years through 2020, according to its IPO document. It also reported a $33 million net profit for the first half of 2021, up 16% from a year earlier.
In contrast, companies on the frontlines of Southeast Asia's digital space have a tougher path to profitability, with heavy spending -- especially on customer acquisition -- needed to maintain growth. Sea reported a net loss of $856 million for 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 startups are now looking to list on the NYSE or Nasdaq to access global investors. But the only one to complete a U.S. IPO is Sea, which is now the region's most valuable listed company.
Junique, who is from France and founded TDCX in Singapore in 1995, said his company's IPO plan was delayed by the pandemic hitting the outsourcing industry. Clients in the tourism sector suffered from travel restrictions, while BPO companies had to adapt to a new work-from-home model. Still, TDCX reported higher revenue and profit last year, thanks to demand from clients in other sectors.
With the world starting to come out of the pandemic, "the IPO timing is probably quite good," said the CEO, who holds 84.8% of shares in the company after the listing.
Now that TDCX has gone public, it plans to expand further. Previously most of its clients have come from North America, but Junique said more are now coming from Southeast Asia. The region accounted for nine of the 15 new clients TDCX acquired this year through September, including a fintech company. "It's a new trend that started about two years ago," he said of the regional shift.
The global BPO market is forecast to grow to $284.9 billion in 2027 at a compound annual growth rate of 4%, according to Krishna Baidya, a director at business consultancy Frost & Sullivan.
Baidya pointed out two critical trends for 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," he said. "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."
Given the ongoing economic volatility, uncertainty and changing demand patterns due to the pandemic and other factors, BPO providers need to expand services by incorporating digital solutions that use, among other things, big data and cloud-based technologies, Baidya said. "Their ability to offer a wider range of business solutions would decide their ability to attract existing or new clients and future success."
