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LPO outfits set to profit

Subprime Crisis In US Increases Opportunities For Legal Process Outsourcing To India
Balaram Keelapattu | TNN

Hyderabad: Subprime might be a bad word in the financial world particularly after some financial institutions in the US having to face rough weather due to their transactions in the segment.

But, there is a flip side to the story too. The subprime crisis in the US is actually resulting in increased business opportunity for the legal process outsourcing (LPO) outfits in the country.

Generally, subprime is an activity of lending money at higher interest rates to individuals with lessthan-perfect credit history.

Some of the major financial institutions in the US have landed in trouble due to the issues related to recovery of such advances and are trying out various methods including legal options to clean their records. Though in its nascent stage, the Indian legal process outsourcing segment is finding an unexpected business opportunity in the subprime crisis. Though the LPO sector is stated be of mere $146 million in size, it is expected to cross $640 million by 2010.

Add to it LPOs' keenness to partake of banking and financial services pie at over $3 billion, the outlook is promising say some CEOs. Though the work is not high-end, nevertheless it is an opportunity that the LPOs could ill-afford to miss is their refrain. Says Sumeet Nath, cofounder of Chennai-based Lawwave: "As a fallout of subprime crisis, the US companies will outsource more work to India to cut down costs. Paralegal functions like due diligence, study of credit history and legal litigations faced by prospective customers, business origination and the like, which are hitherto the domain of BPOs, can come our way, as the US industry steps up degree of vigilance. For LPOs doing highend work like litigation support, it's a value-addition."

According to Abhi Shah, CEO of Clutch Group, "the largest opportunity in the subprime fiasco will be in litigation support for the myriad of lawsuits and regulatory investigations in the works. I think the opportunities will be in three major areas: Defense of mortgage lenders against suits brought by borrowers; Congressional hearings and regulatory investigations of banks, investment banks, hedge funds, special purpose entities, mortgage brokers, REITs (real estate investment trusts), rating agencies, appraisal firms, home builders, etc. And the third area is Securities class action cases for fraud and misrepresentation brought by stockholders primarily against banks, investment banks and now bankrupt mortgage lenders."

Ram Vasudevan, CEO of the city-based Quislex, says that of the high-end works that LPOs do such as litigation discovery services, internal & external investigations, contracts management and legal research, the investigations part in regard to corporate governance and governmental inquiries is more related to the subprime crisis.

"Whenever regulation requires certain adherence to principles and the system destabilises, as has happened in the subprime mortgage crisis, companies and governmental agencies tend to do a lot of investigations and implement corrective measures. LPOs can play a big role in assisting in such measures," he adds.

Still trying to assess the depth of the market that's just opening up, the legal process outsourcing firms say the Indian outsourcing base is all set to see a new wave of activity.


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