Losing high-tech jobs to Asia may make American blood boil. But if you're an adventurous investor, the leading Indian outsourcing companies are worth a look.

Consider

Wipro

(WIT) - Get Report

, a one-time producer of cooking oil that now sports a market cap of $11.7 billion, and, according to published reports, counts among its roster of clients high-tech giants including

Microsoft

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,

Sony

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and

Nokia

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In its most recent quarter, the Bangalore-based company earned $58 million on sales of $343 million, representing yearly increases of 22% and 44%, respectively. When its fiscal year ends in March, Wall Street expects Wipro to report sales of $1.2 billion, an increase of 46%. Investors have noticed: Over the last year, the company's stock has appreciated by 59%, nearly doubling the performance of the

S&P 500

.

While that's a big run-up, it isn't out of line with the companies' historical growth -- and that growth shows no sign of waning. Wipro, as well as rivals

Infosys

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and

Satyam

( SAY), are riding the crest of an outsourcing wave that has seen U.S. companies shift everything from call centers to X-ray interpretation to India.

Collectively, the three companies -- plus

Cognizant

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and

Syntel

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, two U.S.-owned competitors that do much of their outsourcing work in India -- will likely report more than $3.1 billion in revenue when 2003 sales are totaled, according to Brean Murray analyst Ashish Thadani. By 2005, that total should soar to $5.4 billion.

Revenue for the outsourcers represents significant savings for their U.S. clients. But U.S. workers will pay a price.

In July alone, 25,000 to 30,000 new jobs were created in India as a direct consequence of work outsourced from the U.S., according to a report by researchers Ashok Deo Bardhan and Cynthia Kroll of the University of California's Fisher Center for Real Estate and Urban Economics. It's not clear if there is a one-to-one correlation with job losses in the July figures, a month in which more than 226,000 Americans were laid off, but some of the gain for Indian workers was at the expense of the U.S. workforce.

Cashing In on the Offshore Wave

*US owned, with heavy outsourcing presence in India
**Predominantly Indian owned
Source: Brean Murray

Longer term, an often-quoted report by Forrester Research predicts that as many as 3.5 million white-collar jobs, including 500,000 in information technology, could move from the U.S. to India and other low-wage areas by 2015.

What's behind the explosive growth? Cheap, well-educated labor that speaks English, and the ability to leverage a nine- to 12-hour time difference into around-the-clock service are major attractions.

"Not every company can do it, but if you're moving a tightly integrated back-office operation, your savings can be as much as 80%," says Rafiq Dossani of the Asia-Pacific Research Center at Stanford University.

For example, workers at a call center in Kansas City, a relatively low-cost area by U.S. standards, are paid about $10 an hour. Similar work in Mumbai (formerly Bombay) pays $1.50 an hour, Dossani found in a recent study. Factor in amortized equipment costs, profit margins for contractors and miscellaneous expenses, the Kansas City call center costs its client $12.47 an hour, vs. $4.12 in India.

The wage difference extends to higher paid workers too. A CPA-level accountant in the U.S. earns about $75,000 a year, while his or her counterpart in India is paid just $15,000 a year. And as long as Indian universities continue to churn out 100,000 to 200,000 IT and engineering graduates a year, it isn't likely that workers will be in short supply.

Moreover, online collaboration, the increasing availability of bandwidth and declining telecom costs make it possible to move even high-skill jobs overseas.

Still, India has not been a favorite destination of American capital. The

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Matthews Asia Pacific Fund has invested about $2.5 billion throughout Asia, but just $40 million or $50 million of that is in India. "We ignored India for most of our careers because the environment was hostile to foreign investors. There's a deeply embedded suspicion of foreign investment," said Mark Headley, the Matthews portfolio manager.

Then there's the notoriously slow-moving Indian bureaucracy, deteriorating infrastructure, rampant poverty and liquidity issues that slow turnaround times. Add it all up, and it's not hard to see why Indian companies that trade on the U.S. market via American depositary receipts are a lot more attractive than direct investments in India.

There is a penalty attached to the convenience, and it's a big one. Because of their stateside scarcity, shares of both Wipro and Infosys cost 40% more in the U.S. than they do on the Indian exchange. And that makes Wipro, which closed Friday at $47.62, a rather expensive stock, trading at 48 times calendar 2004 earnings, according to Brean Murray's Thadani.

Infosys, which hasn't enjoyed the same growth in share value, trades at about 38 times forward earnings, closing Friday at $89.13. (Brean Murray does not have a banking relationship with Wipro or Infosys.)

That premium could be affected by regulatory changes in India that have made it easier to make American depositary receipts available in the U.S. Wipro, said a company spokesman, is considering such a move.

Thadani, who has buy ratings on both companies, says Infosys is probably the better buy right now based on valuation, and Headley says he moved his fund's money from Wipro to Infosys for similar reasons.

Valuation aside, Thadani says that Wipro has numerous strengths, including the fastest revenue growth in the sector during the December quarter, sustainable margins and a two-year lead in business process outsourcing, or BPO. Simply put, BPO involves moving offshore a large part of a business function -- say claims processing in insurance -- rather than moving just a discrete function like data entry.

More available shares, more competition and lower transaction costs in India could erase at least some of the solid premium Wipro and Infosys enjoy in the U.S. But with growth prospects as sound as these, some near-term bumps might be worth risking.