Software representative body Nasscom today said that specialised services like engineering and R&D would drive the growth of captive units in India as parent companies transform these centres into centres of excellence, providing higher value and efficiency propositions.

Captives are business units of a company, functioning offshore as an entity of its own, while retaining close operational tie-ups within the parent company.

This is one way of establishing presence in cheap labour markets such as China and India, rather than outsourcing work to third-party BPO firms.

"Captives in India are transitioning from being cost centres for their parent companies to 'centres of excellence', providing higher value and efficiency propositions," Nasscom president Som Mittal told reporters here.

The most significant contribution for the captive sector has been the establishment of a design-led engineering services, which will also drive the segment further, he added.

The Nasscom-Zinnov Consulting Report estimates that over 500 captives currently undertake engineering and design services across industry verticals.

"Out of these, more than 200 engineering research and development (ER&D) captives have been established over the last three years, highlighting the R&D and product culture initiated by these captives," Mittal said.

The coming years will see many hybrid models, including collaboration of captives with third-party vendors, for carrying out various processes, he added.

The report, titled 'The Captive Landscape in India', pegs the size of the captives sector at USD 11.1 billion, almost 22 per cent of the total IT-BPO industry export revenues.

India currently has more than 750 captives, employing four lakh people.

"Global companies have leveraged value through either monetising these captives for building skills, enhancing service delivery and reducing time to market," Mittal said.

The report said that going forward, captives would continue to grow and expand into newer service offerings and engage in M&A activities to acquire capabilities in India, along with increased monetisation.