BackCurrency movement of this magnitude will lead to inflation: Tech Mahindra’s CP Gurnani
Gurnani on the firm’s growth strategy, and the likely impact of currency volatility and the US immigration Bill
Premium(Hemant Mishra/Mint)
Mumbai: C.P. Gurnani, managing director of Tech Mahindra Ltd, is upbeat about his company’s prospects after it completed its merger with Satyam Computer Services Ltd, which has created India’s fifth-largest IT services provider with a revenue of $2.7 billion on 31 March. In an interview after declaring June-quarter results on Monday, Gurnani spoke about the company’s growth strategy, overall demand scenario, and likely impact of currency volatility and the US immigration Bill. Edited excerpts:
Now that the merger is official, have clients put the Satyam episode behind them?
People have moved on. It’s been almost five years, and they have seen the amount of work that has gone into it after that. Whether it was the financial restatement or extinguishing the legal fires (class action lawsuits), it was about delivering value to customers, adding more customers and giving profitable growth for almost 11 quarters consistently.
Are you on target to be a $5 billion company by 2015? What’s your strategy to achieve it?
Comviva has given us a leg-up in the product space. As for Complex IT, the entire team is Brazilian and speaks Portuguese. We are supporting 2014 FIFA (football world cup), and it is all happening out of Brazil.
We are looking at strengthening our footprint in Latin America and mulling more acquisitions in Europe as we feel it is the right time to look at synergies and partnerships in Europe. Australia and New Zealand are other areas where good growth is possible. We don’t restrict ourselves to the size of the deal. If it makes sense for the company, we go ahead.
You have also been signing a lot of deals in the recent past.
In telecom, my ticket size is much higher and obviously we continue to get more work in that sector. For example, we just announced a deal with a company for managed network services, and we already do managed IT services work with them. It ultimately gave us the confidence that we are able to run the complete back office of the client (KPN subsidiary in Belgium) in the two big deals we signed in financial services (Europe and Australia). Network, mobility and cloud security services are our company’s strengths.
How well are you doing in non-linear growth that is not related to headcount?
Non-linear growth is still a small part of our business. But I do believe that with the cloud and process as a service, you will start seeing changes, and today what is 3% could be 13% in two years. When the change happens, it happens very swift and fast.
A weak rupee is helping IT companies, at least for now. Also, there are issues such as the impact of the US immigration Bill and related visa issues.
Nobody likes volatility and currency fluctuation. The reason is, while you may think it is positive for us, you have to keep in mind that a majority of my business model has changed. Now I am in global delivery centres. Those costs are in local currency, and any currency movement of this magnitude will lead to inflation. Now, I can’t say this will not impact my wage bill or costs. In the short-term, it (a weak rupee) is helping us, but in long run, it will not.
As for the impact of the immigration Bill, we anticipated a part of it. We have development centres in US cities such as New Jersey and Dallas for local skill development and hiring. Local protection is high on the agenda of the US government. It may look like a restrictive practice, but we should see it as an opportunity to partner with local governments. No IT company sells on cost arbitrage any longer. We now sell value for business. As for visas, green cards are definitely not our model. We would hire locally and send them to India for training and reskilling.
Are you in the race for Polaris Financial Technology’s IT services business?
It’s very speculative and has been in the news for past two-and-a-half years.
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