$5 bn revenue mark is a stretched target, says C.P. Gurnani4 min read . Updated: 30 Oct 2014, 01:17 AM IST
C.P. Gurnani talks about Tech Mahindra's continuing focus on telecom and emphasis on digital technologies
Mumbai: India’s fifth largest software services company Tech Mahindra Ltd’s fiscal second-quarter earnings met analysts’ estimates, on three large deal wins and growth in the telecom, manufacturing and retail verticals in the quarter.
The company’s revenue rose 15% to ₹ 5,488 crore from ₹ 4,771 crore a year earlier, but net profit was almost flat, up at ₹ 720 crore from ₹ 718.4 crore in the year-ago period. The company attributed the flat net profit to cross-currency headwinds and increased onsite business. A Bloomberg survey of 40 analysts had estimated net profit at ₹ 726.8 crore, while 42 analysts estimated revenue at ₹ 5,377.6 crore for the September quarter.
Tech Mahindra continues to focus on intellectual property (IP) and verticals such as retail, manufacturing, life sciences and telecom.
According to C.P. Gurnani, managing director and chief executive of Tech Mahindra, the company sees continued opportunities in the US and Europe despite cloudy economic signals, and is confident of the next two quarters being better than the last two ones on the back of a strong deal pipeline.
In the quarter, Tech Mahindra’s cash stood at ₹ 3,434 crore on 30 September.
The company reported its earnings after market hours. On Wednesday, shares of the company closed 1.16% up on BSE to ₹ 2,396.50 while the benchmark Sensex gained 0.81% to 27,098.17 points.
From the beginning of the year, Tech Mahindra’s stock has gained 55.71% while the Sensex has advanced 30.2% and the BSE IT Index has gained 20.25%.
In a post-results interview on Wednesday, Gurnani, who also completes a decade with the company on 30 October, spoke about his journey from Mahindra Satyam to Tech Mahindra, the company’s continuing focus on telecom and emphasis on digital technologies, as well as the progress the company has made in its effort to achieve its $5 billion revenue target by 2017. Edited excerpts:
Is Tech Mahindra making a conscious shift to large deals, given that your second quarter earnings growth was largely driven by large deal wins?
As a business, Tech Mahindra on the enterprise side had a bit of a lag, because in the past, we were not invited to many large deals. Now, we are being invited, and are participating in them and our large deals win ratio has thus improved. So, I can only say that our three large deal wins in the quarter in the manufacturing sector was an indication of a good performance and I am very proud that the manufacturing team led the way.
Are you on track to reaching the $5 billion revenue target by 2017?
The $5 billion (revenue figure) is a stretched target for the company, and we are working hard to achieve it.
You also mentioned significant investment in the networking space and a strategic focus on telecom going forward. Can you elaborate?
Network services is clearly one of the areas where we are growing, and because of the convergence of IT (information technology) and networks, we believe it is an opportunity. Tech Mahindra has a heritage in telecom, it is a unique positioning and differentiator for Tech Mahindra.
How much does BT Group Plc now contribute to revenue of Tech Mahindra?
Ever since BT’s contribution to revenue became less than 10%, we have stopped calculating quarterly revenue from that client.
There are concerns in certain sections that Europe may even see stagflation. Given that Europe is the second largest revenue contributor for Tech Mahindra, after the US, how do you view the situation?
Europe is diversified; the Scandinavian countries and Germany are doing very well. I see this as an opportunity because we are able to open more local delivery centres, we are able to expand our global delivery footprint and there is some amazing talent available.
Tech Mahindra has almost reached 100,000 employees. Do you see scale emerging as a concern going forward?
It is not a matter of concern, but rather of rejoicing that we are contributing to the global economy as we are not only adding employees in India but also outside India. (Tech Mahindra added 2,580 employees in the September quarter, taking the company’s total headcount to 95,309).
You have been on the boards of both Mahindra Satyam and Tech Mahindra…would you say Satyam is now a ghost of the past?
It’s been five-and-a-half-years. In the business of IT, that’s a long time. So, clearly, whatever was a good part of Satyam or whatever apprehensions people have had have been forgotten and people now know us as Tech Mahindra and we deal and discuss Tech Mahindra during business.
You are about to complete a decade at Tech Mahindra. What are your views on the future of the company, as compared with the days of past?
Thank you for remembering that I’m about to complete 10 years at Tech Mahindra. I think it’s been a glorious 10 years and I promise you that my next 10 years will be more exciting. The focus going forward will be on a lot of new businesses, a lot of new markets, a lot of new services and a lot of new products and platforms.