‘Listing brings out governance of a firm better than if it is privately held’4 min read . Updated: 14 Oct 2019, 12:10 AM IST
Organically, we should continue to grow at 20% but where we will be 2-3 years from now will depend on when we do larger acquisitions, says Ashok Soota, executive chairman, Happiest Minds
NEW DELHI : At 76, Ashok Soota, the man who led information technology (IT) services giant Wipro for 15 years and then co-founded and headed mid-size IT firm Mindtree for the next 10, is looking for more adventures. So he’s off for a paragliding trip to Bir Billing (Himachal Pradesh) even as he charts the future of his newest startup, Happiest Minds, a company he says is born digital and agile which gives it the edge in emerging areas like edutech, healthtech and fintech. In an interview, Soota talks about company’s future plans for going public and making acquisitions for inorganic growth.
Your positioning as a born digital, born agile company places you at the frontlines of technology services providers. However, you don’t have the size to take up really large projects. Are you looking at aligning with other companies or making some acquisitions to get that heft?
Generally speaking, there is a little bit of correlation between your size and the size of your orders but we’ve recently won a digital project with absolutely state-of-the-art technologies against 40 odd companies bidding for it from across the world. Our bigger concern is where a company already has three providers and it says I will just convert my legacy into digital and why do I need a fourth. There we don’t get a look in the door. But if they decide to take a completely de novo look and then we bid for it, more often than not we win.
Partnerships, of course, help. We have a partnership with a company called Cloud Lending which was recently acquired by a larger company called Q2 Holdings. We are their prime partners for implementation. There are multiple players with whom we have these type of relationships.
Acquisitions have to be a part of our story going ahead. Organically, we should continue to grow at 20% but if you ask me where we will be 2-3 years from now, that will depend on when we do that larger acquisition. But I would say in about 8-10 months from now we should start doing that.
What are your future funding plans and what would you use those funds for?
As you grow larger and dilute you don’t want to find at any stage that you have brought management shareholding down to such a level that you face the kind of threat that we saw recently in the Mindtree case. In Happiest Minds, we have now got only one large investor that is JP Morgan which had bought out the Canaan Partner’s stake while we bought out the other investors. That gives us a good base to start our dilution from. We also need to decide when is the right time for us to go public. Our mindset is not to go to another private equity player and we would rather go public. It could also be linked to getting the right acquisition.
The reason for looking at a public listing instead of private capital is that I have always enjoyed running a public limited company. I would rather be responsible and accountable and help to reward the public shareholders going ahead. A listing also brings out the governance of your company much better than if you are a private limited company. We would certainly like to be traded in the market and I believe we will get a good corporate governance premium when we do that.
Does being a digitally native company allow you to charge a premium? In what way does it help your bottom line?
That’s also a function of size. The larger players will always have higher profitability because their overheads get distributed and they don’t have the kind of investments in proportion to their sales that we have to make. I would say that today our profitability is comparable with that of some of the mid-size players here. It has the scope to get higher.
You led Wipro for 15 years and then Mindtree for the next 10. Now for the last eight years you have been driving Happiest Minds. How would you describe your evolution as a leader and how have the challenges you faced in each, been different?
First I must go back to the nature of the business itself. At Wipro the industry was growing at 50% while we grew at about 70% for 8-9 years and that was enough to take us up to number two. There the corporate governance, for which the culture created by Azim Premji must get a lot of credit, became the pull which brought the large customers to us. Nobody asked us about our domain knowledge. In fact, they actually taught us the business because the value proposition was so huge. By the Mindtree phase, offshoring had become a de facto standard but what got us started was that there was a dotcom boom and of course we didn’t know that a bust would also come. We managed to survive and went on to do a successful IPO and grow the company. At Happiest Minds, the challenges are much higher because the industry growth rate is down to 8-10% over the last several years.
As far as my leadership style is concerned what makes me happiest is fulfilling my potential and helping others realize theirs. If you have really done that then the rest of it is actually very simple.
Wipro was difficult and challenging. Mindtree was more difficult for sure, because now we were surrounded by giants, but happier, and Happiest Minds is the most challenging but the happiest.