We will strengthen our board, bring in experts before IPO: UST Global CEO

Mid-tier IT services firm UST Global has seen a compound annual growth rate (CAGR) of 17 per cent in its revenue growth in last five years, making it one of the fastest growing companies globally. The IT services firm, which has its roots in Kerala, has a revenue base of about $1.1 billion with 60 per cent of its 25,000 employees working in India. With investors like Temasek on board, the company also plans to go public in the near future. In a conversation, chief executive officer (CEO) of the firm Krishna Sudheendra told Debasis Mohapatra that the company will strengthen its board by bringing in professionals before going public. Edited excerpts:

Business segments like healthcare, BFSI (banking, financial services and insurance) and retail globally are witnessing a lot of disruption. What is your take on demand environment?

We are very strong in healthcare. Many healthcare companies in the US are in legacy, and are moving to digital. So, there is massive investment happening in this space. Retail (vertical) is going through an interesting phase as they have to compete with e-commerce players. So, retailers are investing in supply chain, customer and in-store experiences. We work with 7 out of top 10 retailers across the globe. Any firm, which deals with the back-end for the retail firms, may experience slowdown, but companies like us, which are working on front-end like customer experience, are seeing a rise in client spends. Similarly, our core strength is in banking, in managing customer experience like UX, and design among others. Currently, around 28 per cent of its revenues come from healthcare, about 22 per cent from retail vertical and 25 per cent from BFSI segment. We grew our revenue at 20 per cent in 2019, and in CAGR term, our top line growth is 17 per cent in last five years, which is the best in the industry.

Most mid-size firms with over  $1 billion revenue face client concentration risk. How is UST Global placed in this respect?

We don't have that much client concentration risk, though our model is “select clients & more attention”. We are a unicorn growing at one of the fastest pace in the industry, but we have only 130 customers. Having said that, our top 25 customers contribute less than 50 per cent to overall revenue.

Do you think, 20 per cent growth in revenue is sustainable in the coming years at a time when the industry is growing at not more than 7-8 per cent?

In 2020 and 2021, we are all poised to grow at this rate. We have signed contracts that give us this confidence. We have 90 per cent visibility on our revenue growth rate of 20 per cent and we are only sitting on the first quarter of 2020.

UST Global has its roots in Kerala. How important is India as a delivery centre?

We have around 15,000 staffers in India out of the total employee base of 25,000. We started up in Trivandrum (Thiruvananthapuram), when it used to be tier-III city. As we are growing at 20 per cent, we will expect 15-20 per cent addition to our Indian headcount year-on-year.     

When Temasek invested in UST Global in 2018, there was a buzz about an upcoming initial public offering (IPO). So, what is the status of UST Global's plan to go public?

IPO is definitely in the horizon, but it depends on the market conditions. It is crystal ball gazing, but I don't know when. We look at it based on the advice of our bankers and investors. 

Will UST Global strengthen its board before going public?

We will strengthen our board before the IPO. Currently, we have 10 members on the board, who are mostly representing the investors. We will look at industry experts in healthcare, financial services or who have worked in large technology companies, and who can guide us.

UST Global has acquired 3 companies last year, taking its number of acquisitions to 11 so far. Will you do tuck-in acquisitions in the future or even look at bigger firms?    

We are open (to do big acquisitions), and we have complete support of investors. But, it will have to fit with our culture. We will not do an acquisition just for the sake of it.