'Inorganic growth is important too'

Q&A/ Arjun Rao

Hyderabad-based ValueLabs, a software development, testing and knowledge process outsourcing (KPO) company, was in news recently for all the right reasons. Through its joint venture with NDTV and Malaysian media company Astro, it acquired Radio Today Broadcasting Limited from the Living Media group in Delhi, Mumbai and Kolkata.

Arjun Rao, chief executive officer of Value Labs is tight-lipped about the deal size but does not mince words to outline the company's growth plans otherwise. Having set up the company in 1997, Rao is now looking at growing the company extensively.

"We are casting our net pretty wide," he says in an interview with Business Standard. Excerpts from the interview:

At present, the company operates from three facilities in Hyderabad? Is expansion outside Andhra Pradesh not on the cards?

We are looking at major expansion plans. In the immediate future, we will discontinue with one of our facilities and consolidate our employee base at our 1,75,000 sq ft facility at Hitec City.

We employ around 800 people at present and intend to grow to around 2,000 in another year's time. The Hitec City facility that has been set up at an investment of $7 million has the capacity to house 1,500 people.

We are, therefore, looking at setting up another 3,50,000 sq ft facility that will involve an investment of more than Rs 60 crore. We have also applied for 40 acres of land in the state for setting up a campus.

Besides, we are planning to set up a campus in Pune in an area of around 15 acres. We have already acquired land for a million dollars. We expect it to become operational in three years from now.

Globally, the company has a presence in the US and Malaysia. Does the company have any plans for expanding its global footprint?

We plan to set up our office in London. We are seeing a lot of traction from the European side and are, therefore, looking at establishing a base over there.

At present, the US contributes to around 70 per cent of our business, followed by Asia-Pacific which contributes to around 20 per cent and the remaining 10 per cent comes from the UK. We expect more business from UK in future.

ValueLabs has so far concentrated on organic growth. However, the recent acquisition of the Red FM brand has come as a surprise to many. What fuelled this strategy?

There were several reasons for that. The first one is that India has become a key market for the globe.

So when Astro decided to enter India, they found partnering with us easy as they are one of our clients. (ValueLabs has deployed a suite of applications and integration components at Astro) Besides, we believe that we need to have a good presence in India and the aforesaid acquisition is one of the ways we can achieve that.

Also, we have been developing many interactive media solutions that we believe can be deployed in the radio segment.

Post acquisition, what are the changes one can expect in Red FM?

There will be greater deployment of technology. There will be more use of interactive media applications and automation solutions, which is minimal at present in the radio segment.

So does the joint venture with NDTV and Astro end with this acquisition?

The joint venture with both the entities has been for investment in the radio segment. However, it is not a venture that ends with a one-time investment.

Apart from this, is the company now looking at focusing on the inorganic route to fuel its growth strategy?

So far, we had been focusing only on organic growth. However, we now believe that inorganic growth is important as well. We are looking at acquiring a company in the KPO segment as we would like to strengthen our presence here.

The company should be a clone of ValueLabs in terms of having a global delivery model with an India advantage.

In the face of growing competition how is the company planning to retain employees? What is the differentiating benefit that a ValueLabs employee can get which others cannot?

We will be shortly launching a housing scheme for our employees, similar to an employee stock option plan.

This will initially be for 10 per cent for our employees. We have always seen that a person aspires to own a house. So, if we can help them achieve this end and incidentally retain them too, it will make a difference. We will be financing this project where employees will be able to get houses at one-third the market price.

The houses will be officially transferred to them after four-five years. Besides, some units will be sold in the open market, the profits of which will be ploughed back in the scheme. So this may arrest the attrition problem too. Our objective is to eventually cover 25-30 per cent of our employee base through this scheme.