HCL Technologies exceeded analysts' expectations in the April-June quarter and posted revenue growth, despite incurring a forex loss of Rs 137 crore. Its business process outsourcing (BPO) division, however, has been under pressure and reported a fall in top line, quarter after quarter. In an interview to Kirtika Suneja, the company’s CEO, Vineet Nayar, maintains that, though currency fluctuations and the crisis in Europe are a few concerns, the environment is stabilising. He also ruled out the possibility of HCL Tech ever merging with HCL Infosystems Edited excerpts:
How does the environment look for you and what are the concerns at this point of time?
The good news is that the environment is robust in the American and emerging markets, with more rigorous RoIs (returns on investments). And, our existing customers are demonstrating growth on the promise of recovery. Positive news is also coming in from countries like Canada, South Africa and those in the Asia-Pacific (Apac) region. However, negative news is emanating from Europe, not only because of its economic conditions but also because of the austerity measures happening in the UK, which is a significant part of our revenue. Continental Europe is another zone of concern, as it does business with many large countries. Currency and cross-currency movements, too, have impacted us. But the most important concern is the war for talent. People did not invest in talent for 24 months and, now, there is a vulture movement in talent and we want to forward-invest in it. This is the way in which we want to be in the upper quartile of growth among our peers.
Is this the reason you hired 6,400 people in the quarter, the highest in any quarter in your company’s history?
Yes. In fact, more than 70 per cent of this recruitment are laterals because we feel that hiring and training new people will not cater to the needs of our global delivery model (GDM). In this model, we need to add headcount and, hence, the average age and headcount in it will be higher. We are not done with hiring. More hiring will happen, but that will be just-in-time. Lateral hiring (experienced people) is not a defensive strategy but an aggressive one. We are a destination for laterals and have created a brand for ourselves in laterals. We made 6,000 people walk away from our colleagues. The strategy is to hire locally and not only in India. This means we will recruit in China, Poland and Latin America, too.
What about wage hikes?
We offer wage hikes in July and October and, this year, are preponing the October hikes. These are competitive hikes of more than 8-10 per cent.
Which is the new ‘Blue Ocean’ for HCL Tech?
The Blue Oceans for us are South Africa, Middle East and Latin America – geography-wise, and business services – from a services point of view. Also, cloud computing and mobility are the new innovative solutions. For instance, in India, we will only be doing turnkey projects in power, insurance and financial services under this strategy. The India business, as of now, is only three-five per cent of our total revenues. The rules of the game are changing and we don’t want to be log-jammed on the wrong side of the business in the next five years.
Where does HCL BPO fit into this picture?
We are transforming our BPO unit to BSERV and expect it to be a revenue-driver for the next five years. We have divided it into three categories. First is the platform and vertical business, where we will invest. Second is the non-core business that is almost 10-15 per cent of the BPO revenues, which can’t be scaled up — like we have ring-fenced outbound calling as it doesn’t have scalability. The third is the business, which is already growing. We will focus on the IBS platform in the UK.
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With $100 million in cash, are you looking out for acquisitions?
There are small acquisitions in the pipeline, but no mega deals.
There were reports of HCL Tech and HCL Infosystems merging.
The two companies are listed and HCL Infosystems will always be a competitor. There are no possibilities of a merger.