 "'Focus on growth to bring in returns to the investors'")
Information technology major Cognizant Technology Solutions’ philosophy of enhancing shareholder’s wealth is through faster growth, according to its vice-chairman Lakshmi Narayanan.
Delivering the key note address at the 4th TN Finance Conclave on ‘Managing cross border transactions — Industry challenges and contributions’, he said: “Our philosophy is based on growth — faster growth, better growth than anyone else. Higher growth will lead to higher EPS (earnings per share) and that’s how higher shareholder return is created. We focus heavily on growth.”
On the company’s growth strategy, he said: “When we were medium-sized, we used to compare ourselves with companies in our industry segment. As we have scaled, given that the nature of investors are widespread, who invest in non-tech companies also, we moved to comparing ourselves in best-in-class in S&P 500.” Cognizant compares itself with companies such as Accenture, which use 15 per cent for repurchase, 15 per cent in multiple expansion and 15 per cent in growth to return shareholders’ wealth. However, Cognizant will have 75 per cent in growth and 30 per cent in the rest of the modes, excluding dividend.
Narayanan added the total shareholder returns could be achieved in multiple ways and Cognizant chose growth as a key parameter. According to him, the technology space is continuously evolving and the players in the sector need to constantly keep investing for the future.
Mergers and acquisitions should be executed if there is a really compelling strategic fit, which would go beyond the question of various laws and tax-related matters, he noted. According to him, aviation, electronic manufacturing and services, pharmaceuticals, and alternative or renewable energy are the sectors witnessing fast growth. These sectors invest on research & development and are expected to have a significant share of the gross domestic product by 2020.
