The fourth quarter (April-June) has been a good one for IT software and services exporter HCL Technologies, as it not only beat market expectations but also successfully completed the integration of the UK-based Axon group. VINEET NAYAR, CEO, tells Kirtika Suneja that the environment remains challenging and pricing pressures remain. Edited:
Your quarterly results are better than expected and your company is signing big deals. Should we construe these as signs of recovery?
Though we are signing big deals, pricing pressures remain, and they are intense. We have given pricing discounts to our customers without compromising on the margins. S&P 500 data show that we are the lowest in history, in terms of quarter-on-quarter growth and in this environment.
The environment is bad and I don’t see recovery happening in this calendar year. Recovery will happen only in the next calendar year.
How does the deal pipeline look?
Our revenues were pulled up because of big deals but the deal flow has softened.
Moreover, in this challenging environment, our clients’ profits and revenues are falling and hence, their IT budgets will also fall.
Deal flow in the April-May-June quarter was soft and July-August-September is appearing to be soft. What is the growth strategy now?
The growth strategy will be according to the Blue Ocean one of creating uncontested market spaces in new geographies, launching new services and to compete with the likes of IBM, Accenture and EDS in total IT outsourcing. For this, we plan to focus on geographies like the Middle East, Brazil, Canada, China, India and South Africa and services like cloud computing and software as a service, among others. Also, the growing verticals or the defensive sectors are energy and utilities, aero, healthcare and government. Energy, utilities and public sector contributed 7.6 per cent to the revenue this quarter, while it was less than 1.5 per cent last year.
How do you plan to tap these new geographies?
Through either greenfield operations or acquisitions. Acquisitions will be used for growth and we plan to acquire firms by 2010, in line with our original strategy. We have cash and can raise debt for these. There is no particular sweet spot in terms of the size of the company, as long as the return on investment is good.
Where does India fit in the scheme of things?
India is an important market for us and contributes less than five per cent to our revenue. The focus areas here are power, telecom, and financial services, among others. However, the approach towards this market is different, as we need to bring in innovative solutions for here, besides different services and prices. What is done globally is not a straight fit in India.
