Even as worries continue to remain over declining revenues from its promoter and top client HP, Mphasis CEO and Director Ganesh Ayyar believes the overall growth prospects for the IT industry remain strong and the company is focusing on entering its next growth orbit.
In an analyst call recently, the management said it expects revenues for the January-March quarter to fall 2-3 percent from Rs 1,564 crore it notched up in December.
The decline is expected to come through on the back of a 5-6 percent fall in business coming from HP, which picked up 60.49 percent stake in the company in 2008 by virtue of its EDS acquisition.
"Our direct business will continue to see good growth over the medium term," Ayyar told CNBC-TV18's Sonia Shenoy and Latha Venkatesh in an interview, adding that focusing on non-HP clients would be the focus for the company going forward.
The struggling PC maker HP, which accounted for about 70 percent of Mphasis' revenues a few years back, today contributes only about 40 percent.
Also read: HP agrees to remain anchor client post Mphasis stake sale
"The channel is declining. We need to crack the HP code. It hasn't happened till now," Ayyar said.
But the decline is not overtly concerning Mphasis, which has been focusing on its non-HP business. In fact, the move away from HP becomes more evident, after the firm adopted a rebranding exercise recently, dropping "an HP company" from its tagline.
"As of now, we are focusing on growing the direct business. The demand is vibrant in the market. But if you are stuck with the old model of offshoring, you will be in for rough weather," the CEO said, who has been quoted in the past as saying that Indian IT companies will not get their next billion dollar revenues from where they got in the past, namely, virtues such as lower costs, or language and location advantage.
"We have invested in acquisitions, sales and marketing, etc," he said. "The ability to transform the business model and bring newer services to the market will bring success and we think we are equipped with the skills."
Ayyar sidestepped a question on reports about HP mulling selling its Mphasis stake saying the question should be directed to the US firm.
Below is the transcript of Ganesh Ayyar's interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy
Sonia: You have highlighted in your analyst meet that it is purely because of the weakness in the HP business that your revenues may decline between 2-3 percent quarter-on-quarter but will this be just a one-two quarter phenomenon or do you think that the company is headed for an extended period of perhaps muted growth?
A: If you look at the market our market is very vibrant and especially in the emerging services arena. If you happen to be sticking to the old model of off shoring, then obviously over an extended period of time you will be in for a rough weather.
Now what we have done in the recent past, we have made some significant acquisitions, we have invested in sales and marketing, we have been focused on two industry verticals. So what we see ahead is a fairly vibrant pipeline and we believe our direct business will continue to have good growth over midterm period. So we are not too concerned about the market growth per se and we feel pretty confident about our direct business growth.
Latha: Other companies for instance Infosys have also lately warned of lower volume growth in the current and the next quarter. What went wrong, why is it that all of you are assessing yourself albeit marginally lower?
A: I cannot comment as to what Infosys or Tata Consultancy Services (TCS) are doing. If you look at the industry I fundamentally believe that in a vibrant market there is demand. Demand is of a different nature, we have the ability and capability as an industry or Mphasis as a company to make use of that demand and grow. So I don\'t see dark clouds over the market opportunity. What I see is the ability to transform, ability to stay focused on certain opportunities, ability to bring newer services to market, newer business models. That will define the success in the future and traditional models will start falling by the way.
Latha: Can you give us some numbers in the business you are getting from HP, what is it in terms of volume growth that was and will be?
A: I can only comment on historical data and we have been declining on HP business. The way we are planning our future is we certainly would like to see whether we could bring growth back in HP channel so far we haven't succeeded, we need to crack the code and see what can we bring to HP which will result in this decline being arrested and growth coming back. As of now our focus is on direct business growth, we feel bullish about the growth faster than the market over a mid term period. As far as HP is concerned we have been experiencing decline over the last three years. So that is the fact in front of us and we are dealing with that fact.
Sonia: Has HP given you any clarity on what its role will be post any kind of stake sale of Mphasis? There are some talks that perhaps HP may look to exit the company as well could that be on the cards.
A: These speculations have existed for last two years. First three years of my tenure as a CEO people were saying that when is HP going to buy and last two years has been when is HP going to sell. First three years, I told them go and talk to HP and last two years also, I am encouraging people to go and talk to HP rather than me commenting on speculations.
Latha: How will margins and realizations and billing pan out in the current and next quarter, will that also along with lower revenues be a little soft?
A: One of the things which we need to get used to because traditionally if you look at the offshore industry, people used to look at what is your demand for number of employees and that used to be translated into your growth projection. Increasingly it is going to be about automation, innovation and productivity per employee. Hence the focus has got to be revenue per employee rather than looking at how many employees you can bill and that is going to be the future.
In that context I feel there is tremendous opportunity not just for us, for the entire industry to leverage automation and innovation and enhance the revenue per employee because we do have the capability across the industry, tremendous talent which needs to be leveraged.
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