"Acquisition is a part of our strategy and it was the only option given that we entered the market late," Executive Vice Chairman Vineet Nayyar said.
Tech Mahindra is big in the replacement market
Vineet Nayyar
Executive Vice Chairman
Tech Mahindra
IT major Tech Mahindra is confident of performing well in the next two quarters. In an interview to CNBC-TV18, Executive Vice Chairman Vineet Nayyar said that the company will endeavour to keep its margins high.
The company's operating profit margin in Q1FY15 dropped 310 basis points sequentially to 18.1 as against analysts' expectations of 19.6 percent. Consolidated net profit increased by 2.7 percent quarter-on-quarter as against forecast of 8.1 percent growth but it beat street expectations on dollar revenue front that grew by 3.6 percent Q-o-Q to USD 855 million as against expectations of 3 percent growth.
Sharing views on the Indian IT sector, Nayyar said that India will continue to be a major force in global IT services and technology space.
Below is the transcript of Vineet Nayyar's interview with Latha Venkatesh & Sonia Shenoy of CNBC-TV18 and Guest Editor Raamdeo Agrawal, Joint MD of Motilal Oswal Financial Services on CNBC-TV18.
Sonia: Last week the key talking point was that Cognizant had scaled down its revenue guidance for 2014. They of course said that its client specific but the worry was that a lot of top tier IT companies have the same set of clients so revenue scale down could extend to some of the other companies like Tech Mahindra as well. What sense you are getting about the second half of the year and how it could shapeup? Would some of these issues be a bother?
A: One thing we have to look at is look at the size of Cognizant and though in 15 percent year on year is not easy, so the absolute numbers are going to increase quite significantly; the only thing is in terms of percentages, you are seeing a slight decline. I think that is a secular trend you will be seeing everywhere. So far as we are concerned, we are on a considerably smaller base, but the next two quarters are looking good for us at this point of time.
Raamdeo: One of the thought processes is that India has absolute advantage in tech services space and we are close to USD 90-100 billion in USD 140-150 billion outsourcing market of services and services overall of about USD 920-930 billion is growing at about 3-4 percent. So, we have multilayer kind of opportunity if world has to go digital and which is happening rapidly. First thing is – at some point of time, in next five-six years, by 2020, do you think India is going to produce two-three-four or even five world class service organisations which will be in the range of USD 20-25 billion each in terms of topline and USD 2-3-4 billion in bottomline?
A: We already have three-four-five top class service companies which can compete with the best in the world. I do not think we have to wait for a decade to reach the level. Our service companies are innovative, they give high quality service to the people and you would also see the stickiness; a stickiness you do not see in the large multinationals, who I would not name at this point of time because once we start working for a client, we give it a quality of service which is difficult to match.
We are not always right. It is not as if we do not mess up but whatever we do, we comeback. There is resilience in Indian companies and I am not talking of Tech Mahindra; I am talking of the top five-six companies, there is a resilience there which is outstanding. So, I have no worry or fear that on the services side and in technology India will continue to be a major force going forward.
Tech Mahindra stock price
On August 11, 2014, at 14:10 hrs Tech Mahindra was quoting at Rs 2164.50, down Rs 22.75, or 1.04 percent. The 52-week high of the share was Rs 2230.05 and the 52-week low was Rs 1227.20.
The company's trailing 12-month (TTM) EPS was at Rs 111.28 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 19.45. The latest book value of the company is Rs 365.74 per share. At current value, the price-to-book value of the company is 5.92.
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