HCL Technologies, India’s fourth-largest software exporter, beat analysts’ expectations with an all-round performance in the quarter ended June. Vice-chairman and chief executive Vineet Nayar, in an interview with Piyali Mandal, talks about how the company would consolidate its position in the coming quarters. Edited excerpts:
HCL Technologies has created a new post of chief operating officer for Anant Gupta. What was the rationale behind the move?
We need to significantly increase our incubated business revenue and identify the businesses we have to incubate in the future. Besides, we also have the ‘employee first’ initiative, the primary reason behind our growth. We need to get our hands on budgets that are not necessarily IT (information technology) ones. All this would require significant thought and attention. I will take care of these. Anant would focus on business-as-usual processes, which I will also look after.
Does this mean Gupta is being groomed for a bigger role?
I have worked with Anant for 19 years, and he has resisted grooming from the first day. So, I don’t think any grooming can happen.
Despite uncerta-inties in the market, you have recorded strong numbers for the quarter ended June. What acted in your favour?
Once you are able get a customer, you should have the ability to expand by selling more transformation services. We are also using some productivity levers like absorbing freshers and higher offshore utilisation, which help margin expansion. From HCL’s point of view, we worked on a well thought-out strategy and anticipated what was going to happen. The strategy was to invest our way into the client and harbour our way into margin expansion.
Macroeconomic indicators are still weak. How would you address the/ uncertainties?
We do not know if the macroeconomic environment is weak. But certainly, gross domestic product numbers are not looking good. However, at HCL, we have learnt how to ignore all these macroeconomic indicators. We believe challenges can be converted into opportunities, and that’s what a team of 85,000 employees continues to deliver.
What kind of outlook do you give?
We don’t give a company-level outlook. However, what I can say is despite the challenges the industry is facing, we (HCL) will continue to be bullish on our ability to navigate through these challenges.
Have you seen any reduction in budgets?
We have seen a substantial reduction in new (business) budgets. There has been a reduction of 40 per cent on new budgets in the first half of this year, compared to the year-ago period. However, there has been a 20 per cent rise in restructuring contracts. HCL is largely focused on restructuring contracts. So, overall, we saw an opportunity there.
During the last nine months, you were largely focused on securing new clients. Now that you have a strong pipeline, are you going to change your focus?
Incubation for growth is going to be the strategy. We have been trying to create new divisions and incubating these for growth, not necessarily fold these in some dominant business, which might throttle these. These include infrastructure services or the Axon business, which we had acquired inorganically and incubated. These have worked very well for us. The infrastructure services line has become a $1-billion business for us. We need to identify and focus on the next growth drivers.
Some of your peers have refrained from announcing appraisals. What kind of wage increases can your employees expect?
We have never linked the company’s profitability with appraisals. We had even announced appraisals during the recession. This year, we have announced a salary rise of eight per cent for offshore employees and two per cent for onsite staff. For some employees, it would be effective from July 1, while for others, it would be effective from October 1.