Our business is doing well in the US, says Tech Mahindra vice chairman

Tech Mahindra beat the Street's quarterly estimate, as it improved margins by cutting costs

Tech Mahindra beat street estimates as it improved margins by cutting costs and focusing on efficiency. At the same time, the fifth largest IT services firm has been pushing for more digital deals, which now contributes to over 22 per cent of its revenues, says Vineet Nayyar,  vice chairman, Tech Mahindra in an interview with Romita Majumdar. Edited excerpts:

Your revenue from top 5 clients has been going down over the past few quarters. Is that intentional?

As we expand, revenue from top clients comes down. That is a consequence of growth. It is also partly affected by the fact that digital businesses have a smaller size.

How is your onsite ratio going to be affected by the increased hiring abroad?

On site ratio will not be affected by hiring in the US. Instead of people from India going there we will just hire more people there. There won't be a significant difference.

BFSI has managed to remain steady compared to your peers. Also, how has digital business fared?

Banking Financial Services and Insurance (BFSI) growth looks comparatively better because our size is small in BFSI. It's an optical illusion. Since our base in communication is large, the change in that sector is more visible. Digital business has contributed to about 22 per cent of total revenue.

Allegations of layoffs have hurt the company image in the last two quarters. Any policy changes that it could lead to possibly?

It's unfortunate that layoffs occur, but we have to respond to the requirements of the market. In the long-term prognosis, labour intensity will reduce due to automation. Machines are going to replace human beings. Even though labour intensity will reduce the number of people employed may go up. It's very difficult for anyone to make projections here.

Are you worried about your business in US and UK?

In US, we've not lost any business yet. Our business is growing well. Can't speak for what the future holds, it's for Mr (Donald)Trump to decide and I don't think he's deciding anything these days. With the new president in the White House, the American situation is in a state of flux. Europe is far more promising politically. As for the impact of Brexit, if our business moves out of UK, then we'll have to follow it. The value of British pound may come down so our takings could come down from there.

What were the major headwinds?

The acquisition of HCI has added about $17 million in revenue this time. Our margins have improved by about 70 basis points. Headwinds being H1B visa costs, weakness in seasonal mobility business due to value added services of Comviva and also the currency appreciation which cost about 60 bps. About $ 20 million gain has come from forex gains due to our consistent and long term hedging policy. PAT was marginally lower.

Charge of software purchases came down in this quarter. There was also gain from sale of an excess land in Pune.