India is not a place where huge margins can be made: Neelam Dhawan

Interview with Managing Director, HP India

Global technology major Hewlett-Packard is going through turbulent times, partly due to some decisions it had taken in the past, and partly because of the deteriorating market conditions. In an interview with Bibhu Ranjan Mishra, HP India’s managing director, Neelam Dhawan, says most problems faced are external in nature. She says India is unlike any other market, and a strategic place. Edited excerpts:

Recently, your CEO Meg Whitman painted a very gloomy outlook for the company in every respect. It seems none of your businesses is doing well at the moment, except software. What is going wrong?
The truth is uncertainties continue in most of the world, and it is not going to be much better next year.

Looking at Europe, you will see no sign of recovery. While some of the data from the US is positive, there are talks about a fiscal cliff. Latin America is a difficult geography. In this kind of environment, no one can expect a great growth.

How is HP reinventing itself to deal with the new normal?
If you look at the foundations of HP, it is a hardware company. So, we are betting big on our hardware business. We have reinvented all our products. We have launched completely new ranges of notebooks, laptops, desktops, printers, servers, storage and networking products. I think it is a good sign that we have been investing in innovation for the future. While hardware will continue to remain a focus for us, we also need services to manage enterprises. Overall, it is a very integrated strategy for the company.

Do you think domestic market conditions would improve in 2013?
In the first six months of 2012, we saw a lot of turmoil in India. First, we saw a free fall of the rupee when the dollar-rupee conversion fell from 44 to about 55. Second, decision-making by the government also got impacted by a host of factors, which slowed the economy. In the second half of 2012, we are seeing a much better economic environment. Decisions are being taken and macro issues and concerns being addressed. The currency has been stable for the past two months. That gives you more comfort than (the hope that) the economic environment in 2013 would be far better.

But the harsh reality is that though you are saying decision-making has increased, HP is yet to be awarded the India Post contract for which the company had emerged as the L1 (lowest bidder) a long time ago.
Yeah, its true. The government process takes its own time. Hopefully, we will see some decisions being taken on that. The India Post project aims at improving financial inclusion. The delay in implementation, will impact a whole lot of people, as India Post is one of the biggest employers in the country.

You have just emerged as the lowest bidder for the Uttar Pradesh government’s free laptop programme for students. Looking at the huge volume — 150,000 units — do you think HP will be able to execute it alone?
Yes, that is not an issue. If the order comes to us, we will be able to deliver all of it alone. Anyway, we are manufacturing in Pantnagar, Uttarakhand.

We have done a lot of optimisation on the cost.

People say doing business with the government mostly erodes the profitability. What is your experience?
None of us can change the way government buys today. Governments have a defined process of going to the lowest bidder. So, when we bid for it, we know the margins might get eroded. But, these are the decisions you take because that’s what will give you the volume.

Are you saying you are ready to sacrifice margins for the sake of volumes?
India is never viewed as a country where we are going to make large margins. When you work in India, everybody realises that the per capita income and the GDP being where it is, the buying power is going to be less. I am sure my competitors also realise that. This makes us focus on what will give value to customers here.