Q&A: Vineet Nayar, HCL Technologies

HCL Technologies exited the September quarter with a marginal increase in revenue and a sequential fall in net income, besides a foreign exchange loss of Rs 65.5 crore. Despite this, Vice-Chairman and CEO Vineet Nayar is optimistic, as he explains to Kirtika Suneja. Edited excerpts:

How does the environment look on deals?
It is after 10 quarters that every single service line, geography and vertical has grown. The Americas are lying on hope, while continental Europe is resetting costs and huge deals are coming from there. Asia is hot and happening because the companies there are globalising, while South Africa has new markets. The amount of deal flow is more than ever before and there are deals between $100 million and $500 mn.

Moreover, pricing is stable and volumes have been growing for the last two quarters. Still, July-September 2008 showed similar behavior and after that, the deal flow vanished.

So, what are the concerns?
Currency fluctuation is the biggest concern, along with macroeconomic indicators being negative. Policies being adopted by governments to discourage outsourcing is another. Though it will entail a cost, the way to counter this is by setting up centres in those countries. So, whether it is a double-dip recession or growth, we are ready for both.

You have been hiring aggressively for the past two quarters. Why?
We have added more than 5,000 people for the second consecutive quarter as we are investing in a bench, with business growing. Our utilisation, at 70 per cent, is the lowest in our history. So, going ahead, hiring will be lower in the next quarter.

How is business process outsourcing (BPO) shaping?
The voice market is still bad but we have signed a $100-mn deal in non-voice in business services. The BPO business will post losses for five more quarters but BPO is back in business and we have hired people in the business after quite some time. We are focusing on the BPO business and it is a strategy to counter the pure-play BPO players.

With all these, what are the new Blue Oceans for the company?
We have set up our new Ecosystem and Business Incubation unit that will incubate five ideas in different technologies like cloud computing, mobility, smart grids, biometrics and e-governance. These five ideas are the new Blue Oceans for us. In verticals, these are public services and healthcare. In geographies, it is Malaysia, Singapore and New Zealand.

Where does India figure?
India contributes five per cent to our total revenues and we have announced our first smart grid implementation in the country and there are $100-plus million deals here. The government is making significant investments, and power and insurance are re-establishing themselves. The Unique Identification (Aadhaar) project is a development area. Also, we are expanding in new cities and opening our Manesar facility in a few days.

With $537 mn (Rs 2,360 crore) on the balance sheet, are acquisitions on the anvil?
There will be small and strategic acquisitions to fill gaps in geographies in continental Europe, where we are not doing business of $100 million or in business services, infrastructure and engineering. These will be sub-$100 mn buyouts.