Q&A: Vineet Nayyar, Tech Mahindra

IT services provider Tech Mahindra continued to grow its revenue from the US markets in Q2FY12. In a chat with Shivani Shinde, Vineet Nayyar, vice-chairman, MD and CEO, talks about the merger with Mahindra Satyam and the eventual BT stake sale. Edited excerpts.

Tech Mahindra logged a 16 per cent growth in emerging markets and 7 per cent growth in the US, this quarter. Can you keep up this run rate?
It is difficult to make any projections at this point in time. We are in the middle of a huge financial crisis, which has a cascading effect — not only in the US, but in emerging economies as well. Even in this scenario, we were able to grow. Within the telecom segment, discretionary spending is going down. But clients have no option, but to look at us to be competitive. Added to this,we have done around 16-17 new projects. This has given us a unique position in some of the markets, and amongst telcos.

BT’s share has come down from 80 per cent a few years ago to 37 per cent. Do you think this will be the level for BT?
When BT contributed to 80 per cent of our revenues, it accounted for less than $100 million. At current levels, BT’s contribution is around $450 million. So, while the percentage of BT in the overall pie has come down, we have been able to increase our share of business with BT. We have also been able to grow business from other telcos.

But BT has called for re-tendering. What will be the impact and would the stake sale of BT impact business?
I suppose as a percentage, BT will go down, but not in absolute numbers. That is what we hope to achieve. As for the re-tendering impact, we had a $6-million fall in revenue. That was the amount of reduction we had in the business from BT. But since the re-tendering, we have got more than what we were already working with BT. In the IT deal, we have got a larger chunk, except that the pricing that we have got is at a lower level. The BPO business with BT has grown and continues to grow. We will try and optimise the BT account by moving away from pure outsourcing work to more transactional work. The BT stake sell will impact our business with them.

How has the 2G scam and expose impacted your business with Etisalat?
We are very satisfied with our deal with Etisalat. We have been serving them and we have been compensated on time. So, from the business point of view, everything is the same.

With all the legal hurdles and issues solved, by when will the merger with Mahindra Satyam happen?
We hope to complete the process of merger by next year.

There are tax issues, but we are contesting them. As for the share swap ratio between the companies, it will be decided by the bankers.