Deal wins strong, our digital focus is yielding results: Tech Mahindra CEO

We will keep the discipline on operating margins and growth rates as we look at acquisitions, says Gurnani

The fifth-largest software services provider, in terms of revenue, Tech Mahindra (TechM), had a strong December quarter (Q3), beating estimates on all fronts. In an interview to Ram Prasad Sahu and Shreepad S Aute, the company’s Managing Director and Chief Executive Officer C P Gurnani talks about the prospects in the telecom and enterprise verticals. Edited excerpts:

Given the good show in Q3, what is your outlook?

This is a milestone quarter for us. With a quarterly run rate of $1.26 billion, we are a $5-billion company on an annualised basis. Growth has come both from the enterprise as well as the telecom segments, with the former growing at 4.1 per cent and 2.6 per cent on a sequential basis. The outlook for the communications sector is good. This is the year of trials for 5G and the next year could see the full sale of spending on 5G.  

How is demand growth, given the macro pressures in key markets such as the US?

The deal wins in the current quarter have been strong. While the overall deal wins in the quarter has been $450 million, the telecom business accounted for $250 million, while the rest was accounted for by the enterprise business. We have not seen any impact on our business, both on account of pipeline and demand visibility. For us, the US is continuing to grow. 

What is your outlook on margins? Is there further scope for an increase?

We have maintained the rising trajectory in operating profit margins, which for the quarter was higher by 50 basis points on a sequential basis. The strong overall growth has come on the back of digital segment. In terms of deals, we have had a good deal pipeline, with two large wins in the communications sector and one large deal win in the enterprise sector in the quarter. The company’s focus on digital is yielding results. Digital revenues have grown 10 per cent sequentially and are favourable from a margin viewpoint, given the high realisations. There are still a few levers on the margin front.

What would be the acquisitions strategy for TechM?

This year, we had done a number of small acquisitions with a focus on bringing in specialised capability largely in the digital space, which helps us accelerate our relevance for customers and grow the organic business. However, this strategy does not stop us from making larger acquisitions, if the fit is right. We will keep the discipline on operating margins and growth rates as we look at acquisitions.