Tech Mahindra is ready to accelerate:CEO | Economic Times

“In Q4, we have signed TCVs of a billion dollars. We believe that in the next quarter also we will sign a similar amount. ” CP Gurnani, MD & CEO, and Milind Kulkarni, CFO, Tech Mahindra in conversation with ET NOW. You have said that FY21 was a year of repair and FY22 will be a year of growth. Can we expect double digit growth in FY22?CP Gurnani: The statement was made last year where our EBITDA had come down dramatically, our growth had stalled and we had presented to our board a three-year plan which said FY21 we will repair and the main focus on repairs was to a) look at growth both in communication sector and in enterprise sector; and b) to focus on operating metrics; and c) to drive much higher revenue in cloud and cyber security. Overall, the plan has worked well. Despite a bad start, we have been able to cover up and we have been able to grow quarter on quarter. It only shows that on the EBITDA side, we have grown almost 70 bps. The repair phase is now over. In the previous three quarters, the total contract value (TCV) signing that we reported every quarter was about $400-450 million. In Q4, we have signed TCVs of a billion dollars. We believe that in the next quarter also we will sign a similar amount. In general, we are ready to accelerate and that is what we mean by the rally phase. While the revenue growth has been subdued, it is a delight to see that there has been margin expansion. Do you expect margin expansion to continue and also is there going to be wage hikes? Where do you see the numbers settling?Milind Kulkarni: We have utilised margin levers already in terms of operational efficiency and transformation. We will continue to leverage those and because the revenue is going to grow, there would be a growth leverage as well because our SGNA will be spread over a larger base. We are fairly confident that we will absorb the salary increases and continue to expand our margins. At the press conference, you mentioned that the deal pipeline has been the strongest ever. In which verticals and geographies do you see momentum building in for Tech Mahindra?CP Gurnani: We are seeing a growth uptick from America and Europe. The growth uptick is coming both from the communication and enterprise sectors. Our current open pipeline is probably the best in recent years. What has been the impact of the second wave on clients, on demand, on the kind of outlook that people are now factoring in? Are you seeing slower 5G investments?CP Gurnani: Personally, it is one of the most serious and tragic situations, particularly in India. The shift has been very dramatic. Absenteeism because of Covid has reached a peak in Pune and Mumbai at about 1.5%, but absenteeism has reduced to 1%. It shows that the Covid curve is now flattening at least in Pune and Mumbai. Right now, it is high in NCR. But the main point is that since we are based in so many major cities in India and we have a global delivery model which has seven centres in Asia, five centres in North America and four centres in Europe, the work from home and the capability to work despite of some challenges is where Tech Mahindra has built in resilience. The second Covid wave is much more serious and we are focussing almost half of our management time on employee wellness. You have announced the acquisition of Eventus Solutions. How will that be funded and would we further acquisitions? How does this fit into the overall strategy?Milind Kulkarni: We announced the Eventus acquisition today and some impact of that will be seen in the coming two months of this quarter. DigitalOnUS acquisition was announced a few days back. So there will be some impact and some growth will come from these two companies. But it is a long-term growth strategy and not just a quarter. Attrition has also been rising across the industry. What is the kind of salary hike planned for FY22? Also what are your plans in terms of hiring?Milind Kulkarni: We do not give hiring numbers because it is actually a proxy for guidance. But yes, we have started hiring from March and that we would continue going forward. We will be hiring freshers and there will be lateral hirings as well. The dividend payout has been the highest ever at about Rs 45 a share. Any further payout plans for FY22?Milind Kulkarni: Our dividend policy depends on the cash that we generate. After retaining some amount for acquisition or internal raises, we want to return to shareholders and that is the reason why you see we have enhanced the dividend in the current year. We have already announced an interim dividend of Rs 45 per share. It indicates our confidence in the future.