Competition Drives Efficiency And Helps Improve Margins

Do you see demand recovery from the developed markets for IT industry? If yes, how strong is it from the developed markets or do you see any new projects from new geographies?

To generalize, demand for engineering services and related soft ware is consistent over the last two years. So it is expected to remain good and I see opportunities in countries like China a lot for engineering and soft ware. So, overall, I feel the demand continues to be strong and there is a good opportunity in Europe, North America. Overall, it is a good demand.

 In the first two quarters of CY14 the deal activity from the European market was at record high. So has your company experienced the same for your business?

 What we see is that there is definitely increase in the opportunity in Europe, maybe because Europe was not so open to adopting with some kind of outsourcing previously. Now there are two challenges they are facing. One is, to some extent, its cost and the other is, more importantly, the talent. So I think both these are drivers for the improved demand from here.

In IT industry new services like IMS and SMAC were supposed to be the big next drivers. What is your take on this?

I think over a period of time it will happen in engineering. It is much more controlled to be within the firewalls of the customer, because there is considerable information and engineering is very conservative, and so people will be very reluctant to provide the information outside.

If you see opportunity there, have you started providing services in these verticals?

Not that much at this stage.

Majorly IT has been impacted due to the rupee scenario. What is your view on the rupee scenario and how do you plan to tackle this?

The way to tackle this is you have to keep improving your productivity and quality that finally adds up to the productivity. That’s the only way you can tackle it. If you look at how the Japanese manufacturers have done in the past when yen was 142 per dollar, they saw that the yen is strengthening. So they thought to be competitive and brought it to 100 yens per dollar. So you have to constantly improve your productivity, change your thinking, may be do much work in India than at other centres. You have to choose the way you operate. You cannot do the same old thing.

How do you see the US Immigration Bill 2013 from your business perspective?

After it was proposed, the opportunities to some companies including ours got affected. But this was never clear due to lots of conflicting statements. Since it has not been adopted I am not paying much attention to it.

Large and mid-sized IT companies have done various acquisitions over their new geographies or traditional geographies. Do you see such activity from your company to explore a new business vertical?

We would be much more strengthening and restricted, and not expanding into new activity.

The large IT companies have considerable EBITDA margins as compared to mid-cap IT companies. Do you see any expansion in margins as and when you expand?

There are two factors. In our case we had one large customer who ramped off , which affects our revenue and therefore our margins. Secondly, there are economies of scale, so unless you are in a different business, your margins are always impacted.

How do you compare your business? How do you see the scenario? Is there stiff competition for your business also?

There is competition. Competition drives efficiency and our ability to get big contracts, which helps us to improve our margins.