In an interview with ET Now, CP Gurnani, MD & CEO of Tech Mahindra & Chairman of Nasscom, talks about growth of IT companies. Excerpts:
ET Now: It is should exciting to lead Nasscom into the 2020 vision, considering that the world is also looking up a shaky place right now.
CP Gurnani: World would not be interesting if we did not have challenges or if we did not have opportunities. I am looking at both challenges and opportunities with a fair amount of excitement. I do believe that we in Nasscom are very happy because we have had all-around growth. We have growth not only in the IT sector but in the BPO sector as well.
We have had growth in the engineering services. We have now about 1000 plus global IT development centres in India and we also have a very active and a very vibrant start-up and e-commerce community. So overall it is an all around growth. There are 100 plus billion of experts. There is a lot to be done.
ET Now: Gartner has cut down the IT spend forecast for 2016. What is your sense? Will Indian IT industry be able to beat the odds despite the increase we have seen in market share from some of the competitors. Do you still expect the industry is going to be able to grow at 12% to 14% in FY17?
CP Gurnani: If I remember correctly, McKinsey projected 11% CAGR. If I remember correctly, exports were projected to grow to 10% to 12%. Domestic were supposed to grow around 15%. So what you are seeing is that to some extent the Gartner projections have been included when we said exports will grow about 10% to 12% or McKinsey putting in a figure of 11% CAGR.
Now I believe there are opportunities and that is why I started the conversation by saying challenges as well as opportunities. The opportunities are the boundaries of what is technology industry and what is a traditional industry. Those boundaries are coming down dramatically. You have seen this happen in travel industry.
You have seen this happen in education sector. You have seen it happened in media sector and you are now seeing a rapid adoption in manufacturing, rapid adoption in healthcare and I can go on and on. So yes, traditional IT spend may come down and that is expected because of advent of cloud and advent of digital technologies.
But there are opportunities because of IoT, opportunities because of the robotics and opportunities because of industry 4.0. It is for us to be on the front and take advantage of those opportunities.
ET Now: Let me now ask you a pointed question not in the capacity of Nasscom but in the capacity of Tech Mahindra. Every time we speak to IT companies, they say do not look at the Nasscom guidance, what Nasscom normally shares is the aggregate picture for the industry but when it comes to individual companies, the story is completely different?
CP Gurnani: I guess both are right because Nasscom is a representative of the technology industry which includes engineering, PPM, startups and product engineering companies. So when you talk to individual company, they are sticking to their domain, verticals and service offerings. The geographies that they represent. Whereas Nasscom try to give you a global picture.
As a Tech Mahindra CEO, I would argue equally that my company will have a different set of opportunities and challenges. As you know, 55% of my business in Tech Mahindra comes from telecom and communication sector. So when I wear the Tech Mahindra hat, I would clearly be looking at the opportunities that the sector which is one of the strongest sectors for us.
ET Now: My simple question to you would be this - most Indian IT companies could well clock in the 12 to 15% growth rate for the next year - is that a distinct possibility?
CP Gurnani: As I said the average CAGR is 11%. Different industries give different projections. I have already shared with you that engineering and product companies give a higher growth rate, IT companies give a relatively lower growth rate when the Nasscom projections are given. All I can say is that I will celebrate both as an industry spokesperson and as an Indian, if we are able to beat the Nasscom projections amidst world turmoil and the volatility, it should be a huge huge celebrations.
ET Now: Rupee or the currency has been on the side of IT industry for about two or three years. There has been a structural and a cyclical depreciation in the rupee from 55 to about 70. Now things are reversing. If rupee appreciates that margin cushion which IT companies has enjoyed, which is a natural margin cushion. Will that reverse? Will that take a hit and if yes what will be the impact of that?
CP Gurnani: Most of the budgeting that I have spoken to the IT stalwarts, have been done on a constant currency. They have definitely taken in a constant currency as it is on 1st of April and really work their numbers around it. Honestly when there is a currency head wind or a currency tailwind, we are very honest.
Most of the large companies have been very upfront and shared with you what is the reason of either higher EBITDA or a lower EBITDA and how much weight the currency is carrying. So you have been able to see the numbers without the currency volatility. You have been able to see the numbers in constant currency and that is a fair way for all the tech companies to report their numbers or at least give you a visibility into their numbers.