Shiv Nadar, founder and chairman, HCL Tech has put to rest all rumours of a sell-out to Accenture and has added that he wouldn't even consider it.
Speaking to CNBC-TV18 on the company's outlook, Nadar says there is not even 1 percent truth to talks of selling out to IT major Accenture.
The rationale, he explains is the different cores of the companies. "If you see the HCL's core, its core is technology. Accenture's core is consulting. We are different kind of organisations. We serve clients in a different manner," he adds while rubbishing any sell-out talks.
While Shiv is confident the company will not be sold out in the next 10 years, daughter Roshni Nadar, executive director and chief executive officer, HCL Corporation adds that the same is unlikely for the next 20 years.
Below is the edited transcript of the interview to CNBC-TV18.
Q: What are the various achievements and milestones that you have been able to achieve both at HCL Tech and at the foundation? HCL Tech now onto its three-decade long journey. We have seen a huge jump in terms of profits, revenues, market capitalisation. The Shiv Nadar Foundation now onto its 20th year. So milestones on both fronts, but you are currently more passionate about the foundation, aren't you?
Shiv Nadar: Yes. I have been passionately doing this for the last five to six years.
Q: I have had this conversation with you in the past. When everyone was talking about who is going to succeed who not just at HCL, but at Infosys and Tata Consultancy Services (TCS) and so on and so forth, around that 2008 period everyone said Shiv Nadar is not going to take a backseat, Shiv Nadar is going to continue to hold onto the reins. No one assumed that you would actually let Vineet Nayar come and pretty much run this place as his did. Do you today miss having him around?
Shiv Nadar: There is somebody else, so the show goes on.
Q: Is there a sense of continuity and the fact that perhaps you would have liked to deal with senior leadership pipeline differently than it has panned out today?
Shiv Nadar: Senior leadership pipeline in this industry always has to be very good. If you have seen, in all corporations, the longer the senior leadership just stays on, somehow those corporations do not do well.
There will be a correlation if you just watch this closely. If you take some large corporations in this industry and just scan it for the last 30 years, you will see that they will have this management change coming up, otherwise they will be receding. It will be one of the two. I miss Vineet for a different reason, because he is a very dear friend. Having him as a colleague is different. Anant is an executive and I do not know him very much.
Q: I want to draw your attention to what we have seen happen as far as Infosys is concerned. That raises the question of whether a lot of these companies which were promoter run where management and ownership has been separated quite successfully, they have not been able to breakout of the founder-promoter mould in that sense. We have had to have Narayana Murthy be brought back as far as Infosys is concerned. Do you think it is going to be tough for companies like Infosys, for companies like HCL to in that sense cut the umbilical cord?
Shiv Nadar: I do not know about Infosys. I can talk about HCL. At HCL, we cut the umbilical cord very long time ago, because I stepped out of the only operative company at the time which is HCL. At that time I took a backseat and took a mentoring rule and that is the point in which NIIT started growing. After that, all the constituent units of HCL Technologies started growing. My role became a mentor a long time ago. I stopped playing an executive role about 19 years ago. It is as far back as that.
Q: How do you see future as far as HCL Corporation and HCL is concerned? What is the sort of positioning that you see as far as both these entities are concerned? Where would you like to see them 30 years down the line?
Shiv Nadar: Thirty years down the line is very difficult to visualise.
Q: Say 5-10 years down the line?
Shiv Nadar: In 5-10 years down the line HCL Technologies will continue to be largely owned by HCL Corporation. That is definitely likely to continue.
Q: The market buzz on possibly selling out to the Accentures of the world, no truth to that?
Shiv Nadar: Not even 1 percent truth.
Q: Why not? You would not consider it?
Shiv Nadar: Of course I would not consider it.
Q: Because this is something that you have built.
Shiv Nadar: Yes. If you see the HCL's core, its core is technology. Accenture's core is consulting. We are different kind of organisations. We serve clients in a different manner.
Q: So selling out is not an option?
Shiv Nadar: Definitely not.
Q: Not in the next 5-10 years?
Shiv Nadar: After 10 years I do not know, but till then, no.
Q: The last conversation that we had you had just about gotten started here at the Shiv Nadar Foundation. Today you sit on the board of HCL Corporation. You are the executive director and the CEO of HCL Corporation. Your father is saying that you will perhaps take the decision on whether or not you would want to eventually sell out as far as HCL Tech or HCL Infosystems is concerned. How do you see the strategic vision and the strategic direction for these entities?
Roshni Nadar: I think definitely to his point not for the next 10 years, maybe not for the next 20 years, HCL Technologies and Infosystems are staying with us.
Q: So you are completely aligned to his visions as far as both those entities are concerned?
Roshni Nadar: Yes.
Q: On this issue of cutting the umbilical cord, in that sense you are part of the umbilical cord. So Shiv Nadar will stay connected through you, through the company and you are the via-medium then now, isn't it? Do you feel the weight of that?
Roshni Nadar: It gets a little cushioned because he is on the board with me.
Q: Is this really something that you want to do, HCL Tech, HCL Corporation? Shiv Nadar Corporation I know. I have seen you at work. At VidyaGyan. I have seen how committed and passionate you are about what you do in the education space, but HCL Tech, HCL Corporation is you heart really in it?
Roshni Nadar: There is no question that my heart is in HCL Corporation because HCL Corporation and Shiv Nadar Foundation are very closely linked and HCL Corporation and HCL Technologies are very closely linked. So, it is a lot more of heart and the mind is slowly catching up.
Q: I know in your vision statement for the foundation you have said that the effort is to execute a creative philosophy as far as philanthropy is concerned. Explain to me what that really means.
Roshni Nadar: I came into the foundation after SSN was founded in 2008. 2008 onwards all our other entities have come into existence - the VidyaGyan Schools, the Kiran Nadar Museum of Arts, the Shiv Nadar Schools, the Shiv Nadar University.
The common thread amongst all these initiatives including SSN is that they are all institutions. A lot of what we see today in private philanthropy as well as CSR tends to be program-based which is a lot more corrective in nature. They identify a problem. They create a program around it to find a solution. There are measureable results.
How do you measure impact? That’s when there is a time horizon. It was started on this date and it could be a couple of months, couple of years, that is going to be the end date, that is going to be its funding pipeline. There are a lot of things. There is nothing wrong in it.
Q: It is a different approach.
Roshni Nadar: It is a different approach.
Shiv Nadar: It has a self-destruct nature.
Roshni Nadar: So, it is a different approach and it is an equally necessary approach, because there are lots of problems in this country and this world which need to be solved and addressed through this approach.
The approach that we chose was a more creative approach which was creating of institutions which would outlast any of the founders and our aim is and we desire that within our lifetimes all these institutions reach a certain sense of self-sustainability so that they last that time horizon. That is how we define creative philanthropy as opposed to corrective philanthropy.
Q: I want to talk to you about the business of actually making each of these institutions viable, self-sustainable because I know that in 2010 you had outlined a budget or a fund of about USD 1 billion which was going to go towards the Shiv Nadar Foundation. You said that you will evaluate that in the medium-term. Can I assume that by 2015 there is going to be fresh fund infusion from your side as far as the Shiv Nadar Foundation is concerned? By when do you see Shiv Nadar Schools or Shiv Nadar University being self-sustainable?
Shiv Nadar: An engineering school, if it is independently priceable, starts breaking even in terms of operating expenses in its fifteenth year. In research, there is nothing called breakeven.
It is a quantum of research that you do. In that, if you have a discipline that the institution funds 15 percent and the rest comes from elsewhere, we will start breaking even in sixth or seventh year.
We can put metrics like this. A business school breaks even between fifth and seventh year. They is operating expenditure, capital expenditure you have to take.
A university will take 20 years, not anything lesser than that. There is also the capital that you bequeath that will stay bequeathed. Somewhere between the eighth and the tenth year a school will start being sustainable.
You must see that whenever we say it is being sustainable we are totally and completely within the framework of law. If the law says that 25 percent of the school students will be given education at the government prices then we do that.
Q: The profits will be ploughed back.
Shiv Nadar: There are no profits, there are only surpluses.
Q: Yes, surpluses are reinvested into the business.
Shiv Nadar: That is the reason why we have come up with complete transparency. What are the surpluses which we generate? We will disclose through a global auditing standards every year. If there is any surplus at all, it will be returned or the cost will be reduced. We want each of these intuitions to self-sustain, but not make any surplus.
Q: How is the working of the foundation likely to change, now with the Companies Law making it mandatory for corporate entities to spend 2 percent of their profits on CSR? You are driven by the idea and the philosophy of daan which is why you have the foundation. But now the daan element of it is going to be linked to your corporate entity. So how are you going to align the Shiv Nadar Foundation with what HCL Tech, HCL Infosystems do on the CSR front?
Shiv Nadar: Let me segregate this. CSR is somebody else's money. I am very conscious of this. This is not a call from HCL Corporation's funds, this is truly the family's money. We are giving that, this is philanthropy. When the corporation gives it is shareholders' money.
Q: The expectation from the government is that CSR essentially also means philanthropy because they are also saying that it cannot be linked to your core business?
Shiv Nadar: Fair. It will be unconnected with that. The difference is, here I am not compelled by any budgets. What we do as philanthropy will completely eclipse what the companies will do as CSR.
Q: Would you not like the two to be aligned?
Shiv Nadar: No.
Q: Maybe not in terms of money, but in terms of vision, in terms of the sectors that you address, in terms of the problems that you address.
Shiv Nadar: I will give you reasons. First, building institutions are like what we do building universities is not the defined priority for CSR as per the act. We do not go there. Here what the foundation on its own steam had planned to do is different from what the government wants us to do in the CSR. I believe the government will always be open to modifying some of those.
Q: Do you think currently the way the rules are drafted it is bad news essentially as far as meaningful CSR is concerned?
Shiv Nadar: I have very strong views on meaningful CSR. Our corporations must learn to give. Our executives must learn to give. Our boards must start learning to measure what they owe the community.
Q: Should they be mandated to give?
Shiv Nadar: It has started, does not matter. You are doing it because it is mandated or you are doing it because you want to do.
Q: But as you said it is shareholder money. This is the government essentially putting on an additional tax on you and getting you to spend shareholder money on addressing deficits that it has not been able to address or is unlikely to be able to address?
Shiv Nadar: It is a very good idea. Because finally, what it will reach with that 2 percent is what the government will struggle to reach with increasing taxes by 20 percent.
Q: Since you are on the HCL board ideas in terms of what you would like to see as far as CSR initiatives are concerned for both HCL Tech and HCL Infosystems and would you be keen on marrying the philosophy and the ideology of what you are doing in the foundation, not necessarily the approach?
Roshni Nadar: That is something that we have been thinking about and we have been working. Fundamentally, the point is that where corporations can play a better role is that if they put their heads together then there is a higher chance that the money which is put in to CSR will reach the actual beneficiary. What I think that even private philanthropic foundations could possibly even learn from the corporate CSR foundations is the government structures and accountability.
Now if you have 2 percent going into CSR you are also going to have pressure from your shareholders because they want to know what you have done with the money and where has the money gone. It creates a system by which disclosure, audit, governance and accountability becomes very important. So actually it is creating a pretty good system.
Q: You are 68, what is the plan for yourself? Corporate India has seen a lot of changes at the top with a lot of people saying their final goodbyes, some actually returning but for you now is there a retirement plan that you have lined up?
Shiv Nadar: I have already retired in 1994 formally. After that I came back for a few years.
Q: In terms of the chairmanship?
Shiv Nadar: Chairmanship, no. I have already stated that before, HCL Technology, I have no plans to step out of chairmanship.
Q: What about the inability to separate ownership from management?
Shiv Nadar: If I see someone who can do this better – currently, most Indian corporations are struggling, most are struggling to find the entrepreneurship as a central culture. You can go through all the companies in this country and that is something which our company must stand up to, it is not the individual. If its culture is entrepreneurial, lot more entrepreneurs and then if it is large then the top leader will not matter at all.
Q: What do you see as being the future especially as far as the technology business is concerned? You have got the immigration bill, a lot of people say that the kind of work the Indian software companies are going after, the low hanging fruit is going to be out of the market, more and more automation will come into play as well. What do you really see as the future of this business over the next five years?
Shiv Nadar: All the fears that are being stated are true.
Q: Do you think Indian IT is enough paranoid about the future today?
Shiv Nadar: I don’t know about the rest but this company is.
Q: What are you most paranoid about?
Shiv Nadar: I don’t to that. I only do the mentoring.
Q: As a tech entrepreneur what would you be most paranoid about today?
Shiv Nadar: Technology. It is going to change even faster. All the infrastructure building, everything machine to machine all of them are going to be impacted by technology.
You can say this class looks really empty but there is something else which looks very filling.
So, if you are an entrepreneur, you will constantly find that and you will constantly give up where it is receding.
Q: So, does one needs to have the ability to forecast, anticipate and sacrifice as well?
Shiv Nadar: Then kill some products, kill some services.
Q: I want to talk to you about the future as far as the foundation is concerned. Will education be the only area that the foundation will focus on or will you look at other areas like healthcare where again there is huge demand supply mismatch, again there is a huge deficit?
Roshni Nadar: As the foundation is evolving its focus is changing from education to leadership and so, leadership has become lot more of a focus. Sometime in the future healthcare is something that we would like to look at only because education and healthcare go together.
Even within our own initiatives and institutions, there is a lot that can be done in healthcare, in each of the individual initiatives.
When you are talking about leadership you are also creating leaders who will possibly become leaders in the next 20-30 years. So, what is the world that they are going to be leaders in? They can't be leaders of today's world. If technology is what drives the world and changes the world then I have to be equally paranoid because that is what we have to work towards.