HCL Tech to restore dividend policy in 6-7 quarters

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HCL Tech to restore dividend policy in 6-7 quarters

Vineet Nayar, CEO, HCL Technologies, said most companies will come back to quarter-on-quarter growth in two quarters. He stated that HCL is considering restoring dividends in the next 6-7 quarters.

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Q: In terms of verticals, where are you seeing traction at this point of time? Which are the verticals that continue to be very venerable as far as you are concerned and which are the verticals that you are not feeling have a certain amount of robustness?

A: It is a very interesting question. Initially, I had a very simple answer and the answer became a little complicated. Simple answer is Industries which are doing badly are not going to suffer, but the answer is turning out different. The Media publishing entertainment is the hottest space HCL is in. Viacom was announced, Reader's Digest was announced.

It is going through a tremendous re-organisation in terms of the way it is bought and sold. We are doing some interesting project on how television spots are sold and how the inventories are managed. That whole industry is doing badly today. From a financial performance point of view, it is one of the biggest investors in the transformation business. We are seeing media publishing, we are seeing life sciences, we are seeing energy in utilities, being big spenders in making this happen. Financial services are is very challenging and continues to be a challenge.

Q: You are not seeing any kind of uptick in terms of financial services.

A: I think because the mergers and acquisitions have almost stalled a lot of companies into freezing, standalone those two companies were doing exceptional well and now with the whole onslaught of mergers and acquisition put on top of them. They are what I called stuck in the internal challenge of integration. Therefore, very good companies have slowed down from that point of view. IT spend has slowed down and some other small companies are feeling depression or the heat, so financial services continues to be a big challenge.

Q: One quick question in terms of the pricing outlook now because we have seen pricing pressure and you have been fairly cautious about where things could be headed on that front. Has anything changed in the terms of what you are seeing in terms of pricing pressure?

A: I think anybody who is asking the question of pricing, is asking the wrong question. I think the question to be asked is margins. Predominately, because pricing is something the customers will demand, has demanded, is demanding, and will demand because that is his right. We have a direct correlation with how his demand and environment is there. So, say that pricing pressure is gone, I do not believe. The budget cycles are till December, late October-November-December. Come May, you will see the customers coming back and saying I am short of my budget or whatever. I think the question of margins is a very interesting thing.

Q: So, what is the outlook in terms of margins?

A: I have already guided the fact that margins will be intact. It is what you do with cost. What is your revenue model? How do you convert into devise-based pricing, more utility-based pricing, more fix pricing. The increase is moving towards new innovative business models. I think Ambani said this very nicely that if you are in the business of buying in meters and selling in feet, or if you buy in kg and sell in meters you would die. I love that argument and I think that is very true of our business. If you are in this feet business and then sell feet and buy feet then obviously you have to ask about pricing pressure, and the number of resources. We are not in that business. We are in the business of total services, total outsourcing, and price contracts. It does not matter how many people we use, we will be able to keep our margin intact.

Q: You have been with HCL for over a three decade, you have seen various business cycles come and go, you have seen various changes within HCL, would you regard this period as perhaps being the most challenging that you faced in your tenure?

: It is a tough question. I would say there were three phases. The first phase was launching UNIX in this country which refuses to adopt standards. Second, was building Comnet. It was my first entrepreneurial venture seven years out of college that I was to build a company of my own and it was a completely different experience. I did not know anything about finance, did not know about HR, but had the passion to create it. I think this would be third. I think this is more execution. Comnet was more intellectual, Unix was more passion.

Q: You are glad that you did not finish that conversation that you were hoping to have with Shiv Nadar in a drunken state at a party once where you were trying to start a poultry farm or something to that effect.

A: Yes. That is true. Shiv and me have a wonderful relationship and he has guided me towards taking a lot of decision whether we are right or wrong. I wanted to do different things. I like challenges and I am fortunate that the recession is here. The journey continues to be exciting. But I believe that if there is no challenge in life then life gets very boring. So, poultry farm is better than a low growth company.