Global ops will boost biz growth in FY16: Tech Mahindra

Despite IT major and competitor Infosys guiding for lower margins in the third quarter of the current fiscal, Tech Mahindra is confident of its business doing well on back of global operations. Speaking to CNBC-TV18, Vineet Nayyar, Vice-Chairman of the company says that Q3 is seeing positive orders traction and business is expected to do well in the second half of the year. Nayyar says that business in Europe is down, but the company will benefit from the low costs. In Australia and US, he says the demand is good. Middle East and Asia, which forms a small part of the overall business, are highly competitive, he adds. Below is the transcript of Vineet Nayyar’s interview with Reema Tendulkar and Sonia Shenoy on CNBC-TV18.Reema: Very recently, Infosys has stirred up the hornet’s nest by guiding for lower margins in the second half of the year and also for a weak Q3. How is the demand in the environment as you see it?A: We do not make any forward projections unlike Infosys. So, at this point of time, I cannot say how we will perform. But by and large, I do believe that business is doing alright. But please do not take it as an indicator either ways.Sonia: But the Visa woes are back in the US. If passed in the current form, what do you think the impact could be?A: Mercifully, I think it will not be passed under the presidency. The new presidency depends on who comes. It could undergo a change. So, I am not holding my breath on the change and at least we have gained a year, a year and a half. Let us see how it turns out finally.Reema: Coming back to the company. Tech Mahindra is focused on improving their margins. In the prior quarter, you earnings before interest and taxes (EBIT) margins stood at 13.7 percent. How much further can margins improve from here?A: We are working hard at it. How much they will improve, if cannot tell.Reema: Any rough indication, any numbers to work with?A: No, we do not, you know better than I that we do not make any forward projections.Sonia: Well, the deal wins in Q2 were at about USD 300 million, how are the deal wins in Q3 and what is the pipeline looking like now?A: It is quite positive.Sonia: But the communication vertical has shown growth in the prior quarters, will it sustain in the quarters to come and is the company still facing any kind of delays in the decision making for deal closures in this particular segment which is the communication segment?A: Communication segment of the industry has been a bit tardy. But, we hope it will recover very soon.Reema: Going ahead for the next 2-3 quarters, run us through the pressure points that you expect.A: In business, pressure points are everywhere. I really cannot isolate it, but US is looking very good. Europe economy is a bit down, but I see that there are positives, because they will be turning to more cost effective solution which we provide, which Indian industry provides, than they were doing earlier. So far, where Australia is concerned, the demand is decent, their currency has come down quite a bit. So, the profitability has come down, but nonetheless demand looks okay. So, net-net, I am positive.Sonia: So, how do you see India, specifically the domestic market shaping up considering that there have been many headwinds in the past?A: Indian market is a very tiny segment of the business we do, so I really do not have an opinion on it. If something very critical for the country comes up, we will be there. But otherwise, we are quite occupied doing work in the rest of the globe.Reema: Come year-end, we start looking ahead for next year’s Budget. Any sense directionally you could help us with how FY17 budgets are likely to be?A: I think things are looking good. US, American continent is very good as I said. Europe, I see it as a positive for us. Australia is good. Middle-east and Asia is always very competitive and it is a somewhat tiny segment of our entire portfolio. So, net-net, if you put all these together, I think the scene is not bad.Sonia: So, you can expect a better FY17 over FY16?A: I am praying for it, you also pray for it.