Taking steps to improve margins at acquired cos: Tech Mah

In an interview with CNBC-TV18, Tech Mahindra vice chairman Vineet Nayyar and CEO CP Gurnani spoke about the company's earnings, state of business and outlook going forward.Excerpts from the conversation.Q: How is the integration with your acquisitions taking place?Nayyar: It will depend from company to company. Sofgen, we can do it in six to eight months but when it comes to LCC which is a very large company in network areas spread over 55 countries, it could take up to two years. But you will see gradual improvement in profitability and the quality of work and in two years time the work relating to software defined networks will start. We as an IT company will have a headstart because we are now in the network area also. So, I do believe that both from the strategic point of view as also expanding our footprint LCC is a strategic acquisition and now it depends on our management capabilities to grow it in the right direction.Q: You have set a very ambitious target for utilisation from 74 to 78 percent. Is that achievable in the next two immediate quarters and in which case would you also be able to arrest attrition simultaneously?Gurnani: 74 to 78 percent is ambitious but very doable. I will tell you two main reasons. One main reason is that A: I have to improve internal utilisation to meet my growth demand, that is number one. Number two is it is also very clear that as I look at my forecasting engine, if I am able to re-skill my internal people my utilisation will go up. So, I genuinely believe that it is good for our internal employees and it is good for the company's balance sheet and the stakeholder.Q: Clearly you defined the areas which hit margins. Going ahead are there active levers that are put into place to be able to bring margins to the earlier high levels and also is there a target that you can give me as to how long would it take to be able to arrest the obvious seasonality factors on margins?Nayyar: Margins is a submission of number of interventions we have all over the world. Now in our tradition of areas where we have been working margins is not an issue. We are plus 20 percent. It is the new ones which we have taken and it is a conscious decision that we need to rectify the margins. That would require series of initiatives including rationalising staff, including offshoring in some measures, including better implementation, use of new technology because remember that we have our specialisation as technology. So, rather than using the older methods we would be using the new methodologies.So, all said and done whenever we look at acquisition the first thing we say, hey, what can I do about it, how can I improve it? And if I see the potential only then will in intervene, otherwise I will let it go. So, it is part of our strategy, we did it in Satyam Computer Services Limited, we did it in Hutchison Global Services (HGS), we did it in a number of earlier acquisition, we hope to do it in this. How long will it take; it could take a year, it could take two years so far as LCC is concerned.