Demand is strong but decisions are slow: Tech Mahindra CEO CP Gurnani

Demand is strong but decisions are slow: Tech Mahindra CEO CP Gurnani
  • Tech Mahindra reported a 5.2% year-on-year fall in consolidated Q3 net profit at ₹1,297 crore, amid a tough macroeconomic environment.
  • The company attributed the slowdown in growth to factors like supply side pressures, hiring and attrition.
  • Here are excerpts from a Q&A with CP Gurnani, MD and CEO of Tech Mahindra during a post-earnings conference.
IT services company Tech Mahindra on Monday reported a 5.2% year-on-year fall in its Q3 net profit to ₹1,297 crore, amid a tough macroeconomic environment.

In rupee terms, revenue for the IT company grew 19.9% year-on-year to ₹13,735 crore while sequentially it grew 4.6%. On a constant currency (CC) basis, revenue grew by 0.2% sequentially.

“The fall in profits is predominantly driven by 2-3 factors – one is supply side pressures from last year to this year,” said Rohit Anand, the chief financial officer at Tech Mahindra. He added that attrition and hiring inflated costs. “We had some accounting impact from last year to now based on acquisitions that we did, some amortization of customer contract and relationship also flows in,” Anand said.

Here are the excerpts from a Q&A with CP Gurnani, MD and CEO of Tech Mahindra at an earnings press conference:

How is the demand environment, considering there are fears of recession and slowdown across the globe?
The current situation is reasonably dynamic. I can only say that the overall macro environment — if we were to do a temperature check — is not uniform across the globe, nor it is not uniform across America or Europe.


So the best way to do it is over verticals and sub-verticals. Look at your clients, look at your relationships and analyse whether it is a B2B or B2C customer. And on the basis of this, I personally believe that demand is strong but decisions are slow. The reasons for decisions being slow is very clearly that they also have to look at their customer base, and at this stage the discretionary spend decisions are relatively slow.

How does demand remain strong amid a tough macro environment? Is there a lot of fear after tech giants like Amazon, Google shed manpower?
Firstly, those are big giants and I am no one to comment on them but if I were to look at them, there is a graph someone showed to me that said -- Someone hired 45,000 people in three years. Now if they got rid of 1,500 people, why can't we take it as a correction? I am only relating to the data, and data says my funnels are stronger than ever before.

My data shows that a customer is engaging with us on cost transformation, digital transformation and business transformation — all three verticals of my service offerings. The area where we have seen slowdown is in discretionary spends, where certain B2C companies have hit a pause button.

How is the hiring outlook at Tech Mahindra? Has the attrition come down?
I am very very happy that attrition has come to 17%. Overall, our utilization has improved to 86.4% and I am very happy with that. In general, the environment that we all are in, I expect Tech Mahindra to be a more agile organisation and as an agile organisation, the budgeting, the hiring, overall management of operational metrics — instead of waiting for a quarter — I expect the leadership team to meet every month and respond to market trends.

I don’t think I want to forecast hiring, all I want to assure you that Tech Mahindra would be agile. We will take in feedback and improve our operational working, on a monthly basis instead of a quarterly basis.


SEE ALSO: L&T reports ₹2,553 crore Q3 net profit, sees boost from major private capex investments
Tech Mahindra’s Q3 net profit slips 5.2% on year to ₹1,297 crore