V Ramakrishnan: In March quarter, if you look at across industriesNSE -0.11 %, there has been a good moment and also across geographies. It has been almost all around. With the exception of Middle East Africa, we had strong growth in the UK and continent Europe from a market perspective.
In verticals, we had good traction in BFSI, life sciencesNSE 0.50 %, retail and manufacturing. Margins have also been quite resilient.
ETMarkets.com: If we talk about digital, it now accounts for nearly 30% of your revenue?
V Ramakrishnan: Correct.
ETMarkets.com: I just wanted to know what is driving growth there.
V Ramakrishnan: In digital, there is a whole host of technologiesNSE -0.50 %. It is an expanding set of technologies. Just in the last year, we added around 20 sub-services which are part of the digital space.
These are becoming more core technologies and many of them have the potential to drive a lot of growth and transformation within organisations. You will continue to see this expanding and maybe after a few years, perhaps almost the all sectors could be driven on the back of many of these technologies.
ETMarkets.com: Is there any competition there?
V Ramakrishnan: There is competition because it is not that we are the only one who are in that space…
ETMarkets.com: Because I guess Indian companies are catching up to the trend…
V Ramakrishnan: Yes, but things to remember is as early as 2013 when our Chairman had said default is digital. Very early on, we saw the signs and the leaders had the vision to look at how to start building those capabilities and capacity at scale and drive the right alliances and partnerships because this is a huge ecosystem of several players, several startups and many companies, who are actually doing work in many of these technologies.
Some complement each other, some are more niche but we work with several of these partners and technology providers and service companies. So the solutions we build are on the back of these technologies.
We also have invested in one or more technologies. So it is a continuing process over the last 4-5 years. A significant number of employees have gained good deep understanding and knowledge in one or more of these technologies. There is in-house technology capability to deliver.
We also work with technology players and then the deep contextual knowledge that we have of our existing customers. We are able to build those solutions, which make sense for the customers. Bring all these together and also the investments we have made in our own research innovation centres –where we have developed some of the products and platforms — some of those also have a very significant role to play in how this is panning out.
ETMarkets.com: Given the traction and the focus in digital, can we expect this 30 per cent to be maybe 35-40 per cent one or two years down the line?
V Ramakrishnan: It (digital) will continue to grow, we cannot put a number. I do not think there is a constraint of any sort. This is a very expanding space. We will continue to see good growth in this for several more years to come.
ETMarkets.com: If you talk about margins particularly like 25.1 per cent for the quarter, I guess it was down QoQ as well as YoY, right?
V Ramakrishnan: Yes.
ETMarkets.com: It was a bit lower than your comfort zone of 26-28 per cent. Is there scope of margin expansion?
V Ramakrishnan: When we look at it on a year on year basis, our margin is 25.6 per cent for the full year and it was 24.8 per cent last year. When you look at it, there has been an expansion of 80 bps or 79 bps year on year. That is something which is a factor to be considered. Also in the current quarter, we had slight increases in some of our expenses and partly some one-offs.
ETMarkets.com: Is it due to sub-contracting?
V Ramakrishnan: No, those have not increased significantly in the March quarter. We did have some spike in the last quarter, but not in this time. So, we are very much focussed on how to continue to increase margins. We do not see anything significant to call out now. It is not an easy task, but there are enough levers which one can continue to focus on and pay attention to and we are comfortable where we are and we are happy with the trajectory.
ETMarkets.com: Do you think the margins will stabilise around the current levels?
V Ramakrishnan: Even if we look at it over the last few years, our margins have been resilient and we continue to do that. Now within quarters, you will always have some ups and downs. For instance, in the coming quarter that is Q1, we will have the impact from our salary increases. Typically in the past years, there is an impact of maybe 1-2 per cent on our margins because of those increases and in subsequent quarters, we quickly recover that.
Such things would be always there, those are part and parcel of it. Our goal is to improve on that and increase it from where we are. And you must also remember that it is the industry leading margin across players domestic, international wherever you look at.
ETMarkets.com: If you can talk about banking and financial servicesNSE 0.05 %, the numbers are pretty good this quarter. But there are fears of the US getting into recession. What are the signals you are getting from clients?
V Ramakrishnan: See, it is not just this quarter, steadily over the last 3-4 quarters, BFSI has been growing. Coming from where we were for the last two financial years on BFSI, we have seen a steady increase in that. This talk of US recession is itself a little debatable because one does not know whether it is really there or not because there are many countervailing factors.
Having said that, the macro is one aspect, what we continue to do is to engage with our customers, prospective ones and individual customers. They have to run their businesses. Now macro is something which the economists and market observers may be looking at but you are running your business from morning to evening. You are looking at how your customers are looking at things, what you should produce, how you should get that, we do not get side-tracked by macroeconomic factors, you continue to do what you have to do.
When we are engaged with our customers, we look at what are their challenges, what are their areas where we can bring technology to intervene and help them in their growth and transformation. That is where the play comes in.
You continue to engage with them and that is how you are seeing the expansion in our own business. From a client metrics perspective for instance, there is a steady increase in number of clients and across various revenue bands or number of deal wins across segments and markets.
These are all very clear signs that while there may be some of these macroeconomic things which will be talked about, you continue to engage with your customers and see where your offerings make sense and that is what we continue to do.
ETMarkets.com: Tell us about large order wins.
V Ramakrishnan: Just to give you a data point, we report the client metrics by how many customers give us more than $100 million business over the last 12 months. There were 38 clients in March 2018 who had given us more than…
ETMarkets.com: Now they went up to 44, I guess.
V Ramakrishnan: 44 yes, so that is not stagnant by any stretch of imagination. And when you look at number of clients in the $50 million plus or $20 million or $10 million or $5 million or $1 million revenue bands and if you look at over the last several quarters not just this quarter, there has been a steady growth in that.
And the $1 million plus number of customers has crossed 1,000. In this particular quarter, I think 1,008 or so. This is the business from over the last 12 months. That is how we have to see, but it is not stagnant by any stretch.
ETMarkets.com: Can we expect this momentum to carry on till 2020?
V Ramakrishnan: Yes, obviously. See this is a derivative, what is it that you have to do grow your business and for that, you need a deep understanding of technology which is what we have been doing and building that continuously. It’s a deep understanding of the domain and in each of the domains or the verticals where we work in, we have a strong and deep understanding of the same.
Can you deliver at scale, can you deliver it across multiple geographies, can you do it in a fashion where time to market for the customer is reduced? Methodologies such as Agile and location independent Agile give that benefit.
When you do all this, you continuously engage with your customers, and see how you can expand your own presence within the particular customer environment and increase your wallet share. You do all that, your client metrics will automatically follow. It has to because the more you engage with that customer the more you increase that share of the pie as well as increase the volume of business. This is a derivative.
ETMarkets.com: What would you like to say to your company’s shareholders?
V Ramakrishnan: First of all, we thank them for their faith in us and the confidence which is reflected in the market capitalisation and the premium which we enjoy among the peer set. We will continue to stay focussed on delivering superior returns and also taking care of the interest of all our stakeholders, which includes our investors.
[“source=economictimes.indiatimes.”]
