MphasiS, an HP company, reported a 28% slump in net profits at R194 crore for its third quarter ended July because of higher tax rates and salary increments. In a chat with FE?s Goutam Das, CEO Ganesh Ayyar talks about the firm?s strategy in the year ahead.
Sequentially, your growth has been lower in Q3 compared to Q2. How is your relationship with HP as a customer?
HP Enterprise Services (ES), which is the biggest portion of our business, hasn?t been growing. That remains challenging. HP ES has been muted for the last two quarters. We need to see how to unlock the growth potential in that business. Today, we continue to work well with ES; obviously, ability to afford a rate card reduction is not there. So we are focusing on what we can do to bring growth for both. We have not extended any rate reduction to HP ES. We had said that we will focus on growing our footprint beyond ES within HP. We started on it in the last nine months; we invested in a specialised salesforce and solutioning team.
Sequentially, in Q3, we grew 12.6% in the non-ES space. We are working on a different model to see how we can bring value proposition. We are working with HP technology consulting, HP server division, HP professional services organization. We have won a couple of deals in the last two quarters with HP?s professional services organisation, which is part of HP software.
With HP?s acquisition of Autonomy and the possible exit from the PC business, what kind of opportunity and impact does it create for MphasiS?
Some people believe that we do business with HP?s PC side. This is wrong. We don?t get any business from HP PC. There is no impact. However, with HP?s accelerated focus in software, clearly software combined with services becomes a very strong value proposition for customers who are looking for solutions. The more HP focuses on software, the greater would be MphasiS? ability to bring a value proposition to HP and their potential clients. We have to build capability, centre of excellence and value proposition around that software.
How does the rest of the year look for the firm? Have you noticed changes in the demand environment?
As of now, I haven?t seen anything that is showing on the demand side. What is happening is that all customers, regardless of whether they are in banking, insurance, logistics or retail, are focusing on preparedness to see what they need to do if the situation gets out of hand.
Clearly, there are a lot of discussions taking place where they are thinking about their discretionary spend. I don?t know what the impact would be. What we are focusing on is our preparedness. First, how do we ensure we increase customer intensity to be able to respond to customer needs.
We are driving a structured programme for that. Second, how do we become operationally agile and nimble so that we are able to weather the storm should it arise. We are taking lots of actions in terms of cost optimisation, discretionary spend, big cost reduction, variable cost optimisation. Third, how do we make sure that in terms of expertise, offering and solutioning, we are able to bring differentiated solutions to customers in times of crisis.
You now have a cash balance of $459 million. Do you want to preserve cash in this environment?
Our strategy is to continuously look at the best return on investment for cash. We will stay focused on acquisitions on the one hand and the board will review from time to time whether share buyback or dividends make sense.
