CEO & MD CP Gurnani

C. P. Gurnani wearing a suit and tie: Employees from smaller towns, cities will make up 20% of Tech M workforce in less than 2 years: CEO & MD CP Gurnani

© Swathi Moorthy
Employees from smaller towns, cities will make up 20% of Tech M workforce in less than 2 years: CEO & MD CP Gurnani

Talent is a key challenge for all the companies, and Tech Mahindra, especially at a time when demand is at an all-time high.  

The company reported $1.53 billion in revenue, up 4.1 percent quarter-on-quarter, in the three months ended December 2021. It notched up $704 million in net new deal wins in the quarter but attrition was 24 percent in October to December 2021, up from 21 percent in the previous quarter.  

In an interview to Moneycontrol, Tech Mahindra’s managing director and chief executive officer CP Gurnani, and Rohit Anand, global head of business finance, spoke about how the company is tackling attrition by tapping tech talent in Tier-2 and Tier-3 cities, and its plans for the Metaverse, the new iteration of the Internet.  Edited excerpts:

Can you take us through what worked for Tech Mahindra in the December quarter and the outlook for the year ahead? It has been a very good quarter for all companies, and top IT firms are looking at double-digit growth rates. Can you give us the Tech Mahindra perspective?

Gurnani: Let me try and give this answer on three vectors. The first vector is the company’s focus on value creation, for associates, customers, community, and the stakeholders. Vector number two, why the company has done well is because of its technology focus like 5G and Blockchain. And more importantly, the customer experience management has done well for us. We continue to invest in digital technologies, whether it is cloud or AI (artificial intelligence), or Metaverse. Our third vector is our capital allocation. We have been careful, data-driven, and disciplined. We have done our acquisitions, mainly on either building our engineering capability, or to build our domain-specific offerings. As you know, we just acquired CTC (European firm Com Tec Co), which is an insurance domain-focused company. They also have digital engineering capabilities. So I think this focus on all the three vectors has helped us. 

When you talk about investments in metaverse? Could you share more on the kind of opportunities you are seeing there and investments you are making? 

Gurnani: The fundamental point is that the impetus has come from blockchain becoming a new word for trust. As you know, we invested in blockchain competency about four years ago. Since then, we have done about 60 projects in blockchain. Number two is connectivity. Number three is the evolution of the Web from Web 1.0, 2.0 and now Web 3.0. I think what we are seeing is that our current positioning in the metaverse is pretty unique. Because we are both market-focused, B2B- focused and also understand how the consumer preferences are changing. If you recall, when I talked about vector two, I talked about customer experience management. So metaverse is an opportunity for Tech Mahindra. 5G, metaverse, and Customer Experience Management will remain our focus areas. 

The earnings before interest and tax (EBIT) margin has come in at 14.8 percent, which is a decline of 36 basis points quarter-on-quarter. Was this because the cost of hiring has gone up? Your attrition has also inched up during the quarter. Do you expect this trend to continue and what are levers that will help address this decline in the coming quarter? 

Rohit Anand: Attrition for the last 12 months has gone up. But on the quarter (basis), attrition has come down by more than 3 percent. So that’s a positive sign from the TechM perspective. When you look at margins from an EBIT perspective, we will be in the zone of 15 percent EBIT, plus or minus. First two quarters, we were in the 15.2 percent range, and this quarter, we are at 14.8 percent. So for the year, it is in the vicinity of 15 percent. When we think about headwinds, we have also taken certain conscious calls from a long-term investment perspective, where we invested in freshers. We have hired more than 10,000 freshers this year. We will continue to hire more as we move forward. It is a long-term strategy for us to bring down costs from a mix perspective, get them trained, deployed and built, which in the short-term does create a certain pressure because of utilization going down. But when you look at the long term, that is the right strategy to deploy, and we are committed to that. Those are a few of the levers that are playing out right now. 

In terms of pricing, have you been able to use that to offset some of these costs? Because a lot of companies are also talking about better pricing because of the demand. So if you can give us some perspective on that. 

Rohit Anand: It is an industry phenomena and we are driving that on each and every engagement. It is very scientific, based on skill, geography and contract. We are working with all our business operating units to drive it not just for now, but also for next year, as we look at having a value gap minimization between the cost of inflation and the price deal we get as we move forward. 

One of the things I want to understand is the talent equation. It continues to be a challenge for all the companies including Tech Mahindra, which is now tapping Tier-2 and 3 cities. Can you talk about how tapping the smaller cities and towns is helping Tech Mahindra bridge the talent gap? 

Gurnani: Number one is talent availability. It (hiring in Tier-2/3 cities) is certainly increasing your supply base. Second is, our initial reactions are that this will reduce attrition. My personal opinion is that our opening of Vijayawada, Indore, and strengthening Nagpur, are very positive signs, and the local market as well as the local ecosystem we have created, we are getting the kind of people that we would have normally not got. 

I remember you said some years ago about the quality of tech talent in India, and how many of the graduates are not employable. We have seen companies spend a significant amount of time on retraining. Now that you are expanding to these newer pools of talent, what is the challenge that you’re seeing as far as quality is concerned,? Has something surprised you about the talent pool in these cities? 

Gurnani: One is a generic statement that I made many years ago, and I still stay with that. Reality is the quality of intake. You know, the joke in North India is that if you want to get into a liberal arts college in Delhi, you need to have a 99 percent score during your 12th class. But if you want to get into an engineering school, you could do it with 50 percent. Now, I’m not trying to be judgmental about that. But intake in both needs to be regulated a bit because, I think we are over-regulated, the medical colleges. But when it comes to engineering schools, they are not regulated that much. The second part is, what happens is that we continue to have a huge cost for bringing in people with the right aptitude and then training them. If a guy’s got good design thinking and mathematical skills, with the right aptitude, we are willing to train (him). That is why you see metallurgical engineers coming into computer engineering. Thirdly, as I said, my supply base increases, but I still have to do a lot of qualification and training. You understand the way Indian systems work. There are kids who will not be able to leave their homes to go to Bangalore or Pune, because of certain social reasons, or girls who will not be able to leave. The moment I increase that supply base, I am able to tap into that talent. And that is what has benefited me by going into these smaller cities. 

Could you talk about how much percentage do you expect this workforce to be for Tech Mahindra? 

Gurnani: I don’t think we put any numbers, but if I look at the way growth has happened, I would not be surprised if it is more than 20 percent from Tier-2 two cities or Tier-3 supply bases. 

I just want to understand when do you expect it to be 20 percent? 

Gurnani: In less than two years. 

Can you share your take on the Budget, and opportunities for Tech Mahindra, especially around blockchain and 5G? 

Gurnani: It is clear that what Prime Minister (Narendra) Modi’s administration has don
e is to establish the fact that technology is the glue between all parts of society. If India needs to be a global power, one of its most important methods will be to do the investments required in technology. So if you notice, I think what Prime Minister Modi has done is focus on education, innovation, R&D {research and development), and also recognize that if digital and cryptocurrency is here to live, why not regulate it? Why not make the bank, the issuer and the moderator for the digital currency? I don’t think we would have expected a better budget for technology companies… 

(For the company) In this case, our bold bets in 5G, and blockchain will benefit Tech Mahindra.