Even though the IT growth story is being played down due to the economic turmoil in the US and Europe, Vineet Nayyar, chairman of Mahindra Satyam is not worried about the high exposure to western economies, but more concerned about the macro environment in India at the moment.
In an interview with CNBC-TV 18, Nayyar says if the inflationary pressures in India continue to spiral upwards, business will start moving out into other neighbouring countries or back to the low-cost areas of US and Europe.
Income tax claims: There is no reason for the penalty
On 22 August the income- tax department slapped a tax penalty of Rs 2,114 crore on Satyam for the assessment years 2002-03 and 2007-08 when B Ramalinga Raju, the founder Chairman of Satyam Computer Services, allegedly perpetrated the financial fraud.
Nayyar, said their plea before the court is simply that the I-T department cannot levy tax on income which actually never even existed. He further said that there is no reason for the penalty to be imposed on Mahindra Satyam now that the new management has taken all the effort and risks to resurrect the company.
Discretionary spending down, but it is not a negative
Nayyar said that the decline in discretionary spending is not really a negative for the company because at the moment there is an aura of caution which surrounds every business.
Because of cost compulsions, the clients have really no choice but to come to Satyam for finding solutions. “They don’t even have technologies in that magnitude available in places to be able to resolve their issues. So I think that is a plus.”
IT cannot tolerate inflation in wages of 15 percent a year
He warned that it is not the global turbulence, but the inflationary trends in India that are actually taking a toll on the IT sector.”This industry, which is basically based on technical personnel, cannot tolerate or except inflation in wages of 15 percent a year,” said Nayyar.
Revenue target of 16-20 percent not overly optimistic
Nayyar said given the current environment, a revenue growth target of 16 to 20 percent for fiscal year 2012 does not look overly optimistic.
Give us a year, and will be back with other biggies in deal wins
Nayyar said that the management has given it self three years to come back to industry standards and level. Even though industry people are recognising the company’s comeback, the income tax overhang, which came out of the blue, may still worry investors, said Nayyar. However, he asserted that within a year, the company will be back with other big players in deal wins.
Temporary losses in hedging due to sudden dollar strength
Nayyar said that up till now everyone was betting against the dollar. But the emergence of dollar as a strong currency has taken everyone by surprise. However, he sid the overall movement of the euro and dollar is good for the sector and one will only see temporary losses in hedging.
Hiring prospects have seen only minor modulations
The company has deferred the hiring dates of some staff nor now. But Nayyar says this is not any indication of demand. Some correction will always happen he said, adding that the deferred dates are only minor modulations and not a sign of any dramatic change in the hiring prospects of the company.
Acquisitions will only be strategic ones
Nayyar said the company’s acquisition will only be a strategic one and not for bulking up. “We are looking at various options”, said Nayyar, without divulging any specific timeline for it.