Tech Mahindra to absorb Mahindra Engineering by Oct

Tech Mahindra, which absorbed Mahindra Satyam a year ago, will complete the merger with Mahindra Engineering Services by October. The company is currently in the phase of statutory approvals to merge the Mahindra group company, which has about 1,500 employees.

The 10-year-old firm operates in the niche areas of automotive, aerospace and marine engineering in the US, Germany, Italy, the UK, China and India.

“All the clearances have happened. We will now go to the High Court and go through the procedural issues. It will take up to October (to finish),” Manoj Bhat, Deputy Chief Financial Officer at Tech Mahindra, told analysts recently.

The company received shareholder approval for the merger in the first quarter.

Meanwhile, the company, which had drastically reduced its staff numbers in its BPO operations, has started adding numbers to this segment, indicating a reversal in last year’s negative trend. Tech Mahindra’s Managing Director and Chief Executive Officer, CP Gurnani, said the business services group (BPO arm) was being transformed to offer platform-based services and building IP and patents.

Last year, it removed 5,000 BPO employees due to profitability issues. It exited five Indian contracts, mostly in the voice segment. From 28,611 at the end of September 30, 2012, the staff numbers fell to 23,225 in September 2013.

Overall, the company added about 10,000 employees in the 12 months preceding June 2014 as the headcount went up to 93,000 from 83,000 in June 2013. The first quarter alone saw an addition of 3,300 employees.

Operating at a lower utilisation rate of 72 per cent, the company is looking at increase the rate to improve margins. “In the past, we have operated as high as 77 per cent,” Manoj Bhat said.

Utilisation rate is an important parameter to show how a company utilises its human resources.

Bhat also said that employees with zero-to-three years experience constituted 28 per cent of their staff. “In the past, it was at 34 per cent. The industry average stands at 40 per cent. This is a longer term lever and it needs to match with the kind of projects we do,” he pointed out.