Answering a query at the analyst meet after the first quarter results, Tech Mahindra Chief Executive officer C.P. Gurnani said the company was going soft on India market.
It is not just Tech Mahindra, several top-tier Indian companies are looking at India as not-so-attractive market.
Reasons
They feel that the market has become a sort of unattractive with increased cost of operations, lags in decision making and low returns on investments.
Manoj Chugh, who heads Global Head of Business Development, (Enterprise Divison) of Tech Mahindra, said one of the reasons could be priorities of businesses. Companies would prefer to focus their resources in the markets where they would get better revenues.
The National Association of Software and Services Companies (Nasscom) had said the domestic market grew by 14.1 per cent last year from Rs 91,800 crore in 2012 to Rs 1,04,700 crore in 2013. Of this IT services market grew by 14.5 per cent, followed by business process management market by 12.7 per cent.
The domestic market constitutes only a small fraction of top-tier IT firms, with its revenue contributions ranging from 2-6 per cent. Compare this with over 50 per cent by the Americas and 20-30 per cent by the European market.
T.K. Kurien, Chief Executive Officer of IT Services Business of Wipro, the first quarter was soft in India and Middle-East business due to delays in discretionary spending and seasonal weaknesses. “It is not playing out in line with our expectations,” he said. Wipro will be announcing its second quarter results later this month.
“We have reduced our exposure to India market and it contributes to 8 per cent compared with 12 per cent in the past,” said Partha De Sarkar, CEO, Hinduja Global Solutions.
Rajesh Subramaniam, Managing Director and Chief Executive Officer of Firstsource Solutions (BPO company), said the problem with the India business was that the returns did not justify the investments both in terms of effort and management bandwidth spent.
“If the same effort were to be spent in bagging deals overseas, the return on investment is much higher. Most back-office companies that are servicing India market are losing money,” he told Business Line recently.
Soon there would come an inflection point where companies will have to take some tough decisions, he added.
Earlier in March, Subramaniam told analysts that the company had terminated ‘couple of clients’ in its domestic business.
In some cases, the company is continuing with the same client with some lines of business while exiting others. As part of the strategy, Firstsource reduced 416 seats during the quarter ended June 30, 2013, across its delivery centres in India.
Hitachi upbeat
Vivekanand Venugopal, Vice-President and General Manager of Hitachi Data Systems (India), however, has a different view.
The company provides IT infrastructure solutions to firms. “Indian market is very attractive despite negative sentiments. Customers are investing in IT and huge development happening in tier-II cities.
“It is only a matter of time when Indian customer provides some level of returns to make the market attractive,” he said.
(With inputs from Venkatesh Ganesh in Bangalore)