1. HCL Tech bets on acquisitions to drive growth

HCL Tech bets on acquisitions to drive growth

Country's fourth largest IT services firm HCL Technologies is aggressively looking at acquisition opportunities in areas like engineering and R&D services as well as digital technologies to drive growth.

By: | New Delhi | Updated: October 23, 2016 3:20 PM
HCL Technologies Country’s fourth largest IT services firm HCL Technologies is aggressively looking at acquisition opportunities in areas like engineering and R&D services as well as digital technologies to drive growth.

Country’s fourth largest IT services firm HCL Technologies is aggressively looking at acquisition opportunities in areas like engineering and R&D services as well as digital technologies to drive growth.

In the past few months, it has announced acquisition of companies like Geometric (for USD 200 million) and Butler America Aerospace (USD 85 million).

“In certain areas like engineering and R&D services, there are opportunities to consolidate,” the newly appointed CEO of HCL Technologies, C Vijayakumar, told PTI.

“So, wherever there are niche providers, which is adding to our strategy or helping us to further our strategy, we will be very open, we announced Geometric, we announced Butler. Potentially, we could be looking at others as well,” he said.

The company also sees opportunities in the infrastructure services space, he added.

“On the digital and new age technologies, we will continue to look at small capability-led acquisitions,” he said.

Vijayakumar, who took over as the chief on Friday, exuded confidence in the company’s ability to get business at a time when its larger rivals, TCS and Infosys have given a cautious outlook for demand in IT services.

The companies cited macro economic challenges softness in client spending, especially in sectors like banking and financial services and slower ramp-ups as reasons for the muted outlook.

Infosys reduced its yearly guidance for the second time this year and said it now expects revenue to grow by 8-9 per cent on constant currency basis.

HCL, on the other hand, has maintained its outlook for 2016-17 at 12-14 per cent on constant currency basis.

However, this does not include the earnings from the two acquisitions. If the deals close within this fiscal, the growth could be higher than the stated outlook.

Vijayakumar said that while spending on traditional IT services may be affected clients are also enhancing their “discretionary” budgets on disruptive technologies to boost business and stay ahead of competitors.

“If you kind of focus on that (discretionary spending), you will find the business going down… If you focus on disruptive technologies, I think there is enough business. I think that’s where you will see little bit of duality in the conversations with some of the other providers and us,” he said.

HCL Technologies is “very sharply focussed” on how it can address this “disruptive transformation spend”, he added.

“…so, that’s a way we are able to maintain a positive commentary and I am optimistic about what we can do,” he said.

Vijayakumar said: “I think my biggest focus is on re-articulate our strategy — the Mode 1-2-3 strategy — and execute onto that growth strategy, that’s my biggest focus apart from people overall.”

He added that another area of focus would be on converting the deal pipeline which looks good currently into deals and execute them.

“The third area of focus would be that we have made a lot of investments, inorganic, IP and partnerships. How can we get the best value out of them, those investments is what we would look at,” he said.

Asked about the challenges he sees, Vijayakumar said employee engagement is an area where the company is lagging.

“We have done well in the last 4 years. We were a very employee first culture-led company. So I want to make sure we are able to connect with people more. I think that’s probably is an area where maybe we are falling short a little bit,” he said.

Vijayakumar added that he plans to re-initiate meeting with employees to enthuse them and play a bigger part in the company’s overall strategy execution.

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