HCL Technologies? CEO Vineet Nayar says his company will not fall into the margin trap and hence, margins in financial year 2012 will be the same as 2011 ? at 17.1% with a decline in the first quarter next year owing to the wage hikes doled out and the difficult macro economic environment. In an interview with FE?s Diksha Dutta and Kirtika Suneja, Nayar explained that his company is too small to worry about margins at this point of time.
Maintaining margins have become a worry for IT players. Does HCL share the concern?
While others are seeing a dip in their margins, we are seeing a marginal increase this year. We gave an offshore salary hike of 12-14% and an onsite hike of 2-3% to our employees recently. This increment was effective from July this year and you will again see a dip of 300 bps in our margins in the next quarter. But in the bigger picture, our margins improved by 110 bps this quarter and one needs to realise that our margins are in pressure because of significant investments.
Have the US visa rejection issue become an irritant for the company?
It is an irritant in the short term because in some cases, rejection rates are less than 1% while in others, they are high. This is because of the high unemployment rates in the US and in the long term, people expect you to create jobs rather than shift Indians to other places. We are ready to create jobs and collaborate with educational institutions to generate employment through structural changes. We are talking to stakeholders in the US and hope to see rejections coming down.
HCL focused on hiring laterally last year. But now we see the trend changing. Why?
Lateral hiring last year helped us in getting new business. Now, the contracts have stabilised and the transition is over. Thus, we can substitute laterals with freshers. But the laterals will continue on the existing contracts. Earlier, we used this lever to win business, now we are reversing the lever to win margins. From last year’s component of 25% freshers, the number now stands at 40%. But, I am not sure what will be the ratio in the next quarter. It is true that laterals migrate a higher salary cost and we took that risk to win more contracts.
How will the BPO business transform in the coming years from voice to non-voice?
We have decreased the component of our voice business from 90% to 50% now. We want to do strategic voice business which adds value and that is the change we are focusing on. We are not focusing on low-end BPO business and want our business processes platforms should fit in with the rest of the businesses. Today, we have built digital platforms for media and publishing and even the drug discovery segment is pushing our BPO business. The losses in BPO have reduced from $5 million in the last quarter to $3.9 million this quarter.