IT engineering service company, Cyient DET is cautious of adding new customers especially startups because it wants to secure its cash flow and doesn’t want to lock itself with the funding uncertainties of startup winter.
Speaking to FE, Karthik Natarajan, executive director and CEO, Cyient, said, “As far as new clients additions is concerned, we are very conscious in terms of who we are adding as a client and we are also cleaning the tail accounts on a continuous basis.”
Natarajan was explaining about on why there was a fall on client addition in the Q2 of FY24 both quarter on quarter (QoQ) and year on year (YoY) basis. In September quarter, 15 new clients were added by the company, compared to 20 in the June quarter and 17 in the year ago period.
“We have put in a very stringent qualification for adding the new clients because it’s not so much about in our industry. I think we genuinely believe that for our size of the business, we don’t need more than 100 – 175 clients to be fair.”
Natarajan, further explained, “We have clear definition of who should be our clients — they should be part of the top 200 R&D spenders, they have to be part of top 100 global innovators and they are part of Fortune 500 customers.”
There’s no point in adding somebody who’s Fortune 2500 or 3200, he added. “We definitely want to put a clear filter to ensure that we are adding the right kind of customers because we do believe our business is a growth business.”
He believes that if they add a client, the same account should grow to minimum of $5 million in three years time. There is no point adding clients who can’t show scalability potential.
“Scalability is the most important thing for our business because I do get some excited sales person who wants to add a customer and who could be a startup who could be a new company emerging and I get nervous about it because it’s definitely good to work on some new creative innovative project at the same time, we also want to secure our cash flow and ability to pay and suddenly they’re funding stops.”
Natarajan said that the company is very cautious of adding startups. “We also make sure that they either pay us up front or they pay through an escrow account because it is not something that we want to put their funding as a risk element for our cash flow.”
He added that that he is not just talking about Indian startups but also global startups. “I’ve seen in the last 15-20 years how the startup industry evolved. Whenever I go to Bay Area, my antenna goes up. I always ask who’s the new talk of the town, and I get some names that is different from the ones that were mentioned when I visited last year.”
He mentioned that startups constitutes about just 1-2% in the company’s portfolio. “In semiconductor industry, we work with some of the cutting edge projects in terms of three nanometer and even below and some of those designs come from startups. But we also make sure that we do the credit check and ensure they do have the ability to pay us right before we start engaging them.”
ON GUARD
* In September quarter, 15 new clients were added by the company
* Company belives that there is no point adding clients who can’t show scalability potential
* The company wants to secure their cash flow
* In chip industry, the firm works on some of the cutting edge projects