TechM added Rs 950 crore cash in the December quarter, taking the total cash/equivalents to Rs 4,951 crore.
Stating that Tech Mahindra has a bias towards using cash for acquisition rather than buyback, its chief executive C P Gurnani said the company will focus on bottomline and is also willing to sacrifice on revenue growth for it. “Right now my capital allocation policy is that I will give dividends but at the same time, I need cash to acquire companies. That is a better use of capital,” Gurnani said on the sidelines of the annual Nasscom Leadership Forum today. It can be noted that companies such as TCS, Infosys, Wipro and Cognizant are mulling share buybacks as they are sitting on huge cash piles, which has led to investors demanding either share buybacks or heavy dividend payouts. TechM added Rs 950 crore cash in the December quarter, taking the total cash/equivalents to Rs 4,951 crore.
Asked about the increased shareholder activism, as at Infosys where the promoters have come out criticising the present board and the management, Gurnani said shareholders have a right to know about the affairs of their company and companies have to answer every such question. “When it becomes one of the hedge fund managers or one of the promoters, the answers will be the same, it is just that you will have to answer them in public,” he said.
Commenting on the recent announcements on buybacks, he said such moves were “overdue” because of the “hoards” of cash some companies are sitting on. On business outlook, Gurnani said TechM will be focusing on the bottomline as well as widening its margins. “My priority is going to be on Ebitda now because I am lagging behind on this. Our 1,15,000 employees know that I am willing to sacrifice growth for Ebitda,” he said.
On the company’s low margins, he said, “It does not feel good that I am at 16 per cent and the leader is at 27 per cent.” Gurnani, however, did not spell out any targets, blaming the “turbulent world” we are in, but said there will be an effort to widen the margins every quarter. Faster growth in non-US markets boosted TechM net profit by 14 per cent to Rs 856 crore in the December quarter, while margin expanded by 91 bps to 12.41 per cent.
Total revenue rose 12.8 per cent to Rs 7,558 crore, while its pre-tax profit margin rose an anaemic 0.80 per cent to 15.7 per cent on increase in revenues but was restricted by cross-currency headwinds, higher furloughs with telecom sector clients and higher percentage of people deployed onsite. Gurnani, who also chairs the industry lobby Nasscom, said different companies will react differently to the ongoing changes in the industry where the traditional “run” jobs are showing a slowdown while “change” jobs are increasing.
He said data collection will be a tedious affair and therefore, Nasscom has decided to take some time before coming out with its estimate on revenue growth for the industry in fiscal 2018.