Excerpts from CNBC-TV18's exclusive interview with the management: Page 2

Q: What’s your sense? You spent most of your time with clients. Is there anything which makes you cautious about either volume growth this year or pricing flexibility at this stage because so far it’s good, the numbers do not bear any scars. Are you apprehensive after talking to the people there?

Mynampati: I would echo the same sentiments that Ramalinga Raju has expressed. We spent lot of time with customers, day in day out; there are odd market segments, there are odd customers that are still grappling with the realities of the market and the impact on their business due to the market condition.

By and large we are seeing two-three things; one, there is a clear indication of what global sourcing can mean to businesses in terms of higher efficiencies and the maturity of companies like Satyam being what it is; the strategic role that companies can play in the transformational initiatives for the customers.

So to that end, the broader environment that we have seen for our market is very positive not withstanding what we hear about the economic slowdown or whatever. There are going to be one odd customers and one odd market segments that are influenced under grappling with the realities of the market. But by and large, I would say we have seen continuation of fairly positive sentiments in the market.

Q: Are you apprehensive about protecting these kind of margins over the next four quarters? What kind of levers do you have which can come in to play if indeed there is a slowdown from clients in the US?

Vadlamani: Talking about the current quarter, we have done exceedingly well on the margin front. We have seen a QoQ improvement of around 164 bps. So volumes is a key for us.

If you look at this quarter, we have got 9.42% volume growth. This is the third quarter in succession where our volumes grew more than 9% ahead of various others. So that really helped us in managing the margins. Going forward too, I think volumes holds the key for us to manage our margins. If volumes come our way yes, we can definitely maintain them very efficiently. For example, this year our offshore loading factor has improved by around 1.8% and we already have industrial metrics there. We have now shown further improvement in the loading factor.

Also, the pricing really kicked in this quarter in a big way. The offshore prices have gone up by around 2.27%, on sight prices have gone up by around 2.37%. So net-net, in the last nine months, our prices have gone up by over 4%, so pricing is also coming to our rescue. So there are various factors and once you look to the future as to what will happen yes, definitely these are various things that we need to look at. Definitely most important thing is the fulcrum; the fulcrum is the volumes. As long as the kind of growth we are looking at, for example this year we grow at 45.2%, this much guidance we have given for the entire year. If those kind of volumes come our way, that will definitely give us sufficient elbowroom to manage our margins.

Yes, there are headwinds by way of wage inflation, rupee appreciation and various other things, but we can definitely manage them.

Q: More than 9% volume growth is sustainable in the face of the kind of environment that you are sitting on?

Mynampati: I would not answer that directly because that would be adding to what the guidance that we have given. But there are few things that we need to take into account –the deal sizes are increasing; we are seeing an active market as far as large deals are concerned. Just to drive home that point, we see about 1.5 times the activity in the large deals markets compared to what we had seen in FY07 and out success rate has improved quite substantially.

This quarter alone we have won about four large deals; large deals being defined as revenue of more than USD 50 billion and the good thing for us is that these deals are distributed across regions, market segments, across technologies and once we have that kind of a large deal and longer-term commitment from customers, it follows that the volumes would automatically come. How sustainable in terms of translation to number may be debatable; but the environment supports continued strength in the volumes of our business.

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