'We will go for acquisitions for strategic reasons'

Q&A: Vineet Nayyar, Chairman, Mahindra Satyam

'We will go for acquisitions for strategic reasons'
K Rajani Kanth / May 24, 2011, 0:33 IST



In just two years after taking over Mahindra Satyam (the brand identity of Hyderabad-based information technology outsourcing company Satyam Computer Services), its parent company Tech Mahindra is looking at inorganic growth to take Satyam, which it had nursed back to health, to do a marathon. Mahindra Satyam Chairman Vineet Nayyar shares with K Rajani Kanth the company's mergers and acquisitions strategy, investment plans and new verticals that show promise for the future. Edited excerpts:

How has 2010-11 been?
I think it has been a good year. We had indicated earlier that the company was almost mortally wounded when we took it over. Like any other patient, it was in the ICU for a while. I do believe that phase is over and (the patient) is now convalescing.


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In the beginning of the year, our Ebitda (earnings before interest taxes, depreciation and amortisation) was four per cent. It went up to six per cent and has now gone up to 13 per cent. We are satisfied with the pace and the growth in the company. We are also putting up new buildings and structures in Hyderabad for our new employees for new projects which are coming in. So, by and large, the progress is satisfactory. My personal feeling is that the performance is much better than I expected.

What is the investment that is being infused into creating new infrastructure?
Capital expenditure for our Hyderabad and Chennai campuses is between Rs 300 crore and Rs 400 crore. In our Hyderabad SEZ, spread across 26 acres with a built-up area of 400,000 sq ft, the first tower has come up and 4,000 associates have already moved in. We have started working on the next tower too, which will accommodate another 4,000 employees. We are building a large campus in Chennai and expect the Phase-I to be inaugurated in a few months. Ultimately, we will put in about 8,000 employees in Chennai. But, to begin with, there will be 3,000 to 4,000. In addition, we are thinking of putting up two towers in Visakhapatnam. The planning is done and work will start shortly.

Mahindra Satyam has Rs 2,753 crore cash and bank balances as on March 31, 2011. How are you planning to utilise it? Are you looking at acquisitions?
It's our careful husbanding that has kept this money available to us. If an opportunity presents itself, we are always looking for acquisition deals. But we do acquisitions not for purely growing the company but for strategic reasons. To get into areas where we are not present. It will obviously be technologies .. that’s where we are in. The possible size of such deals depends on the opportunity. It could be a larger deal or a string of pearls. The cash is available with us.

Your rivals are already making big strides on the cloud computing. What about Mahindra Satyam?
We already have a special task force on cloud computing. In fact, we are already doing it. Cloud has just started, so how it will evolve globally we don’t know. People do believe there is a lot of potential for it. We are doing it, and if an opportunity presents itself, we will exploit it.

What will be your focus for the next two years?
It will be on segments that we have been specialising in. Media, manufacturing, engineering, and banking and finance are the verticals we are in and these will be the areas that we will be heading for.