http://www.indiainfoline.com/news/showl ... =658&lmn=1Mr. Pankaj Agarwal,
Group CEO and MD, Mindteck India Ltd
Jul 14, 2008
Mindteck India Ltd. is a multicultural global Technology and IT services company that delivers business and technology solutions to a wide range of Fortune 500 companies and Small and Medium Enterprises (SME) across the globe. It has offices and development centers in India, US, UK, Germany, Netherlands, Singapore, Malaysia, and Bahrain. Core software solutions and services include Embedded Systems, Business Applications Consulting, SAP, and Security, Infrastructure & Managed Services. Mindteck is an ISO 9001:2000, ISO 27001:2005, ISO 13485 certified, and a SEI CMMi Level 5 assessed Company.
<b>Mr. Pankaj Agarwal is the Group CEO and MD of Mindteck. He is responsible for the overall growth of the Mindteck group. Pankaj is a business leader and an entrepreneur for more than two decades. Prior to Mindteck, he founded two companies; Infotech Consulting, Inc. in Pennsylvania in 1996; and Binary Semantics, New Delhi, in 1986. He holds a bachelor degree with high honors in Electronics and Communications Engineering from Delhi College of Engineering, one of the premier engineering institutes in India.
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In a freewheeling one-on-one with Hemant P. Maradia of India Infoline, Mr. Agarwal says we are looking at 30-35% growth in the topline for FY09.
Can you tell us about your ‘Go-Global’ strategy?
In February, we acquired Infotech Consulting, based in Pennsylvania, USA. The acquisition value was US$21mn. It was the starting point of our Go Global strategy. It was a big acquisition, and promises to further strengthen the company’s market position in the US.
After that, the company announced three more acquisitions. In April, we completed the acquisition of Primetech Solutions, a California-based IT consulting company. We also bought out two of our associate companies in the UK and Singapore.
What kind of tangible and intangible benefits you plan to accrue from this strategy?
These acquisitions will expand Mindtek’s operations in the US, Europe and Asia-Pacific.
The company is expanding its sales force globally, and expects to add many new clients in the coming quarters.
One of the prime objectives of the acquisitions was to strengthen our service offerings, and to become a full-scale service provider in the space that we operate in.
The whole idea was conceptualized in November last year. We decided to grow our business through acquisitions and consolidate the organisation.
Through these acquisitions, we wanted to become a global organisation. Majority of the company’s business comes from the US. But we only had 10-15 people there. With these deals, that number has now jumped to almost 400.
By acquiring our subsidiaries in Singapore and the UK we got access to wider markets in the Asia-Pacific and Europe. We will also be able to strengthen our operations in the Netherlands and Germany. We also plan to set up shop in Ireland.
Now we have a much larger and significant operations in the US as well. Our execution capabilities have been enhanced with these acquisitions. Today, when we go to a client, we can offer them a complete solution. Our delivery capabilities have also expanded.
We plan to set up operations in China, the Philippines and Japan as well. So, the consolidation within the organisation and the acquisitions will definitely help.
It helps us in improving our bottomline and cash flows. It will also help us get a global line of credit. Earlier, we had a line of credit only in India. Now, we have it in Singapore as well as in the US.
If you get money from the US, we will have to pay just 5% interest rate, instead of paying 13-14% interest rate in India. We can get a line of credit of up to US$10mn now, which can help us do more acquisitions in future. These are some of the advantages that we will leverage on as we move forward.
These were a complex set of transactions, and we are done with them. We can now start focusing on business growth, both organically and inorganically. We will more companies. This is a good time to do it.
You have spent US$30.6mn on the first phase of 'Go Global' strategy. How much more do you plan to spend and over what period?
We raised US$7.5mn. We used US$6.5mn to acquire these companies. Everything else was paid in stock. We still have a little bit of money left for a few more acquisitions.
Are you on track to achieve consolidated revenue target of over US$75mn for the year ended March 2008?
Before the acquisitions, Mindteck had revenues of US$30mn. Post the acquisitions; our consolidated topline touched US$75mn. Now we will build on the new revenue base. 30% of US$75mn is a much larger number than 30% of US$30mn.
What is the promoters’ stake now?
The promoter equity was 78% prior to these acquisitions. Now the same stake is at 64%.
Promoters do not have a single person on the Board. All members are independent. There is nobody, who truly represents the promoters on the Board. This has been the situation for the last three years. Earlier, they had an observer. Now, they do not even have that.
What's the guidance for the fiscal year 2008-09 and the following few years?
The actual effect of all the acquisitions will start kicking in only from this year. We are looking at 30-35% growth in the topline in the year 2008-09. We did our budgeting in late last quarter, and are first two-month’s numbers are pretty much on track. But, with fears of a recession in the US, and all, it’s anybody’s guess. We have a strong pipeline of orders and a strong business proposition.
What is your take on the US economy and the financial crisis there? What kind of an impact has it had on your company?
Most of our work comes from the hi-tech industries. We do not do much business with the financial companies. So, the sub-prime crisis and the consequent slowdown in the US have not affected us. But, a weak financial sector may impact other sectors, and there may be a little bit of delay in new orders going forward. Normally, it takes 8-12 months for such a thing to happen. A lot of the projects have already been sanctioned to us. As people start looking at new projects, that is when we will know the real impact of the downturn.
We have good customers, and companies that are very strong. So, we are hoping that this will help us in future. We also do a lot of work in the government sector. That side of business should not get affected. None of our clients have told us that they will be deferring new order placements to us.
What is your recruitment plans for the year?
We have added 200 plus new employees in the last six months in India. We are getting new business. From 275, we have jumped to 475. So, there is definitely growth. We have closed lots of good orders. But, will the current momentum sustain? We can’t predict at the moment.
There is lot more stability in employee turnover, relatively speaking. The pressure from increasing wage costs has come down a little bit. We are able to hire a lot more people. We recruited almost 60 people in May. Earlier, the situation was tight in terms of the availability of people.
In the US, in 2000-01, it was a nightmare to hire people. But, after the dotcom bubble bust, the situation really improved.
We are expanding our operations, both in Kolkata and Bangalore. We are planning a new facility in Bangalore totaling 250 seats. We are doubling our office space in Kolkata.
In total, we will be adding 300 plus seats at both these locations. We are hoping that in the next six months, we will be able to fill those places.
For our Bangalore facility, we will be moving into the SEZ. That will help the company, as we will get some tax benefits.
Our total headcount globally is 1200. We have 400 people in the US, 480 in India and 150 in Singapore. The rest are all in Malaysia and Europe.
How do you plan to tackle the US-related problems?
We are increasingly focusing on Europe, and we have got good traction there. We started our office in Germany in May. We have some good clients in Germany. We are also doing well in Singapore and Malaysia.
But, the problem is that the Singapore dollar is much weaker than the US dollar. And, the rates that you get there are lower in absolute terms. So, even if we get more business out of this region, the impact won’t be much.
The Euro business has the potential to counter the dollar business. In absolute numbers, we will have more dollars coming in from Europe and Singapore compared to last year. But, percentage wise, the US will continue to stay very high, as we continue to do a lot of business there.
The whole purpose of these acquisitions was to boost our business in the US. We want to grow that business. We are still a very small player in the industry. We still have a lot of scope to grow in the US. We can grow at 30% plus in the US and we will achieve the target this year.
There are enough opportunities in the US. To grow by 30% on a topline of US$ 2bn it is tough. To grow 30% on US$75mn, it is far easier. It’s a doable target.
In Europe, we have started signing contracts in euro. We are exploring if we can sign up contracts in rupee. In the US, we actually got rate increases from some of our customers. And, we have not yet reversed those rates back. Right now, things are looking good.
What is your reaction to the Government's decision to extend the STPI benefits by one more year? How do you plan to prepare for the post 2010 era?
It definitely helps. We might have to move into SEZ as we grow. From the industry perspective, the discontinuation of the STPI benefits will hurt the smaller players the most. So, from that angle, it doesn’t make sense, because all the large players are moving into SEZs. It will be difficult for the smaller companies to do that, as rents are very high there.
What is the outlook on prices? Are you able to extract higher prices for new contracts and renewals?
Not from all clients. Some of them have agreed, while others haven’t. We increased our rates by 10%. The dollar has anyway risen against the rupee by the same margin this year.