Home Page – SoftwareeWorld – Interview ‘Fighting fit & running’ Mahindra Satyam’s CEO says he is clear about the leverages available to continue the transformation process..
“I want to be an end-to end-shop to enterprises — starting from their products to running the operations.”
C.P. Gurnani
CP Gurnani is a man in a hurry. The CEO of Mahindra Satyam walks into the air-conditioned room sweating from the intense Chennai heat, in which he has been interacting with his employees in open-air. He spares 30 minutes of his time for eWorld before rushing off to a dinner with his Game-Changers — handpicked middle management executives who he thinks would make a difference to the company in the days to come. Excerpts of the chat with eWorld:
How has the macro-economic environment impacted you these last 12 months, ignoring for now the impact of the former chairman’s financial crimes?
We have come out much better than expected. We saw the resilience of the organisation and the desire to rejuvenate and be a fighter — we call it the spirit of Satyam — it differentiated us and allowed us to bounce back. It wasn’t easy that the former senior management was involved in financial crimes, that our associates tried to catch falling swords and did not even know if they would meet their own EMIs in the short term. That we have been able to retain about 380 clients and regain their confidence, and book another 50 plus clients is another testimonial for us.
The improving economy is not yet a tailwind for us. We have to show more hunger, more willingness and knock on more doors to get back. The overall softening up of the economy is an opportunity. To convert our headwinds to tailwind would take a lot of effort.
Which means your efforts to get back on track would cost you more than it would your peers?
Our cost of sales would definitely be marginally higher than the big Indian IT players. But we are on a three-year transformation journey — We have been cash flow positive. We don’t have to dip into the treasury to get new money to run our business. We are investing $100 million in Chennai and Hyderabad to set up campuses and buildings. That the board cleared this investment is testimonial that this company is strong and running.
As to our operating Metrics — SG&A and others — we are definitely marginally higher than Big Indian majors.
First the company said that it would restate financials for seven years before the former chairman’s crimes came to light. Then, that commitment came down to three years, and now you say you would restate starting 2008-09. Why leave it to CBI to restate earlier financials?
It’s a very complex thing, involving the CBI, SFIO, various stock exchanges around the world, with documentation not fully available and forensics of each and every entry being scrutinised. It’s a tedious process. We will come out of it by September 30 this year. For the last three quarters, we have been cash flow positive and doing well. We did have to go through phases such as the virtual pool. (The company put 9,000 of its employees in a virtual bench, of which a third were re-absorbed and the rest were either out-placed with other IT companies or left on their own). But we are back in the game, and in what I call the third phase. The first phase was when we were in ‘ICU’, starting January 7, 2009 (when news of the scandal broke) till June that year (when Tech Mahindra took over the company); we were in the ‘recovery room’ in the second phase till December 2009; and now we are fighting fit and running.
But if you don’t restate for the entire period of seven years, isn’t Damocle’s sword hanging above your, the CEO’s, neck?
I am very clear as to what I should worry about as a CEO — I know my liabilities, I know what liabilities I am contesting, I know what cash I have in the bank. If my balance sheet shows I made a profit of Rs 400 crore four years ago, what does it tell me? Today, I am running a business for which I need an opening balance. Even as an investor, you only need to know the net worth of the company today, whether I am fit and have a strategy for future growth, and whether operating metrics are equal to or better than competitors’.
The annual report is for transparency. After running this company for four quarters now, I know what my financial assets are, I have a fair assessment of liabilities, of my business and of my growth strategy, what my differentiators are and what leverages are available to continue my transformation journey.
And, I don’t have to put out my hand for money to anybody.
With money in hand now, what gaps do you wish to fill in your offerings, through acquisitions?
If wishes were horses, I would acquire in the engineering services space. Our team here is very competent and they could do a lot more (with the aid of acquisitions). It’s a growth industry.
Two, I would acquire in high-end, platform BPO companies and three, augment my reach and capability in healthcare.
I can’t make an acquisition now because, technically, we are in the silent period. It’s only a wish list right now. I am now a custodian of shareholders’ money. If I can’t communicate to shareholders, we can’t spend their money. Only after the restatement of financials would we make an acquisition.
Likewise for the hiving off of the animation business for which you have the permission of the CLB (Company Law Board)?
We would more or less time it with our results. We want to be very transparent with shareholders and to honour the spirit of transparency and communication.
Our focus will be on enterprises and industry domain — making films is not a domain that fits into my four strands — enterprise business solutions, platform BPO, infrastructure management and engineering services. I want to be an end-to end-shop to enterprises — starting from their products to running the operations.
You talked about your three-year journey…?
Our first year, ended recently, was to stabilise operations and right-size it. The second year would be to demonstrate growth, for which we are investing in technology and innovation. The third year is for sharper focus on operating metrics.
Given the backdrop of the company’s earlier fall, how do you hope to retain talent and attract new manpower? We heard of an exodus onsite for you…
Exodus? We had to right-size the company. So exits were part of the plan. My attrition is comparable to most of the majors. We will be deciding on increments and promotions for our employees next month — July. We are hiring 8,000 people this year starting April 2010. About 3,000 are already in, 30 per cent of which are freshers. We visited Ivy League business schools in India and the joining ratio was 85 per cent. In fact, you should not even be interviewing me but speaking to people who have joined us, reposing their faith in us…
‘I chose MSat because …’
At Gurnani’s insistence, eWorld met a recruit, new for the company, but with some eight years of experience behind him – Siddharthan Panneerselvam. Having worked for five out of those eight years for another Indian IT services major in the US, Panneerselvam did a one-year management programme at IIM-Ahmedabad before joining Mahindra-Satyam two months ago. Here’s why Panneerselvam, among others, chose Mahindra-Satyam:
What areas did you work in before you did your management diploma?
I handled delivery of software service, as well as client engagements, for a manufacturing customer in the US. In fact, I was struck by an individual at the client premises who went back to B-School with some 11-plus years of work experience. I thought it wise to do so, too. He was a Kellogg’s alumnus — I saw the difference in his thought process. He was a mentor.
Why Mahindra-Satyam (MSat)? Did you have other offers on hand?
I did attend the first round of interviews with other IT firms — both domestic as well US-based companies with large presence in India. But I ultimately want to be an entrepreneur. And even while being employed; I didn’t want to be lost in a huge organisation. If I went back to my earlier employer, I am sure I would be lost among its mass of employees. Here, I have direct access to the CEO. That is important for me.
I chose Satyam because it’s an opportunity. I see it as a Phoenix rising from the ashes but it needs good hands to push it along. I want to be part of that journey. — KBK
The Mahindra name, of course, mattered. If Satyam had not been taken over by such a respectable name, then aspirants would obviously think twice. Our professors too were of the opinion that here is a growth story waiting to happen.
What did friends and family say about your decision to join Mahindra-Satyam?
We had intense debates about this within our class. I actually started off arguing against joining Satyam. My point was, why would anyone refuse offers from outside where the rewards are similar and the risks are lower, not to mention a settled life-style. The points that came in favour of choosing MSat impressed me. One point was if I fail, I still don’t have much to lose. But if I succeed in contributing significantly to its rise, the upsides are high. It’s much like being part of a start-up. The older structure has broken down and a new structure is emerging. I want to be part of the team that defines the structure and the future of the organisation. In effect, I was more convinced about joining MSat, than convincing in my arguments against joining the company!
I am now with the BFSI vertical, with responsibilities in pre-sales and solution offerings. I wanted to get into sales. But entering a new vertical, I need knowledge of pre-sales, which sort of blends everything. Once I am equipped, I would like to try my hand at sales.
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