Coronavirus is an opportunity for India; It can reap benefits by stepping up its manufacturing facilities: Abhishek Singh, Mastek Ltd

Abhishek Singh, CFO, Mastek Ltd, speaks about coronavirus and its impact on the business, UK market contribution, global IT spending environment and acquisition of Evosys India among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: How coronavirus break out across the world will hurt your business? 

A: Concern related to coronavirus has been there for many days but the focus has increased towards it in the last few days. As an organisation, we have also reflected over it and adopted the necessary precautionary steps that we can take on the customer as well as delivery centres. As far as business is concerned then we haven't experienced any direct customer impact yet in both the UK and the US markets. Business is running as it is, however, the customers have inquired about the steps that we have taken to safeguard them. If it turns into a pandemic situation than our back-up plans are ready to run the customer gets undisturbed services. At this moment I can say that we haven't seen its impact on our business till February 29.

Q: Do you think that there are opportunities for India amid coronavirus spread that has increased supply-chain issues in the companies? How can India play a bigger role at this moment of concern?

A: Obviously, as the old saying goes that every crisis is an opportunity and it applies to hear too. China has been a core part of the supply chain engine of the world may it be the pharmaceutical industry, metal manufacturing or something else and China plays an important role in almost every segment. And in that context, if India steps up manufacturing in focused areas and creates a capacity to meet the global demand then definitely the world will look towards it to diversify its risk. However, if we have a look on it then will find that several APIs of the pharmaceutical sector comes from China and that's why we are dependant on China and this is a time when the opportunity of 'Make In India' can be realised. 

Q: Around 75% of your earnings come from Europe. What is your outlook there and have you subdued your order outlook amid this scare?       

A: 75% of our business comes from the UK, not from Europe. And, we have seen a lot of impact of BREXIT on our business in the initial nine months of this financial year and now have moved into the post-BREXIT scenario, where the economic engine has started moving. There is a stable government that has a clear view of how to achieve the BREXIT. So, the slowdown that we had experienced in decision making earlier has reduced a bit as there is an improvement in decision making. We are quite positive about this quarter.

Q: What are your view on the global IT spending environment and its impact on it as the US is also getting impacted with it?

A: This is not the first problem for the world and it has already faced issues like H1N1, SARS, and Ebola among others. And, the mortality rate due to coronavirus is low when compared to these issues, which means it is an addressable challenge and the world can handle it. My view on it is that it will bring a disruption in immediate and intermediate terms. And you can see that even big companies like Google, Amazon and Oracle have curtailed their immediate and non-essential travels and have asked its employees to use the technology. This is a disruption but if you have a look at the overall technology spend, may it be the US or the UK - the two main markets for Mastek - then there is a demand for technology spend. The US is going into an unprecedented scenario where joblessness is at a low level and the economy is robust. So, technology is in demand and it needs niche service providers who can understand their requirement and provide a solution for it. As far as the UK is concerned then opportunities are opening up after BREXIT and the companies should get ready to serve it. However, in the next 3 months, there will be little effect on the market and demand following how coronavirus subsides but we expect that the business will be on a strong footing in a long term of 6-12 months. 

Q: You have acquired Evosys India in the recent past. So, let us know about your plans for inorganic growth opportunities over the next 2 quarters?

A: Evosys is a big transaction for us. We are quite excited about Evosys as it brings a capability on both sides with it in the form of a wave cloud wave technology. It is a cloud implementation partner and this wave is just started and Evosys is the front-end centre where it is recognised as a platinum partner by Oracle. The customers have given a significant thumbs up to their delivery capability. And, we had an endeavour to align it so that we can strengthen our cloud solutions and accelerate the growth of Mastek. As far as the next 2-4 quarters are concerned then we will have a tab on the market to find out the ways to fulfil the gap in capabilities and capacity through tactical acquisition. And, we are always open for such acquisitions.  

Q: Let us know about Mastek's growth plan for FY21 and highlight the important areas, growth drivers and specific segments that you want to grow?

A: We have just concluded a big acquisition in the first week of February and it will have a positive impact on overall growth targets and it is being accessed to set up the internal targets. Apart from this, Mastek is looking at the pipeline and the order backlogs that is converting in our main market in the UK and that too in the public sector of the country. It gives us confidence that we will return on the growth trajectory in FY21. 

FY20 has been a flat year for us and possibly there had small degrowth in terms of the core business. However, there has been slight growth if seen in consolidated terms. So we can say it with confidence that FY21 will be the year of growth driven by the UK and the public sector in the UK.

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Q: Any number that you would like to share in terms of growth levels? And, what is your outlook on margins?

A: We will maintain the margin that was delivered in the third quarter (Q3) and will try to increase it. We will have a northward trajectory in both top line and bottom line. As far as the top line is concerned then we never provide any guidance related to it but expect that we will return to the two-digit growth.