While FY14 growth has been secular in nature, FY15 revenue growth is seen in early to mid-teens for the sector, Mittal says. "We are seeing growth across sectors and there is good traction across all verticals," he told CNBC-TV18 in an interview.
Below is an edited transcript of the interview on CNBC-TV18
Q: Your guidance at this point stands at around 12-14 percent. Given what you have seen in the quarter gone by for the IT companies and what you are possibly projecting in the second half would there be a case for you to possibly up your guidance or would you stick by it?
A: We are going to stick to our guidance. We are very pleased with the performance. In a lot of ways we had factored it in February based on what we had started seeing. There is a lead-lag performance because we had started seeing customer visits happening and large number of requests for proposal (RFP) going on. So we are very pleased with what we are seeing.
As you would see that the global economies have still not rebounded fully back and that shows that the Indian value proposition is very clearly coming through and the strategies that Indian companies had taken are actually reaping results, but we do not think there is a need for us to revise our guidance at this time.
Q: This time around given how strong Q2 has been for most of the IT companies do you see FY14 on the whole being towards the upper end of your guidance closer to 14 percent rather than the lower end?
A: The range is pretty narrow at 12-14 percent and within that whether it is on the higher end does not really matter. We also have issues of how transfer pricing happen. One-third of our industry is captives and multinational companies, they are growing, but when they do they transfer price given that the rupee has become 62 in terms of dollars it is quite likely that we might have to make some adjustments there.
So when you look at overall industry we are saying that it should be between 12-14 percent. The key point however is the traction that industry is getting. Whether it was expanding geographies or going deeper into customers or getting into newer verticals—all of them have started kicking in. Many of these changes had started happening when the downturn happened in 2008-09 and since then industry has made many, many strategic changes which is going to auger well for us in the coming years.
Q: Sticking by this 12-14 percent increase that you are expecting in FY14 then where do you expect it to come from? Will it just be a few of the industry leaders which will propel the growth or do you think that it might just be more secular in nature?
A: It is secular in nature, so if you see while there maybe differentiated performances across companies, but overall if you look at it medium-sized companies have done well, large-sized companies have done well. We have similar reports coming in from IT, BPO, engineering services, so it is across. The strategies that individual companies follow are very different. For example, if you look at the midsized companies they are really focusing on specific customers, they are working in niche, they are going deeper into the customer.
If you look at large companies they have expanded their service offerings, they got into the newer verticals and they have also expanded geographically. We also have changes that are taking place, so transformation is a big thing for our clients. That is happening and most of them are integrating social media, mobility, analytics and cloud into this which is also newer offerings that are leading to increases we see. I do not think these increases are going to be one-time. I think investments are happening in IT to get productivity, expand markets, so I think overall almost everything that looks positive for us.
Q: Given the traction that Indian IT has been seeing do you see FY15 to be much better than FY14?
A: I think so. When you look at the base of this industry and you tend to all the time look at it in percentage terms if we achieve our 12-14 percent which I think we will, the industry exports would be at the range of USD 85-86 billion. When we exited 2008 this was barely USD 50 billion. So even in the worst times we have grown from USD 50 billion to USD 86 billion in a five year timeframe and I think that base is large. So I would think that next year also it should be in the early to mid teens.
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