'Focus can help mid-tier companies grow'

Image: Mexy Xavier

Kishor Patil, CEO and MD of KPIT Technologies, speaks to Forbes India on the sidelines of the ongoing Nasscom India Leadership Forum on how mid-cap IT firms can outperform the growth projection and his strategies for growth.

Q. With Nasscom lowering its growth projection for the IT industry, what opportunity does a mid-cap IT firm like KPIT have?
The Nasscom outlook is generally for the services business. There are a lot of unpredictable things happening there. But there is always a lot of opportunity for mid-tier companies to perform well, just like we have been doing for the last many years. Last year was certainly a soft year for us. But if mid-tier IT firms put their act together, they can outperform this. I would say this (Nasscom projection) is a fair assessment, a bit on the conservative side, but factoring in some of the uncertainties in the market.

Q. Why has the outlook been reduced?
There is uncertainty in the market. The US market, which is the largest market for IT companies, is slower for sure. There are uncertainties in Europe too, where the France market is down. So from that perspective, there are a lot of external factors due to which the sentiment is down and the economy’s growth rates are muted.

Q. What strategy should mid-cap IT firms adopt?
I think a focussed approach or effort can bring more results. For mid-cap IT firms, you are not talking about a market share. You are instead talking about a percentage growth. Mid-tier companies can focus on their strengths and invest in growth heavy markets. For example, if Europe is growing as compared to the US, you can easily do that (shifting market focus). But for a $15 billion company, US becomes such a big pie of their revenue that it is not easy to move. So, from that perspective, if mid-tier companies play to their strengths they will be grow. More importantly, mid-cap firms should focus on new growth areas, which are digital, infrastructure management and cloud and Internet of Things. And that growth is substantial.

Q. What is the differentiation KPIT offers?
We are focussed on three to four areas which are growing. One is traditionally our strength area of automotive engineering, which continues to grow. It is driven by growing trends like electronics, hybridisation, electrification, and so on.

Secondly, it is the digital area. We have a great set of customers that includes infrastructure, digital and cloud among others. If we just focus on them, that will bring growth.

Third is Internet of Things (IoT). We have an advantage because we have a fair balance of IT and engineering, which is very important for IoT. We are very well positioned in that space.

Q. Which sectors are you focussed on for customer acquisition?
Cummins and HP are some of our bigger customers.  Sector wise, in automotive, we have almost all customers. In oil and gas, we have six to seven out of the ten players in India. That apart, we also have clients in energy and manufacturing. However, we don’t deal with telecom companies, financial services and insurance. Looking at our size, we just want to focus on our expertise and be a dominant player in that space.

Q. Which are your biggest markets globally?
The US is our largest market in terms of revenue, right now. But in terms of growth, Asia is the fastest-growing and also Europe.

Q. What is your strategy going forward?
What we intend to do is first focus on these markets. We don’t want to do anything new. We have developed a technology for the electrification of electric bus. It was flagged off by the prime minister. Second is Intelligent Transportation System, which is installed in 5,000 buses in India. It is one of the largest implementation of ITS in the world. We are looking at some of those markets to grow. Through this, we know exactly where the buses are, whether there is any problem, is anybody off the road, is there bunching which has happened, whether the buses are running on time, estimated time of arrival and so on.

Other thing we are looking in the digital world is how you make your customer ready for the digital world. It includes smart campus solution, like intelligent parking, intelligent security, intelligent building management system, overall experience as also automation of electricity meter reading.