India’s startup story is “intact” and the fundamentals of technological innovation remain vibrant and relevant despite fluctuating valuations in the startup space, according to HCL Technologies Chief Executive Officer C Vijayakumar. The comment from Indian IT major HCL Technologies’ top official comes at a time when investments and venture capital deals in the startup space are beginning to wane as investors are wary of making large checks amid uncertain market conditions.
Asked about startup valuations coming off their peak and whether the space is headed for a possible reset, HCL Tech’s Vijayakumar said in an interview with PTI: “I absolutely believe that the Indian startup story, tech innovation, products, that everything that comes out of India, is very intact”.
“Obviously there’s some kind of downgrade in valuations… but other than that, the big picture is very vibrant and relevant to a lot of new things happening in the market. So I’m very positive about that,” added Vijayakumar. .
After a dream flight and dashing valuations in recent years, the wave of venture capital that haunts the Indian startup ecosystem (the world’s third largest startup ecosystem) appears to be waning. Shocked by concerns about profitability, cash burn and corporate governance issues, investors are wary as stock market corrections have taken the shine off newly listed startups.
Startup funding declined 17 percent sequentially to $6 billion (about Rs 47,800 crore) in the April-June period, according to industry association Nasscom. According to a report from market intelligence platform Tracxn, total funding raised by Indian startups in the last quarter of June fell 33 percent sequentially to $6.9 billion.
Funding appears to have peaked from its previous peak, as witnessed by the third quarter of 2021, the Tracxn report said. .
Whether HCL Tech would look at the startup space for acquisition, given valuations have become attractive, Vijayakumar said, “it all depends… we are constantly looking for capacity-driven acquisitions, on the services and products side. If we find something interesting, we can look at it.” HCL Technologies recently reported a 2.4 percent year-over-year increase in its consolidated net profit for the three months ended June 2022 at Rs 3,283 crore. The turnover of the Noida-based company was Rs 23,464 crore, almost 17 percent higher than the same period a year ago.
The company maintained its revenue outlook for FY23 in the 12-14 percent band, citing “strong momentum in the market” and saying it is positive about the growth trajectory. The company expects to be at the lower end of the guided EBIT margin (earnings before interest and taxes) of 18-20 percent.
Vijayakumar claimed the company is “in a good upcycle” and will use multiple levers to mitigate the challenges surrounding margins. As to whether the war between Russia and Ukraine will have any impact on operations, Vijayakumar said the company does not have a presence at these locations for sale or delivery.
“We are present in some neighboring countries, such as Romania, Poland … so in those countries there is no problem, business is fine. We had no direct exposure to Russia or Ukraine,” he said.
As for Europe, the company has seen no material changes in overall pipeline or demand, and “it remains quite robust”. When asked about timelines when the company plans to get its staff back to work, Vijayakumar said HCL Tech is pursuing a “virtual-first hybrid business model.”
“So where the work can be done virtually, we tell people to keep doing it virtually. We set up an engagement model where we expect them to be at one of our locations, maybe a few days a month, or in some cases , a few weeks,” he said.
That model is now evolving. “Perhaps about 20 percent of our workforce is working from our locations, and that number varies from location to location. We think it will only increase marginally, not dramatically,” he said, but he didn’t disclose a target ratio or timeline for achieving it. same.