Tech Mahindra outlines Rs 638-cr capex plan  ( July '23,2008, Hindu Business Line)

Telecom solutions vendor Tech Mahindra has outlined a capital expenditure plan of $150 million (Rs 638 crore) for the next three years, according to its Chairman, Mr Anand Mahindra.

He was speaking to shareholders at the 21st annual general meeting of the Mahindra group company.

Of the planned spend, 60 per cent will go as investments in physical infrastructure such as buildings and real estate while 40 per cent will be used for enhancing technology, Mr C.P. Gurnani, President (International Operations) of Tech Mahindra told Business Line on the sidelines of the AGM.

“Tech Mahindra is in the process of building campuses in places such as Belfast (Ireland), Milton Keynes (UK), Chandigarh and Kolkata,” said Mr Gurnani. Capital expenditure is the total amount of money spent by a company to acquire or upgrade physical or technological assets.

Large-scale contracts

The BSE listed firms focus on chasing long duration; large-scale contracts have paid off in these times of economic and business volatility, according to Mr Mahindra. The company has been keen to engage in deals that have a contract period of three years or more.

“Traditionally, the Indian IT industry has grown through time and material based contracts with duration of less than a year. Signing long-term deals ensures revenue commitment which in term gives the company levers for productivity improvement measures and to plan from a longer-term horizon,” said Mr Mahindra.

BT Group Deal

Yesterday, Tech Mahindra announced that it has got a $700-million deal, spanning for a five-year period, from the BT group.

Responding to a shareholder’s query on the upfront payment of Rs 440 crore made to BT for this deal, Mr Mahindra said the payment should be looked at as a sum paid for acquiring a company.

By doing so, Tech Mahindra is assured of an assured stream of revenues and it ensures greater stability to the earnings outlook of the company, he added.

The Tech Mahindra scrip was up by 9.65 per cent to close at Rs 744.65 on the BSE today.