C.P. Gurnani has not played golf, his favourite pastime, for nearly a decade. “I would be the first to tee off at the Jaypee Greens Golf Course [in Greater Noida] on Sundays,and play for almost six hours,” recalls Tech Mahindra’s managing director and CEO. “It was a weekly ritual.” The ritual had to be discontinued because he had to take up a challenge—perhaps the biggest in his career.

In April 2009, Tech Mahindra, the information technology (IT) arm of the Mahindra Group, bought a controlling stake in the scam-hit Satyam Computer Services; Gurnani, who was the head of global operations at Tech Mahindra, wastasked two months later with leading the re-branded entity, Mahindra Satyam.

The days that followed were hectic. Gurnani’s first task was to put Satyam back on track. Itsbusiness was severely dented by its chairman B.Ramalinga Raju’s admission in January 2009 that he had fudged the company’s books to the tune of ₹7,000 crore. Before the scam came to light, Satyam had nearly 500 active customers. In a year’s time, the number reportedly shrank to 300-350. Rising attrition made matters worse:The company’s employee rolls shrank to 27,000 from the previous year’s 45,000. So, after he took his position at the helm, much of his time was spent in damage control. In 2012, Tech Mahindra announced Mahindra Satyam would be merged with it. The merger was completed in June 2013 and the new company with Gurnani as MD and CEO was listed as Tech Mahindra Ltd the next month. “I was more than a little nervous about handling the transition, with zero idea on how much time it would take. I told my family I would be busier than I had ever been,” he says.

Today, Tech Mahindra, No. 46 on the Fortune India 500 list this year, has put its days of chaos well behind it. It is India’s fifth-largest IT services company with a revenue of $4.77 billion (₹32,189.50 crore according to Capitaline data)and a profit of over half a billion dollars as of FY18. With 118,400 people on its rolls, it has operations in 90 countries. Over the years, it made seven key acquisitions in various emerging technologies to increase its reach and capabilities. It has seen steady growth in revenue during this time, but it has not managed to leapfrog into the league of its larger peers in the $167 billion Indian IT outsourcing industry. In FY18, Tata Consultancy Services led the pack with revenue of $19.09 billion, followed by Infosys at $11 billion, Wipro at $8.06billion, and HCL Technologies, at $7.84 billion. What makes the gap glaring is that Tech Mahindra set an ambitious revenue target of $5 billion by FY15. This was a few months after the merger with Satyam in 2013 which doubled its revenue to$3.1 billion, increased its staff strength to 89,400 and presence across 51 countries.

Tech Mahindra office in Noida
Tech Mahindra office in Noida
Image : Sanjay Rawat

So, what happened? After the merger, it was expected that Satyam’s high IT delivery capability would help Tech Mahindra improve its scale in the high growth markets that existed then. But industry observers say what the merger actually did for Tech Mahindra was help it gain size, but added little in strategic value. V. Balakrishnan, chairman, Exfinity Venture Partners, an early-stage technology fund,says the acquisition of Satyam helped it become a meaningful player in the industry and gain newer verticals and customers. However, “since both the companies were in similar businesses with no perceptible differentiation, the combination has not delivered the X factor in growth which you normally see in a strategic acquisition”, explains Balakrishnan, a former chief financial officer and board member of Infosys.

Over the past four-five years, the Indian IT outsourcing industry has witnessed sluggish growth in traditional IT services businesses such as application development and maintenance, verification of software,business process outsourcing—which still account for about 60-70% of revenue for Indian IT majors. Revenue from export of software services is expected to be 7-9% in FY19, according to IT industry body Nasscom—slower than the 12-14% growth the sector saw four-five years ago. Meantime, revenue from digital businesses such as cloud computing, the Internet of Things (IoT), analytics, and mobile is growing at 20-30% year-on-year. A major chunk of Tech Mahindra’s revenue comes from servicing its clients in the communications sector. In FY18, the communications vertical comprised 43% of Tech Mahindra’s total revenue. It is slowly bringing down its dependence on this vertical due to patchy and cyclical spends by its clients—inFY17, the revenue share was 48%.

Another pain point for Tech Mahindra, experts say, is the lack of emphasis on the banking,financial services and insurance (BFSI) sector. “The top three and mid-tier Indian IT firms—including Mindtree, Hexaware Technologies, and others—derive major revenue from BFSI. This vertical contributes 30-45% of revenue for IT majors,” says T.R. Madan Mohan, managing partner, Browne & Mohan, a management consulting firm. For Tech Mahindra, revenue from the BFSI vertical stood at 13.7% in FY18.

Anand Mahindra
Anand Mahindra
Image : Gettyimages

Tech Mahindra, which has its headquarters in Mumbai, is aware that the winds are changing, and its acquisitions have been in line with that realisation. It knows it has to position its brand as more relevant and new age in a highly commoditised industry where players clone each other’s offerings. “Tech Mahindra’s key issue now is how to differentiate the firm—what may have made them successful till now will not be the secret sauce for the next five years. The firm may find itself shrinking if it fails to make added investments and continue investing in client-side talent,” says Phil Fersht, founder and CEO at HFS Research, a U.S.-based outsourcing advisory firm.

Gurnani emphasises that the acquisitions were carefully planned to build niche capabilities in areas where the firm wanted to boost its presence. FixStream Networks, which Tech Mahindra bought in 2014, is an artificial intelligence platform for IT operations; SOFGEN, a 2015 buy, is a provider of banking IT solutions. “Data, analytics and artificial intelligence are at the core of almost every solution. My big bet is on network services, 5G and engineering,” says Gurnani. But Tech Mahindra has not consolidated these acquisitions. “We allow them to be separate businesses and units.” Gurnani says it has worked out well for the firm. “At present, we have seven-eight products in the automation space.”

However, not everyone sees value in all of Tech Mahindra acquisitions. Fersht says, “The acquisitions of Comviva Technologies [now known as Mahindra Comviva] and FixStream Networks have been reasonably effective at adding revenues and local competency. However, I have seen nothing from Pininfarina—Tech Mahindra hasn’t managed much with this.” In December 2015,Tech Mahindra’s acquisition of Italian design firm Pininfarina, an iconic brand in the automotive and industrial design space, for €90 million (about ₹370 crore) made investors in the IT firm worry that the deal might hurt Tech Mahindra’s margins, as the Italian design firm had been losing money for years.

Tech Mahindra does not think so. “Today, Pininfarina is one of my biggest bets,” stresses Gurnani. “You need confidence to acquire an iconic brand like that and negotiate with eight banks to crack the deal. The negotiation lasted a year. The acquisition has worked out pretty well and it will help our engineering services business.” At present, Tech Mahindra owns about 76% stake in Pininfarina, known for its design work for car brands such as Ferrari, Maserati and Peugeot. According to reports, Pininfarina is looking at $1 billion in revenue over the next five years by combining the engineering services of Tech Mahindra with its own business. However, Gurnani feels that he did go a “little overboard” on acquiring companies which were underperforming. “I believed that we had the management bandwidth and wherewithal to turn them around, but it took us a lot longer than anticipated.”

Tech Mahindra’s digital push has begun to show results. For the quarter ended September 30, 2018, the firm’s digital revenue grew 10%quarter-on-quarter, contributing 31% to total revenue, one of the highest among the top-tier Indian IT firms. “I would be surprised if by the beginning of 2020 we are not 50% in terms of digital revenue contribution.” During the same period, TCS digital revenue contribution was 28.1%, while Infosys’s was 31%.

Tech Mahindra is prepping its staff to be future-ready, too. It has initiated multiple internal trainings in the digital technology space for its employees. The IT firm claims that more than 90% of its technical workforce has undergone training in digital familiarisation and primary digital skills. In addition, more than 60% of the technical workforce has completed advanced training modules in digital competencies. The Company plans to re-skill a batch of another 50,000 employees. Padma Parthasarathy, senior vice president and global head, consulting services, Tech Mahindra, says that because the younger generation understands technology more intuitively, Gurnani started this informal learning session where young executives would brief him on new technologies. “Now it is a formal process in the organisation where senior leaders can choose a younger mentor who will guide them on newer technologies,” says Parthasarathy. The company also rejigged its top management and set up a growth office to align new digital technologies with its enterprise business. Jagdish Mitra, currently the chief strategy and marketing officer,will head the enterprise business from January 1.

Gurnani, or C.P. as he is generally known,topped the 2018 Fortune India 500 list of highest-paid executives with ₹146.19 crore. Last year, it was ₹150.71 crore (remuneration is inclusive of salary, bonus, commission, perquisites, stock options, and others). In light of the moderate performance of the company, this may seem odd, especially when one learns that the former MD and CEO of industry leader TCS, Natarajan Chandrasekaran, was at No. 15 in the 2017 list with a package of ₹30.16 crore. “I see this as a matter between the Tech Mahindra board’s compensation committee and Mr Gurnani. Having said that, one must also look at the fact that the Satyam merger was extremely difficult to manage, and I would imagine that the committee would have taken that into account while determining appropriate compensation for the CEO,” says Siddharth Pai, founder and general partner, Siana Capital.

Gurnani’s story is not dissimilar to the proverbial “small-town-boy-who-made-it-big” tale. His father was a senior officer in the Central Bureau of Narcotics, so the family moved around a lot. Schooled across various cities in Rajasthan, Gurnani graduated with a degree in chemical engineering from National Institute of Technology, Rourkela. In a career spanning over 36 years, he has held several leadership positions in companies such as HCL Corporation, HCL Hewlett Packard Ltd, and HCL Perot Systems. In 2004, Gurnani joined Tech Mahindra, then known as Mahindra British Telecom, a joint venture between British Telecom and Mahindra Group (the U.K. telecom major exited Tech Mahindra in 2012). The firm then had a workforce of 5,000 people with a revenue of about $100 million.

<em>M Damodaran Ex-Chairman, SEBI </em>
M Damodaran Ex-Chairman, SEBI
Image : Gettyimages

Gurnani, 60, admits he may have made some mistakes such as giving the $5 billion revenue target and going a bit overboard with Tech Mahindra’s acquisition strategy. “We have learnt that it puts pressure on your good health—when you give public targets,” he says. “We made minor mistakes and we learnt from them.” And he has the unflagging support of the $20.7 billion Mahindra Group. “C.P.’s [Gurnani] leadership skills, in particular his ability to inspire people, has helped drive Tech Mahindra’s success. In addition, his vision to invest in startups and strategic acquisitions has helped the company to grow in new directions,” says Anand Mahindra,chairman, Mahindra Group, who believes the acquisition of Satyam was a turning point for Tech Mahindra and the group. M. Damodaran, Tech Mahindra board member and former Securities And Exchange Board of India chairman, says,“C.P.’s ability and willingness to engage with the board is phenomenal. The readiness with which he responds to queries and questions empowers the board to engage effectively. Tech Mahindra’s forward-looking strategy is consequently a shared approach to shaping the future.”

And Gurnani has a clear idea of where the money will come from in the future. He says the product and platforms group should make up 10% of the business in the future, with integrated engineering and design services adding 20-25%to the revenue mix. Network services account for 8% to the company’s top line—he expects it to grow to 15% on the back of the 5G revolution.“Digital is all pervasive and if I look at M&A,we’ve consolidated over the past few years but can now look to pick up the pace again,” he says. Don’t Be surprised if Tech Mahindra scoops up a couple of new-age tech firms in the coming days. Gurnani may have stopped golfing, but he knows the key thing in the sport, or any activity, is to keep at it—mistakes and setbacks are part of the game.

(This story appeared in the December-March Fortune India 500 quarterly special issue.)

Follow us on Facebook, Twitter & YouTube to never miss an update from Fortune India. To buy a copy, visit Amazon.