It’s a classic story of a company hauled back from the brink of disaster. The hero, in this case, is known in the industry as the go-to turnaround man. With three turnarounds under his belt, Anil Nair was called in to bail out an ailing AGC Networks, an Essar group company, in 2014. By the end of FY15, the company had turned profitable. This is its story.
Till March 2011, all was well at AGC Networks. The company, which focusses on unified communications, network infrastructure, and data centres, and operates in 13 countries, was growing profitably. But its debtors began defaulting, and that, coupled with a bad economy, sent the company down a slippery slope. By FY14, losses amounted to Rs 285 crore.
Enter Nair, as AGC’s managing director and CEO. One of his notable successes was in 2008, when he turned around an information and communications technology company by focussing on its regional office operations, restructuring its sales pitch, rationalising working capital, and increasing services. In 18 months, customer satisfaction peaked, market capitalisation almost tripled, and net profits multiplied many times.
To understand how Nair pulled off the AGC turnaround, look at the recent goings-on in this segment. Christopher Cook, director of investor relations, IBM, sums it up in a June 2014 report for Motilal Oswal Securities: “The technology services industry has moved from merely outsourcing infrastructure/data centres to driving efficiencies and optimising usage. The next step in evolution ... towards integrating cloud, analytics, and mobility, has just commenced. Indian vendors will need to move up the value chain to capitalise [on] this opportunity... Vendors with capabilities to sell across geographies and with sales forces close to the ground will succeed. Clients choose vendors that can best address all concerns, including budgeting and growth.”
With that in mind and his turnaround experience, Nair drew up AGC’s revival plan.
“First, I made sure I had a team willing to take it on the chin,” says Nair. Some employees were let go and new ones were hired. To those who stayed, he clearly stated the purpose, positioning, and quality mandates of the company, setting common benchmarks for all to follow.
Next, he went about optimising costs, cash flow, productivity, and partnerships. With steps like cutting down on original equipment manufacturers and vendors, Nair won back AGC’s credibility among clients. Nair also stressed on systems and processes and kept a close watch on progress, ensuring that targets were met, and the success could be repeated.
Today, when its competitors such as Zenith Infotech and Geodesic are languishing, AGC is on course to expand its footprint. At the close of FY15 it posted a profit of Rs 14.8 crore. Net operating income went from Rs 774.7 crore in FY14 to Rs 890.9 crore in FY15.
Harsh Jagnani, assistant vice president of credit-rating agency ICRA, says the segment is about scale, not margins. “In a difficult market, when corporate growth is slow, it can become tough for smaller players to survive.”
Nair realises that the days of plain vanilla systems integration is over, and the action has shifted to customised solutions. “Right now we are in the turnaround phase, after which comes consolidation, followed by innovation-led growth,” he says.