Mr. SUKUMAR: My investment philosophy is very simple. My objective is to invest in businesses that can generate superior return on capital over a period of time. I think this can come primarily out of intellectual capital mostly in terms of quality of management and depending on the businesses, type of competitive advantages the management can build into a business.

In the case of Infosys, which has been one of my core holdings for a period of time, I think the competitive advantage comes from the ability of the management to develop a team, and act as a team, because IT services business is no rocket science. The ability to deliver a product which is suited to the requirement of the client, understand his requirements, have a fair dealing with the client, timely delivery are all more important. These qualities come out of everyone in the team acting in concert, so there has to be a philosophy of people feeling that they have to deliver value. In the case of Infosys, the quality comes out of the HR policies of the company. Mr. Narayana Murthy has been able to inculcate a feeling of togetherness, a feeling that the wealth is being created for a common pool, not for a single person's pocket and certain quality standards in every department right from delivery to programming to every aspect of the business.

Similarly, depending upon the company, I look at what is going to provide the sustainable competitive advantage, which will allow for some pricing power, and pricing power cannot come without delivering something extra to the client. It might vary depending on the client or it might vary depending on the business.

Mr. CHETAN PAIKH: Mr. Sukumar, you mentioned that intellectual assets are very important in the current context for generating a superior competitive advantage. What about traditional franchises like brands, businesses with very large moat characteristics? Do you think that going forward into the future, they would be able to maintain the durability of their advantage? Do you feel that their fade rates are going to start becoming a lot higher?

Mr. SUKUMAR: Durability will depend on what is being built. If the management works towards building something in the organization that cannot be replicated very easily, obviously the durability of the competitive advantages can be substantially longer than if the management were concentrating only on the current revenues.

Mr. SUKUMAR: I typically look at three years. I think three years would be the average. I think shorter than that would not go with this philosophy because transformation cannot come overnight, business cycles are there. Even with good quality management and competitive advantages the market might turn sour for some time. But looking far too longer doesn't fit with the horizon of my investors, I mean they are not looking at 15 years to make money out of the mutual funds' products. That's not the expectation of the investors. So some balance has to be there. If it was just my money, I could look at a 15 years time or if I want to use savings only after that point of time.

The other thing is to look at the P/E ratio and try to relate it to the return on capital. Obviously, P/E ratio is related to the return on capital. If the company can generate a superior return on capital, you are willing to pay a premium P/E ratio. That is, you know, a quick way of looking at things. Sometimes, you have to take quick decisions and you don't have the luxury of doing too much of cash flow analysis and things like that. Obviously, when you're looking at P/E ratios, things like accounting policies are more important. If you're looking at cash flow analysis, they are not that important because it's just cash generation you're looking at.

There are a lot of nascent businesses where this type of analysis will not hold good, for example, any analysis with regard to Internet in the Indian situation, where the usage is not very high and the present revenues don't reflect the long-term potential. So you'll have to make some analysis of how big a business it can be at some point of time. You have to relate it to some other existing business. If you visualize a business replicating Hindustan Lever's business at some point of time then, one may consider a Hindustan Lever kind of valuation at that point of time. But this means achieving a growth rate of 15 percent, a margin of 10 percent, a very strong brand and similar dynamics, and finally, similar size.

Or you might want to give a discount because the growth is higher. So you know what type of market value it can come to at that point of time and discount it to the present value. So I think it depends on the situation. Very difficult to say that I will look at only one.

But normally in internal analysis, we start with the history - we look at what has been the band of the various valuation parameters like price earnings, price to cash flow, dividend yield, or enterprise value to revenue or enterprise value to EBIDT. We look at it from the historical perspective, what are the valuation bands, the high and the low, and where we are currently with respect to that, but this is something we'd like to look at.

Mr. SUKUMAR: Adjust the cost of capital, I think. I adjust it entirely on my subjectivity and my feel of the risk factors. I obviously look at what other analysts look at using beta as a measure. But, I would also look at it from a more qualitative aspect viz. the type of management. Thus, I try to factor in all these things - an unknown management and other things would just increase the premium substantially.

Mr. SUKUMAR: Yes. When I started out, I used to lay much more emphasis on numbers than what I do today. It is essential to look at all those numbers, but thinking too much about them takes the focus out of the main issue, and you have to get a feel of where the company is heading, you have to get a feel of what the investor expectations are. I think those are crucial - you see, a mismatch between the expectations and where the company is heading is also equally important. Like in the DCF work that you have done, even after you have put in your projections, you don't know. You could have done a DCF for Infosys three years ago at 40 percent and it could have gone awfully wrong. You have to get the feel of the dynamics that are changing and . . .

Mr. CHETAN PARIKH: All businesses ultimately will regress towards the mean and all businesses over time would have a certain fade rate. And it's very much your assumption of the fade rates vs. the market's assumption of the fade rates that would determine the investment result. That would, to a large extent, be dependent on your own subjective feeling, your experience.

Mr. UTPAL SHETH: Since the intellectual capital is such a central pillar of your investment philosophy, could you describe in slightly greater detail what are the parameters that you would use to evaluate intellectual capital and how would you determine the factors of intellectual capital?

Mr. CHETAN PARIKH: Can I just add a question? Would this also include brands? Would you be classifying brands as intellectual capital? It's a form of intangible capital. It's really the marketing spends which are going towards building a moat. So broadly how does one value any intangible asset?

Mr. SUKUMAR: Yes, I think you have said the right thing about valuing intangibles. I try to look at that when I go for initial meetings to the company. I try to understand what their basic business is all about. I try to tell them to list what are the factors affecting the business and why do they think they're going to be more successful in the business than the competition? After coming back, I think a lot about that. I try to ask myself some questions as also to my colleagues, external analysts and a few other people in the business. I get a feel of the business. Then I try to jot down the essential factors, many of which might prove to be irrelevant.

A management might say that these are the ten important things and we have all of them. But when you think over it and go through the entire process, you know that only two are materially significant, and may be you'll come up with a third factor that the management didn't mention. We try to get a feel of what is going to be essential for the business to grow profitably, since growth in an unprofitable way is not useful for any investor. Once that is there then the next step is to ascertain whether that is true.

If you are looking at Infosys, it is the quality of the lower-level people, their feeling that they are a part of the company, they are also equity shareholders, and that they are going to gain substantially from the quality of the systems that they are going to deliver. If you want to ascertain that then you have to go and meet those people. There is no use just speaking to the managing director or the finance director. You have to be there in the public hall of the SBU where you might meet some of the programmers. I try to do that. I try to go on the field and get a feel of what is happening. Mutual fund investors like me have the luxury of going and meeting all the people. For smaller investors it might not be possible. But there are always short cuts, you have contacts, you know people. They may not be as accurate as you being on the field yourself, but you know that certain people are reliable, and can give you information. You have to use that network to get a feel about it.

Mr. CHETAN PARIKH: In the words of Phil Fisher, you would be using scuttlebutt i.e. investigating the company, trying to find out sources of independent information and not strictly relying on the management as to what the business looks like.

Mr. SUKUMAR: I think essentially you always need to have some feeling other than what the management is giving you. That is very important. I think that if a person is not careful and if you are only relying on the views of the management, it can be totally wrong. I think there have to be a lot of other sources and it cannot be just by annual reports alone.

Mr. UTPAL SHETH: Sorry to go back. Can you throw some more light on factors that you consider as part of intellectual capital?

Mr. SUKUMAR: Intellectual capital varies from company to company. Clarity can come out of discussing some examples. In the case of Satyam, it's intellectual capital might be in the form of the management being proactive and concentrating on reusable components to achieve success in the software business instead of developing it for every customer. Then it can tell the customers that Satyam can build your systems faster than others can.

Its ability to think through how the business can be run better, how to deliver additional value to the customer and price the product accordingly. The customer will probably be willing to pay a little more if the system can be delivered faster. So, by having built this component, the company can charge the customer a little more and the customer is also happy because additional value has been delivered to him. This particular component has been developed only once and has probably been put into five or six systems. So the development time and effort for everything is going to go down. The manpower expenses are going to be down. So the costs are down, the revenues are up, and probably the model is becoming more scalable because more customers can be served with the same amount of resources. So you see that this type of thinking and effort has contributed to the intellectual capital.

In the pharmaceutical industry, it can be in the form of R&D and lots of things can come out of getting a feel of the market as well as what are the products that one needs to come up with. It can also be educating the doctors about treating a particular ailment in a particular way, or providing information over the Internet to the medical community and thereby cutting the cost of sending so many medical representatives to give so much of literature to the doctors.

Mr. SUKUMAR: Let us assume that the integrity is given. It will anyway not be worthwhile to be a long-term investor in a company where you have issues on the integrity of the management. Given that, I think that one important thing is the ability to take the right amount of risk. I think the risk-reward ratio is not very linear. It is a curve where at certain levels of risk, your possible rewards can be very high. But if you go higher than that, you take too much of risk and you probably will get wiped out because other people will take the right amount of risk and create certain formidable barriers. So that is a very important issue. Management should not be totally risk averse. To quote Narayana Murthy, Ships are safe in the harbor, but that's not where they should be. That is a very crucial issue.

The other thing is - what is it that drives the management? Whether it is short-term results and being in the limelight today, or whether they have the vision to say that I want to build up something which is very substantial. Ideally, this should be within my investment horizon. I mean, there's no use betting on a management that wants to develop something over fifty years if I'm going to be a three to five year investor. So that vision has to match with my investment horizon.

The next factor is the concept of sharing the rewards. There has to be a right level of sharing. The management cannot be totally greedy and say that it can't share with the employees or that it will pay the lowest. This doesn't work that way because then you won't motivate them or you won't retain the best people. But, at the same time, if the management only wants to be popular with the employees and the shareholders, and is unreasonable in issuing ESOPs, that can be a cause for concern. After all it is a question of balancing the interests of all the stakeholders. One thing is certain. By sharing the pie, the overall cake itself can grow faster. That is more important. I look at it from that point of view. There is no point in the management giving 25 percent equity in ESOPs when the employees are not bringing anything substantial. I would question them as rigorously as the management that is giving only 2 percent when the employees are doing a lot of things. That is silly. So this is a very important issue with the management today.

The ability to carry people along is very important. If you have to take some long-term bets or medium-term bets, and if you have to go through rough weather, and still want to be popular everyday, then it's very difficult to take some tough decisions. You have to convince people that tough decisions are right. One example is Infosys. They lost the GE account and it was a very tough decision then because it was a very significant client. But without that decision, it would have been very difficult to sustain pricing power.

Mr. UTPAL SHETH: In the context of your definition of intellectual capital and management quality resulting in competitive advantage over a period of time, what are the competitive advantages that one can measure in more objective terms?

Mr. SUKUMAR: I think there is no predefined yardstick and no independent rating agency who could do this. Let's talk about a company targeting higher value added work or something. One can look at per head revenues to see whether it reflects what they are saying. Or you tell them to explain why they believe they are doing something exceptional. If Dr. Reddy is speaking about high quality R&D and claims they have some of the best scientists and they have some of the best facilities, it is probably worthwhile going and seeing it firsthand. When we interact with them, we usually try to read some journals to find whether what they are doing is contemporary. We also try to speak to others in the same field and evaluate if they are really well regarded in the particular community. It's just a question of just asking more questions and something usually comes out at the end of it.

Mr. UTPAL SHETH: The last element of your investment philosophy was how the competitive advantage gets reflected in pricing power. Could you elaborate your perception of pricing power and how you evaluate pricing power in companies?

Mr. SUKUMAR: Pricing power must be viewed differently in consumer markets and differently in the business markets.

In the business market, evaluation of particular products or services is more objective by the buyer. So he has more tools to analyze and probably more motivation to analyze since the absolute value he is paying for could be pretty high, as distinct from a consumer market situation where it's more of an impulse and trend and style drive a particular customer. So, in the industrial scenario, the pricing power will depend on track record. So, track record is going to be very important. If a particular person has to have a track record of delivery, good quality product and services, and adhering to time schedules is important.

For example, let us say Maruti has two suppliers. And both of them are going to supply the same component to Maruti. One supplier says "At my cost I will connect my computer system to your network. You can let me know when you have such and such level of inventory and I can deliver the requisition within so many days". He tries to build something extra for the client for which he doesn't mind paying a little more since he can also save from that proposition. So these kind of situations develop. It is not necessarily related to the product alone but the bundle of value addition that you're going to do for your customer. So that is going to be important. Obviously, this is where the intellectual element comes in. Whether you're thinking of yourself as only a supplier of that particular thing or whether you're going to see how you can add value and then share a part of that value addition. So these types of things are going to be very important in an industrial situation and sometimes because of that the pricing power can be enormous.

I think it is very easy to find lots of examples in software where by adding a little more value, you can have much more pricing power. Obviously the rule that is being applied to Maruti cannot be that drastically different.

In the consumer market it is question of building the right perception of the product, what we define as branding. The key competitive advantage here is the perception differential that can be created by spending a particular amount of money. It is not correct to say that a company that spends more on advertising probably has greater brand power. It depends on how much you can get out of that advertising buck that you have spent. Obviously, organizations like HLL will get better results as they get up to 30 to 40 percent more media for the same amount of money. This is a very serious competitive advantage because not only have they got a brand, but also they spend far lesser than competitors for additional brand perception. That can make a lot of difference.

Mr. CHETAN PARIKH: The value addition that you're talking about is basically to avoid commoditization of any form. You go up, you try to avoid, you differentiate yourself and try to not only . . .

Mr. SUKUMAR: Differentiate is one factor. I feel we are living in a tough world and you have to deliver that extra value. This extra value may not necessarily be in the core product but in the way it is delivered or in the time it is delivered, or the place where it is delivered or in the information relating to the product.

Mr. SUKUMAR: The most important factor is doing it logically and coolly and not to over-dramatize things. I think you have to be genuine. What I believe is that we are going to become the number one mutual fund by being the most genuine mutual fund. Because, over a five-year period, people are going to realize who is going to be taking more care of their interests.

It's not going to be the percentage returns year-to-year. I think it's very difficult to be a Superman in this business because you can't call everything right all the time. It is better to have a consistent way of doing things and do things where you have total conviction. I think there is no need to do anything very dramatic.

Mr. CHETAN PARIKH: Play a five-day match instead of a one-day match.

Mr. SUKUMAR: Let me just speak about how the market has evolved. In early '90s, there was nothing like return on capital, there might have been only a few genius investors looking at it at that point of time. The whole market was looking at very simple way of putting every company in the same bracket. You look at the PE ratio, you look at the book values, and you look at the dividend yields. Then multinationals were given a little more. Birla management was given a little less, Tata might be little higher and that's the way you were looking at it. The strength of the businesses were not being factored in at all, return on capital was not a major issue in those days. It was believed that when foreign investors started investing in India and foreign brokerages came in, overnight these things would change. But, unfortunately, they did not change. The foreign investors who started investing at that point of time were so-called emerging market investors who were much used to looking at the same thing in other markets. Even those markets were not evolved like the better markets of US, UK where these issues count for a lot. In the last three or four years, India has probably overtaken most emerging markets in sophistication. I think the investor sophistication has grown very substantially whether it is EVA or comparative advantages or in any models or looking at the contemporary standards of management transparency. I mean India has clearly overtaken most emerging markets in terms of the sophistication and probably ability to price stocks at more realistic levels that reflect longer-term potential. Of course, the best pricing is always higher in bull market because sentiment is very positive and greed takes over.

And similarly in bear markets investors think prices are very high and tend to spend more on the things and once it pays it is easier for a person like me to get more reports. In early 90s when I started in this profession, if I said that I want to spend four days meeting people in only one company, they would have thought that I'm mad. But today you can convince the management that this type of comprehensive research is very important and we are willing to put in, most of the better quality competition, they are willing to put in the resources today.

The one key change that has happened is the greater depth that we are willing to go to in our research. At that time, one analyst probably had to track a hundred companies. But now he can track 20 companies and do more detailed analysis, more spreadsheets, increase sophistication with the help of more automation coming in (e.g. Bloomberg). But in terms of most of the fundamental issues which drive a company, I think the basic belief that you have to bet on good businesses and on the ability of the management to create wealth has not changed very significantly over time. That is still the underlying concept.

The two-theory opinion about the resources we can put in are very different.

Mr. SUKUMAR: I can think of quite a few elements of risk.

Mr. SUKUMAR: It does play a role because we essentially run open-ended funds. Fortunately all our equity funds have been mostly retail driven. We have an average investor holding probably in the average of 40-50,000 rupees. So we have fortunately not seen huge money going out of the fund even in the worst of the bear markets. But the point is, even if it doesn't happen, one has to be reasonably prepared for that because it is a possibility and you can't say that I thought it wouldn't happen. There has to be at least half of the portfolio in fairly liquid stocks so that you can sell them without seriously affecting the price.

Mr. SUKUMAR: One way is looking at the portfolio and benchmarking it to some of the better quality fund managers, or those whom I think are better quality fund managers. But more importantly looking at what are the misses, what are the stocks I have been sort of tracking or I should have tracked but really missed a big move conceptually, with the stock moving very sharply due to fundamentals. I also evaluate mistakes that I made in my assumption as a result of which some stocks are not doing so well, or I might have sold some stock that I should not have sold. Performance with regard to the team plays an important function in the team. Others should provide inputs and I should also be of some value to the rest of the team, otherwise that part is not fulfilled.

Mr. UTPAL SHETH: Could you share with us any idols that you might have in the investment world - either here or abroad?

Mr. SUKUMAR: I think the maturity level is still pretty low. In 1995 or 1996 it was a very difficult task to get my closest friends to invest in any fund or equities. But, now that you tell them not to put money, they want to put money in the craziest of the stocks that seem to be moving. And if you try to dissuade them, saying that it doesn't seem to be fundamentally strong, they don't care. I think lots more investor education needs to be done. Equity cult needs to spread in the right sense. Equity cult doesn't mean that everyone comes in, invests in equities and in public issues.

With respect to professional investors, one good trend has been that of a lot of private-sector funds coming in. The overall quality of research is definitely improving. They not only do research, but believe in research. Such a research oriented investment approach has improved in the true sense. In 95-96 everyone did some soul searching. It was a good thing that most people intended to do high quality stuff. But, the disturbing trend in any bull market is that many of them seem to have forgotten the lessons they learnt in that bear phase. My apprehension is that there is a bear phase starting soon. I think probably 75% of them would have made all the same mistakes, which they did in the earlier bull run. So the learning doesn't seem to be happening at the pace at which it should be. But it is happening.

Mr. UTPAL SHETH: How important is timing in your overall investment strategy?

Mr. SUKUMAR: Not very important at all.

Mr. CHETAN PARIKH: Stock picking would always have a good element of timing. You have historical valuation bands of parameters like PE, P/BV or P/Sales etc. You try to time stocks by buying and selling them at the boundaries of historical valuation bands after considering other forward-looking and relative approaches to valuation.

Mr. SUKUMAR: For valuation, yes. As I mentioned earlier, when the sentiment is worst and you know the fundamentals are pretty good, that is also in a way timing…

Mr. CHETAN PARIKH: Because you are buying in a bear market.

Satyam Computers

MR. UTPAL SHETH: Given that your IT fund has been such a phenomenal performer, which is your best IT pick as of now?

Mr. SUKUMAR: The pick I have been really proud of is Infosys, which has been my holding for a long time. I first bought the share sometime in late 1993 or early 1994. I went and met the company, liked the business, the people and their basic strategy of trying to convert most of the work they were doing for clients to offshore bases. At that point in time they did not have much of infrastructure and most of the consultants were working at the clients sites. But the vision seemed to be very much there and the quality of people was very high.

The other important component was the ability to develop a team, make all team members very comfortable and make them deliver value. The next issue was the ability of the management to take some sort of a calculated risk. This was reflected in their willingness to refuse the GE contract in their desire to go places in the long-term and it clearly proved a point. They also took some risks by developing products. Some of them were successful for some time but over a period of time the product strategy didn't really work well. In spite of the products not doing well, the company was able to increase their rate of growth in the services business so that the overall impact on profits was minimized.

MR. UTPAL SHETH: But the stock which has the largest weight in your IT portfolio as of now is Satyam. Could you share with us the investment case for Satyam?

Mr. SUKUMAR: Satyam started out not being perceived as a top-rung IT services company. I think the basic issue was that the founder was not himself an IT professional. So, the basic culture was probably different at that point of time. Transparency was an issue. There were doubts whether the funds that were generated out of the IT business would be used in that business or would they be used for funding other family businesses and other such issues.

To the management's credit, they realized that IT business had a lot of potential and the chairman, Mr. Ramalinga Raju, proved to be a very quick learner. What I like in him is his ability to get a hang of the basic issues involved very fast. In spite of not being an IT professional, he had the vision to put money into things like Satyam Infoway and Vision Compass much ahead of the competition.

Competition is speaking about Internet being a key driver at this point of time. Satyam Infoway started a long time ago to help B2B e-commerce either through EDI or through Internet protocol. They have also evolved over a period of time as a top-rung IT services provider and this is clear from the quality of their clients, the quality processes which are in place and the quality of people even at the lower levels. I recently met the head of the internal competency center and other people in people in marketing and was quite satisfied.

I also visited their Vision Compass development center at Bangalore and the type of people I saw, the type of work they have done, and the demonstration of the product clearly brings out the depth in the company built over a period of time. I think that we are not paying much for all these businesses put together.

The market cap of Satyam is less than $4 billion against $10 billion for Infosys while Satyam earns half the profits of Infosys. With a mere 2-3 percent dilution, interest cost of Satyam will come down and profits will be 60-70% of Infosys. Besides, Satyam owns around 60 per cent stake in Satyam Infoway. Vision Compass can also generate a lot of value of the company if it becomes a success. That is what makes Satyam a really attractive bet. Though purely as a services company, Infosys would score over Satyam, but as a combination Satyam looks very attractive.

MR. UTPAL SHETH: Do you believe that the Indian IT sector is evolving in a slightly unusual way. The EV to sales that Indian markets are paying for IT service companies are far greater than the EV to sales that U.S. markets are paying for service companies. Also the EV to sales that we are paying for product companies are actually lesser than the EV to sales that the U.S. markets are paying for product companies. In which case is there a very good case for focusing the investment strategies on product IT companies rather than service IT companies at this juncture?

Mr. SUKUMAR: To answer your first question, EV to sales is a derived concept. The main concept is discounted cash flow. You look at a company like Cambridge Technology Partners (CTP), whose revenues per person is in the region of something like $ 200,000 against $40-45,000 for Infosys. While some part of work done by CTP might be in high value added services, I think the vast difference in per head revenue is because they are based in the US and their costs are much higher. That is why you are seeing that Indian companies are able to sustain growth and high margins whereas US IT service companies are facing pressures on the margins.

As the revenue per head is so different for a US versus Indian IT service company, I think it is very unfair to compare their EV to revenues. Besides, lower revenue per head for Indian IT companies also indicates that the ability to grow the businesses is higher. So growth rates of Indian IT companies are going to be higher, margins are higher, and return on capital is higher. Considering all these things, it is natural that PE multiples as well as EV to sales of Indian IT service companies will be different from their US counterparts.

Regarding product companies, the critical issue is how close you are to the market. The way most of the start-up product companies evolve is that you develop some kind of a prototype, go to 4-5 prospective clients, and a lot of interaction is involved in conceptualizing a product. Developing a product in such a far away land, where communication facilities were not good enough, was not easy as you could not see your client. Some time ago, it was even difficult to video-conference with a client. So the inherent barriers to developing products were there and only a few of them have emerged successful in India. But, over a period of time India can also evolve as a supplier of products because the population of Indian IT professionals is increasing and they are increasingly getting more integrated with their counterparts abroad.

Indian product developers are not typically looking at really big products. A company like Visualsoft may be looking at small ideas so that they can make some money out of it, reinvest the money made in to some other product, and develop some components which can be licensed. The valuation will essentially depend upon how big the product can be. If you have something like a BroadVision or a Siebel on hand, which become billion dollar products, then the valuations will look very high on the initial revenue base which is quite small. I think that none of the Indian companies have products that can sell in such large scales and hence the lower EV to sales for Indian product companies.

Mr. CHETAN PARIKH: Mr. Sukumar, I have a couple of questions to ask. I must confess I don't know much about this sector. But I have some Bloomberg statistics with me. The return on equity of Satyam has gone down from around 26.5 percent in 97 to 20 percent in 98 and then gone up to 54 percent in 99. So what really happened in 98? It's a bit erratic. The same for return on capital employed number, which is down from 22.5 per cent to 16.5 per cent and then up again to 30.6 per cent. The sales per employee has moved down from Rs.1.3 million in 96 to Rs.0.8 million in 98 and the to Rs.1 million in 99. Could you comment on these numbers?

Mr. SUKUMAR: The low return on capital in the earlier years was due to massive investments in infrastructure and hardware that were bunched together. The infrastructure was a pre-requisite to motivate clients to give projects to be done offshore (in India) rather than at the clinet’s site. As Satyam got more offshore projects the assets were effectively utilized.

Regarding the revenue per employee, I think a lot of business was converted into offshore projects from onsite work, impacting revenues per employee. The margins are better for offshore projects but obviously the revenues are much lower because the costs are much lower. Also, in these years massive recruitment was done and it took time to make them productive.

Cipla – Extraordinary Wealth Creation

Mr. SUKUMAR: I think it would sustain at these levels. I think the industry margins as such would expand and Cipla will probably expand a little lesser. So it's not the margin expansion that we're betting on.