On Episode 866 of The Core Report, financial journalist Govindraj Ethiraj talks to Rajesh Nambiar, President at Nasscom as well as Pranav Haldea, Managing Director at PRIME Database Group.

SHOW NOTES

(00:00) Stories of the Day

(01:00) Markets rise on fresh hopes of a deal between Iran and the US

(03:49) Law firms appear to give clean chit to HDFC Board on Chairman’s resignation

(05:41) Indian midcap stocks hit highs, small caps on the cusp of a bull market

(07:11) How India’s GCC map has expanded to 2,117 companies and growing, in newer industries

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Thursday, the 7th of May and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai. India's financial capital.

Our top stories and themes…

The markets rise on thresholds of a deal between Iran and the United States.

Indian mid-cap stocks are hitting highs and small caps are on the cusp of a bull market.

Law firms appear to give a clean chit to HDFC's board on the chairman's resignation earlier.

How India's GCC map has expanded to 2117 plus companies and growing in newer industries as well.

Markets, The War, HDFC and Oil

The United States and Iran are closing in on an agreement on a one-page memorandum to end the war in the Gulf, a source from Mediator Pakistan familiar with the negotiations has told Reuters. The Pakistani source said a report earlier by Axios, the American media organisation, on the proposed memorandum was accurate. The Axios report had cited two U.S. officials and two other sources familiar with the discussions.

Axios has shown that it can be quite close to the minds of those who walk the corridors of power in the White House if not the actions. The source in Pakistan told Reuters that they will close this very soon and they're getting close. Last month Pakistan had hosted the only peace talks that took place between the United States and Iran which were inconclusive but has seemingly continued in that role of a mediator.

Thanks to all of this crude prices fell almost 10 percent to 98 dollars and 20 cents per barrel the lowest in two weeks and the war of course has shut the state of Hormuz through which 20 percent of global energy usually flows but Axios reported the deal would involve both sides lifting restrictions around transit through the waterway. Talks across the world were up including in Europe and futures on Wall Street. The S&P 500 of course has hit its latest record high thanks to strong company earnings and excitement about artificial intelligence according to a Reuters report once again.

Back home stocks jumped towards the end of trade after swinging back and forth during the day on Wednesday. The Nifty 50 was up 298 points to 24,330. The Sensex was up 940 points to 77,958.

The indices posted their biggest single day gain since the 15th of April. This also helped take the rupee higher to about 94 rupees 61 paise per dollar. On Tuesday it had touched a record low of 95 rupees 43 paise.

The rupee has now logged its sharpest single day gain since the 2nd of April so that's more than a month. That was the day when regulatory steps by the central bank to curtail speculation in the rupee had driven it up against the dollar that is. Some corporate news Bajaj auto has posted a bigger than expected profit in the fourth quarter on Wednesday thanks to local and overseas demand for its two and three wheelers.

Profits rose 34 percent to about 2746 crores for the March quarter beating analyst expectations of 2521 crore rupees according to LSEG data reported by Reuters. Yesterday we reported that April was a very strong month for India's auto industry with record sales for the month that's a month of April for four and two wheelers and we also got a sentiment check from the federation of automobile dealers associations who said that things were looking good for the next few months as well according to their own dealer polls. Law firms reviewing governance at HDFC bank are set to report this month that they have not found any major lapses according to a Reuters special report which also could clear the way for the reappointment of its CEO.

HDFC bank had roped in Mumbai-based Trilegal and Wadia Gandhi and Company after its chairman Atanu Chakraborty resigned in March citing incongruence between his personal values and bank practises something he did not elaborate on further. The resignation was followed by a close to 14 percent drop in the bank's share price and that prompted a statement from the central bank which tried to allay investor and depositor concern about the bank according to a Reuters report. HDFC has about 120 million customers and just over a tenth of banking deposits for those who came in late HDFC bank and HDFC the mortgage company had merged in July 2023.

Back to that report the law firms apparently looked at minutes and video recordings of board and extraordinary general meetings over the last three years to ascertain if the chairman who resigned that had raised governance issues and if so how were those addressed. According to those sources who spoke to Reuters all issues raised at the board level were handled as per prescribed processes though they did not elaborate on them so we will have to wait and see what the report when finally made public says which should of course be in a few weeks. Reliance industries will shut some units at its 660,000 barrels per day refinery for three to four weeks of maintenance after Nehra Energy resumes operations later this month according to petroleum ministry officials quoted by Reuters.

Reuters also reported on Tuesday that Reliance plans to shut a crude unit and some secondary units at its refinery for routine maintenance and such maintenance is routine and also important.

Mid-Cap Highs

Shares of mid-cap companies jumped again with the nifty mid-cap select index hitting a new high of 14,223 rising two percent on the national stock exchange on Wednesday's intraday trade amidst a sharp rally in pharmaceutical and financial shares according to a report in business standard. The previous high hit by the mid-cap select index was on December 2025.

In the last month the nifty mid-cap has outperformed the market by surging 13 percent as against 5 percent in the nifty 50 according to that business standard report. Another report on Bloomberg says that India's small cap stocks are also staging a sharp comeback now remember we have been talking about this on the core report and we spoke about this to analyst Ambarish Baliga as well. The Bloomberg report said that the nifty small cap 250 index was up one percent on early trade on Wednesday and was set to extend its rebound from March lows to 20 percent.

All of this puts it on the cusp of a so-called bull market and the first amongst the country's broader market segments to reach that milestone. Small cap stocks have obviously been hammered quite heavily with the same 250 member stock index falling 10 percent in March. Brokerages are also lifting earnings estimates for smaller companies citing stronger growth visibility relative to larger peers according to that Bloomberg report.

India’s GCC Expansion

India now hosts about 2117 global capability centres operating around 3728 units and employing about 2.3 million professionals as of fiscal year 2526 according to a new report put out by industry body NASSCOM. The number of GCCs has grown about 32 percent since 21 or in the last five years and an estimated 506 of Forbes global 2000 companies now run operations from India. The total revenue of this ecosystem is at about 98.4 billion dollars or just under 100 billion dollars and more than 1200 GCCs have embedded AI and machine learning capabilities with about 250 dedicated centres of excellence or focused on AI and machine learning.

Many companies as I understood through a series of interviews with leading GCCs and their business heads are using India to trigger their innovation journeys in AI and this is now a growing trend. Interestingly some 504 GCCs are actually backed by private equity firms and if you were to take a step back 63 percent of GCCs are from the United States or their parent companies sit in the United States and that number is actually growing despite everything you hear and perhaps see while Europe and UK account for about 21 percent. Newer countries who are setting up GCCs in India include the United Arab Emirates, Denmark and Belgium which have more than 50 plus GCCs each.

Newer sectors include health tech, clinical intelligence, luxury cruise operators, global sports brands, major hospitality chains and even a shoe company. The report says that nearly 50 percent of GCCs now operate at a high maturity stage and the time to reach this level is also collapsing with 96 percent of GCCs established after 21 that's in the last five years have launched with a product or portfolio mandate. Leadership models are also evolving with 64 percent of site leaders now holding dual mandates that combine global functional ownership with site leadership owning mission critical responsibilities including cyber security and AI governance.

I spoke exclusively with NASSCOM president Rajesh Nambiar who was earlier chairman and managing director of IT services major cognisant and began by asking him what were the key trends he was seeing in the GCC space.

INTERVIEW TRANSCRIPT

Rajesh Nambiar: If you look at the overall industry, I think it's not been a great year, given that we still had growth, which is good. We still had the whole industry grew by about 6.2% or so over the last one year. And we also had employment growth.

Even though it was not at the same clip as the revenue growth, the employees still grew by 2.3% or so. But then the silver lining, or like a green shoot, if you may, within the story, was there are some really bright spots like GCC that you mentioned, global capability centres, they grew a lot faster. They had a clearly higher number of employees joining them compared to even the service providers in some sense.

So that was a big aha for all of us. So if you look at the last five years or so, I think we have grown at a very steady clip of about 7-8% on the GCC front, sometimes even 10%. And I think that has given us a lot of momentum in that space.

Today, we have 2117 GCCs as of the last count that we had, the 31st March 2026. That's a big number compared to what we thought we will end up with. So every year, I mean, almost more than two new GCCs a week is what we're actually coming into the country.

There's a lot of expansion on the brownfield, which means an existing GCCs are also expanding. So an over number of units are also expanding quite well. So in my mind, we thought some of the global, whether it's the geopolitical situation, or what is going on with technology, artificial intelligence, there may be a little bit of a lull, but we were proven otherwise.

I think there is still enough momentum in the mix, which has sort of given us the growth.

Govindraj Ethiraj: Right. So in the interplay between IT services, people are moving from IT services to GCCs, and maybe some back as well. How are you seeing the composite picture today?

Rajesh Nambiar: There are two types of movements that you think about. One is a leadership movement, which we believe that there's probably more, which is going from the IT services into the GCC leadership. I think that's very natural, in the sense that, you know, the type of leadership that you need around the GCCs are slightly different from what you need traditionally from an IT services firm, because you're dealing with external customers, and then you have sales to run and so on.

So I think there's a little bit of a pivot people have to make to make. Then you're talking about the larger group, which is the majority of the population. I think they've kind of learned to coexist in some sense.

You know, obviously, the GCCs end up paying a little bit more than what the service providers pay, but then you have better growth opportunity in the services space, because you know, you can do multiple things. So it's been always been a sort of apples and oranges in some sense, and then can't really compare them. But there are some movements back and forth, very little from the GCCs onto the service providers, but mostly you find this way.

And also the fact that they're hiring more than the service providers, at least if you take the last couple of years, that's been the case.

Govindraj Ethiraj: Right. And GCCs are now almost $100 billion revenue business. That's correct.

98.4 billion. Touching $100 billion. How does this now contrast when you look at the entire IT services?

And are you calculating together or are you beginning to separate?

Rajesh Nambiar: No, we are separating out in some sense, and we do have segmentation. So the broader industry is roughly at $315 billion for the same time period. So it is almost 100 out of 315, which is a pretty big portion of it.

I mean, if you consider the fact that 20 years ago, this was probably a very, small number. I mean, today it's a very large part of what the growth is actually for the industry has been. The interesting part is not just on the revenue numbers and the employee count, also the type of work they're doing.

I mean, there was a time when people thought the GCCs don't really do good work, whereas the service providers are doing better work because they've been serving global clients and so on. But that also has changed a bit. And today, especially the new GCCs have been positioned as AI-first GCCs, which means that they've been able to do a lot more interesting work, own a broader problem for their enterprise, for their own enterprise represent much more than probably some of the service providers.

And so in that sense, I think they've truly been moving up the sort of the innovation curve. I mean, we all talk about innovation, etc. And as you know, I mean, not everything is innovation.

And so there is also want to make sure that we're not overblowing this whole innovation thing that every GCC today is in. There is a significant portion of the GCCs who are actually doing a lot more meaningful work they probably did 20 years ago. And the movement is clearly the faith that the broader their global enterprise actually has on them, the capabilities they've shown over a period of time, the resilience they've shown against many of the other problems that GCCs faced.

So that's actually giving them the run.

Govindraj Ethiraj: The stat that you shared was that 250 plus GCCs are AI ML plus exclusively. Correct. In contrast to 20117, it's obviously a good number.

But I don't know, can you throw some more light on it?

Rajesh Nambiar: It's basically what most of them have started in the last one or two years. So that is number one. And they started as AI first?

They started as AI first. They didn't start with saying that we need to save a lot of cost, or they're not starting with saying that, okay, we need to maintain the legacy of the enterprise in India, and so on. So they started with saying that we need to create the right set of capabilities around artificial intelligence, which means that they need to take some broader problems and try to solve it in India.

So if that is the mindset, and they've been able to expand quite a bit on being AI first, but that doesn't mean that only 250 are doing AI. I would say more than half of them are doing some kind of AI, you know, whether it's AI implementation in some pockets or developing some tool sets and you know, incorporating some of the models. And so all of that work is happening in other GCCs as well.

Govindraj Ethiraj: Okay, I'm going to come to an IT question, broader IT question in a moment. But when people come to you and talk about GCC now, and ask you about setting up in India, at this point of time, what are the kind of questions they're asking? I mean, this is as 2026 question.

Rajesh Nambiar: You know, some of the questions they asked us maybe 10 years ago are still relevant, meaning, which is the right city to go to? And which is the, how do we really set up shop? And what are the broader challenges which you will have with the incorporation and so on?

So those are all obviously there. But the bigger question for that they're asking us is about the kind of talent which is required in today's world, which means that, you know, they know for sure that there is a, the volume is never a problem, there's going to be a lot of people. So it's not that they will have an issue in hiring, especially given the market condition today, that's not an issue.

But do I have the right leadership to lead the centre into the future, the new age growth that they're looking for? That's number one. Number two would be saying that, will I get the right kind of talent, you know, I no longer will have to start hiring people and then, you know, train them for a long period of time before I could really make them deploy them.

So that's another thing which they are worried about saying that, now that there's so much happening around AI, you know, is that the right time for us to go out and make this investment? Will I be able to get the right set of people? So it's no longer the volume game, it's more of saying that, you know, really, do I have the capability for us to go out and do this?

So that would be the second concern that they'll have, if at all. For them, it is a challenge would be saying, which is the right place for us to go and, you know, invest and then, you know, will I get the right set of talent? So these are some of the newer questions they're asking us.

Right. The answers to that would be? The number one answer would be that if you don't get it here, you're not going to get anywhere else.

So that's number one, but that doesn't solve the problem. But we believe that, because of the fact that we have this, remember, I was talking about the ecosystem that we've created. And the biggest advantage the GCCs are getting today is not just hiring from each other, but sort of leveraging a broader ecosystem, which also means that, you know, we have the largest pool of AI ready talent in the world.

It comes because of the fact that there's so much of service providers, they're also been dealing with this issue. So this is not in isolation only for the GCCs, because they would have created enough capacity. So the chances that if you're setting it up now, you know, if you need really 300, 400 people to really bootstrap your whatever you're trying to do, even in the artificial intelligence space, even in the cutting edge space, it's not going to be that hard.

You know, you can definitely find that number of people from across the board. So I think for them to get convinced that there are enough of the pool, enough of the sources, which exist, especially if you take a larger city. Now, it's a different story the moment we flip the question and say, do you want to go to a tier two and so on?

Because that's why I didn't say that, you know, for a new operations to go directly into a tier two is not a great idea at this point.

Govindraj Ethiraj: Okay. We've had a war raging in West Asia for some time, it's just created uncertainty around the world. What's the sense or impact of all of that on IT as a whole, IT services as a whole, if so, and how are you seeing the next few months?

Rajesh Nambiar: I would say good thing only because of the fact that it hasn't been a big impact as yet. And the reason I'm saying as yet is that, you know, there is always an indirect impact which comes. If our customers are actually hurting, which also means that, you know, they will reduce the discretionary spend, which means eventually it comes back to bite the industry.

So number one is that our exposure, the Indian technology industry's exposure to Middle East was very minimal. So from a percentage point of view, it was negligible. So that way, we didn't have any issue of, you know, people moving back and forth to the Middle East.

Govindraj Ethiraj: I was told we've benefited because there were people who wanted to set up GCCs in the Emirates, but are actually now thinking of moving to India.

Rajesh Nambiar: To some extent, but GCCs were never really a… GCC was also very confusing. We are talking about the other GCCs.

Setting up centres in Middle East, that was being done for a completely different reason, right? So that we've really not competed with them in that sense. But there are companies which are sort of looking at doing a lot of things in Middle East.

Now they will think of doing it in probably a different location. I'm not suggesting it's only India because that type of capabilities, especially around some of the new age technology, they do it in India, they could also pick another centre. But pure GCCs, obviously, India gets a bit of a benefit.

But I thought the question was broader in terms of the IT industry and the overall industry. And all the uncertainty that we've been seeing. Yeah.

If you go back and look at the results, which is announced by all the companies, almost without an exception, almost every one of them had increased level of order books. So the book of business, if you may, or the signings, as we call it in the industry, which are actually an indicator of the future revenue, has actually been going up, which is a good news. The revenues have also been going up, but not by a large margin.

I mean, you know that the percentage of growth, depending on where you are, it was pretty decent, but given everything else, but certainly there was no negative growth or and so on and so forth. That's number one. The employee growth has been sort of a bit of a concern in some companies had a flat growth or no growth at all.

Some of them had a very little growth. So that is a concerning point because you are finding now gap between revenue growth and then the employee growth has been sort of widening a little bit. So that's a concern that we need to keep in mind.

But otherwise, as of today, if the war ends tomorrow, I think this will be a blip on the radar. But if the war lasts for the next six months, certainly there's going to be an impact on every industry, including us.

Govindraj Ethiraj: Rajesh, thank you so much for joining me.

Rajesh Nambiar: Thank you very much.