Chennai-based software-as-a-service (SAAS) major, Zoho Corp doesn’t expect stellar growth rates in FY23 but in the words of co-founder and CEO Sridhar Vembu, the company is “cautiously optimistic” about its growth prospects in the coming fiscal. Vembu told CNBC-TV18.com that the company was looking to increase its headcount by 1,000 in FY24, even as it remains committed to not laying employees off.
According to filings with the ministry of corporate affairs, Zoho reported profits of Rs 2,748.83 crore for FY22, an outstanding rise of 43 percent, year-on-year.
“We have built a strong investment R&D and this is showing up in the numbers that you see,” said Vembu, in a one-on-one chat with CNBC-TV18.com, “We certainly don’t expect 43 percent growth continuing this year owing to challenges, but we are cautiously optimistic.”
He added: “We will not resort to layoffs because that isn’t part of our culture — we want our employees to feel secure about their jobs — but our hiring has drastically slowed down. We still want to hire 1,000 people this year across the board, especially in R&D sales and support.”
IT Enterprise Division: Zoho’s top performer
Fears of sustained slowdown notwithstanding, what comes as good news for Zoho Corp is the performance of its enterprise IT management division, ManageEngine. The company announced that India is set to become its second-largest market in three years, thanks largely to the pace of cloud adoption here.
In a release, ManageEngine reported a year-on-year growth of 50 percent in its India business for 2022 with customer count seeing an increase of 30 percent driven primarily by demand from BFSI, real estate, and manufacturing sectors. The release added that ManageEngine would “soon reach $1 billion” in revenues.
“Digital transformation in India is continuing even though we’re leapfrogging many advanced countries in terms of digital payments and in other spheres as well,” said Vembu, “India has the resources to continue this pace of digital transformation and cloud adoption, and we at Zoho are working to ensure our customers get the best products and experiences.”
‘Budget 2023 must incentivise R&D investment’
For the Indian economy to grow amid challenging circumstances, Vembu said he believes greater R&D investment was a non-negotiable. “The industry needs to be incentivised in order for this to happen,” he said, “R&D investment as a share of India’s GDP is still low, and that is a problem that can be solved only by way of incentivising R&D spend.”
In an indication of continued economic slowdown, Vembu said that Zoho’s deal sizes continue to shrink despite a spike in customer count. “While the Indian economy has held up remarkably well, the challenge for us is how well we navigate global circumstances,” he said, “We managed well during the pandemic, but we need to be prepared now for the debt bubble collapse and how we navigate it.”
In 2022, Zoho reported revenues of $1 billion, even as Sridhar warned that the economic slowdown could continue for two to three years. The Economic Survey tabled today forecast a slowdown of between six and 6.8 percent next fiscal before a slight recovery in 2024.
