Tamil Nadu yet to crack GCC code, says Industry secretary Arun Roy

CHENNAI: Tamil Nadu may be the preferred destination for IT and ITES, but when it comes to Global Capability Centres (GCCs), it clearly lags behind Karnataka, Arun Roy, TN secretary, industry, investment promotion and commerce, observed on Wednesday.

When it comes to most economic parameters, TN, as a state generally ranks in top two or three but as far as GCCs are concerned, Chennai is way behind Bengaluru and other cities too, he said, as he went to elaborate “it’s true that we have about 10 per cent of India’s GCCs but as a city if you look at it, we are behind way behind Bangalore, we are behind Mumbai, Hyderabad, NCR region of Delhi and even Pune. So somewhere, we lost.”

Speaking at the ‘GCC Next Summit 2024’ organised by Kreateworks here, he said the task of promoting GCCs is now top priority for TN, housing about 300-odd units.

As part of the strategy, Roy said, manufacturing obviously remains the prime focus of investment promotion but invariably, “today when we talk to our manufacturing investors, we try to also tell them to establish a GCC in TN.”

This, he reinforced, was restricted not only to new investors, but “even our existing manufacturing investors. We tell them please think about creating an R&D centre or a GCC in TN. Some of them have shown positive interest and some of them have made movement in that regard as well. Secondly, we also actively reach out to GCCs in other cities because some of them might be wanting to expand as they might want look for a different location as part of a de-risking strategy.”

GCCs in Bengaluru or northern part of India are being tapped since there are multiple opportunities and also make sense as a de-risking strategy, Roy said adding many investment decisions made by a new investor are dependent on their peer recommendation. Existing investors remain “our best ambassadors for investment.”

Earlier, in his address, he also said TN has immense potential for the development of GCCs to make Chennai and other cities for multiple reasons including the availability of talent and infrastructure.

The industry investment promotion team has been also focusing on extending incentives and subsidies to nurture investors, that are critical to decision-making in selecting among cities. “TN has probably one of the most attractive GCC incentive packages,” Roy said, as he gave an overview of the “very straightforward policy for Fortune 500 companies or equivalent companies.”

Not restricting it to Fortune companies, he said “those renowned companies, which set up GCCS, 30 per cent of the pay bill is reversed in the first year, 20 per cent in the second year. So, it’s a very easy, straightforward policy. This was announced about a few months back and we already see a lot of transaction thanks to this policy. We are open to tweak the policy based on feedback from the industry.”

Ramkumar Ramamoorthy, partner, Catalincs, said three decades ago, Chennai was considered to be the GCC hub of India. While Bengaluru had to contend itself with a few semi-conductor and chip manufacturing companies such as Texas Instruments and Intel, which established a GCC there, bulk of the enterprise GCCs all made a beeline for Chennai: Bank of America, Citibank, American Express, but even Dun and Bradstreet (D&B), which eventually got spun off into Cognizant. The world leader in information research chose Chennai for their GCC way back in 1993, when D&B established an entity called D&B RIC (Russia, India and China). While the Russian and Chinese experiments did not take off, the Indian experiment which was in Chennai took off and subsequently became Cognizant.

Ramamoorthy also said at least a dozen GCCs have turned third party in the last few years. While mid-market companies offer scope, the real big opportunity is from “the next generation of private equity and VC-backed smaller companies,” he added.

Calling these extremely innovative entities as “nano GCCs” he said in the next few years’ thousands of nano GCCs would come into the country. Similarly, if a Walmart or an AstraZeneca or a Citibank can come and set up their technology operations in India, a significant number of large established business powerhouses in India are “setting up their technology back offices quickly starting to serve third party customers in a matter of a year or two.” These included big Indian names such as Reliance, Welspun and Bajaj Finserve. TN, specifically the TVS group (TVS Next, TVS Digital, Sundaram Business Services) or the Murugappa Group with Net Access, Lakshmi Machine Works through Petrus Technologies and Shriram Group via Novac, are some of the finest examples in this regard.