Company's order size too increased in the past few quarters and currently it stands at Rs 25000 crore. He expects FY13 revenue growth to be closer to 18 percent.
Also read: Rolta India Q3 net rises 3.8% to Rs 73.1 cr
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What's the story on margins? While your volume performance is as you guided even better, the margins for the second consecutive quarter have been slipping a little. What is the reason and when do you see them stabilising?
A: Margins are actually very good. We have been showing quarter on quarter increase and our margins are in excess of 40 percent EBITDA. So, we are very happy about the margins. It is higher because we have really changed our model from service centric company to a service solution centric company with lot of our own Intellectual property (IP).
This has given us more stability, annuity and we are able to play at a higher value end. Certainly, in each quarter there are sometimes more software of our own, sometimes which is less sometime which goes. Volumes and profit and loss to that extend has not done much.
Q: Nevertheless, there is this minor tweaking. Is that something that you stay around the ballpark 40 percent margin picture?
A: It is between 40-42 percent. It is much dependent upon if suppose the solution consists of more our own software and IP. Thus we have a higher margin and like on that. However, in this quarter also we did very good projects.
For example, US Trade Development Authority gave us a project to do for city of Nanjing. Olympic are being organised there and we are doing very sensitive sensors. We are in real time taking the information and providing for that. Similarly, for GE, IT and for engineering, Reliance and for many other such largecap companies we did very good projects.
Q: What's the outlook on the revenue side? Last time you spoke about a 16 percent revenue growth for FY13. Is there a case to better it since you have been doing quarter after quarter growth of about seven-eight percent, any early signs for FY14?
A: This year we should be able to close about 16-18 percent revenue growth. It can go up to 18 percent. As far as the next phase is concerned, we are quite happy about that. So, we believe that we should be able to maintain double digit growth even in next year.
Q: Will it be as good as 18 percent?
A: I will be able to say more accurately as we go forward into the year. We are going to do next years' planning in next one month. However, we are certainly seeing double digit growth. We have very good action in our pipelines. The pipeline is growing. We are getting specialised large orders now.
For example, we got USD 30 million order from Memphis. We are right now negotiating very large order of about USD 25 million in engineering IT space. So, our sizes of orders have become much larger than what it used to be.
Q: What is the order book currently at?
A: About Rs 2,450-2,500 crore. That is the kind of order book, which we have now. The pipeline is also about Rs 7,500 crore. This is the qualified pipeline which we talk of.
Q: If you can give a little more clarity at least qualitatively in terms of the volume picture. The National Association of Software and Services Companies (NASSCOM) projections have been more optimistic than it was for the previous year.
A: We have been showing that FY14 has been better than FY13. We are quite positive that it should be like that because we have traction in everything what we are doing.
Q: Would you say that for the industry also?
A: I cannot say much on Industry. In our own case we have really gone through a transformation. That is giving us that traction now. We are seeing the benefit of that coming to us.
Q: You have recently acquired AdvizeX Technologies. How significant is this acquisition? What kind of revenues as well as EPS will it accrue for the company in FY14?
A: This is a good company in the space of cloud, software defined infrastructure in mobility and in big data. So, this is a very cutting edge technology. This provides solutions and it has almost 2,500 customers. It has been there around for about 30 years.
We paid about USD 34-35 million for this. This should be able to give us access to all these customers. We are expecting that we should be able to take all our other services to these customers. That is one reason why you are seeing some growth in our revenues and our profitability because this is certainly profitability accretive since beginning.
Q: Some numbers for how much can it contribute?
A: It has contributed to our EBITDA some percentage, which it has improved. I certainly believe that to our revenues also it has given a growth of about, this year we will be growing at about 17-18 percent. About 7-8 percent is because of this acquisition.
Q: What are you sensing in terms of visa issues? After all we know that things are getting stricter especially in the US. Will that start hitting you anytime in FY14 and the industry?
A: It can hit the industry very well because the rules are becoming very strict. In all probability, the US will insist for 50 percent force to be domestic US employees and then they will give visas accordingly.
Fortunately, in our case, we have a good population of almost about 1,000 consultants who are permanently posted there. We do rest of the business more from offshore here. Over 80 percent of our business is offshore. Our need to send on visas are much limited and whatever visas are required, we will be able to get for next 1-1.5 years.
There should be no issue as we go forward. However, certainly this is going to create hardship for many companies who have already got larger population there.
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