Chennai floods and furlough were the main headwinds in the fouth quarter of calendar year 2015, says R Srikrishna, Executive Director and CEO of Hexaware Technologies. Despite this, the company added orders from new clients in the year, he adds.
The company reported 13.9 percent jump in its net profit to Rs 99.4 crore in the fourth quarter of CY16. Consolidated revenue rose 15.1 percent to Rs 819.5 crore in the quarter.
Speaking to CNBC-TV18, Srikrishna says that the main goal is to grow faster than Nasscom average even in CY16.
Discussing the Chennai floods, Srikrishna says that the impact was close to USD 3.5 million due to complete shutdown. In the last quarter, wage hikes also impacted efficiency by 70 basis points, he says.
The company’s orderbook is looking healthy with deals from new clients to tune of USD 120 million in Q4.
Below is the verbatim transcript of R Srikrishna's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: On the topline it has been slightly disappointing but that is because of Chennai floods and seasonally we know you are impacted by furloughs. Did you face any other issues?
A: It was a disappointing quarter but we have always said you got to look at our multiple quarter, three or four rolling quarter performance. However, when we started the year we set off with a goal to outgrow the NASSCOM guidance and that was the first bar we set and we think we have done that comfortably. On reported currency we have grown almost at 15 percent on revenue and profit after tax (PAT) outgrowing that.
Therefore, so we feel good about our overall performance for the year and our primary objective was to establish growth momentum and we have done that. We have also clocked in extremely healthy order booking from new clients which will then act as a tailwind for future quarters.
On this quarter apart from the tailwinds calendar is a major one for this quarter. It happens always in Q4 and we also had more furloughs than normal which is a possibility at this time of the year as clients do some budget balancing. So Chennai floods, calendar, furloughs those were the three major headwinds.
Sonia: Can you quantify the impact of what the Chennai floods has done to both your revenues and margins because that is a one-off?
A: Basically we were not working, we were shutdown and when we opened, our number of employees, because of situation at their home front, could not come to work. So essentially the impact is ultimately into the calendar, so in aggregate the calendar, furlough in Chennai impact was almost USD 3.5 million
Latha: The revenue from your top five clients declined again. Are these client specific issues that you are facing?
A: There are some quarterly variations. Our top five clienteles ultimately outgrew the company average for the full year, so we feel good about our top customers.
Sonia: Your margins were down 210 bps, which is the lowest that we have seen in the last many quarters. Can you break it up for us, how much was on account of wage hikes, how much on account of Chennai floods and lower utilisations?
A: The fact is that in the short-term basis your cost does not necessarily vary, so a lot of the revenue impact tends to fall down into profit impact. On top of that we had about 70 bps due to wage hikes.
In the previous quarter we had done wage hikes but they were staggered, so the full impact is in this quarter for offshore and then we did increments for onshore this quarter, so in cumulate both these, there is about 70 bps impact.
Latha: Will you be able to beat growth faster than the industry average in calendar FY16 and do you have the confidence that the company's growth will be better than it was in 2015?
A: Both those certainly will be the goals. Our goal is certainly we will outgrow than the NASSCOM average, of course they have not published it yet but it will come out next week and it is always to do better year after year. So both those will be our goals.
Sonia: Can you give us details on what the order booking has been like this quarter. How many new deals, how many renewals and how many are you currently chasing in your pipeline?
A: We only report on deals from new clients, so that in aggregate for the year was USD 120 million and that represents about six time increase from what that same number was in calendar year '14 for us and the quarter was USD 20 million. In the previous quarter we had hit USD 100 million and the total year is USD 120 million. We do not report incremental business from existing clients.