Jul 19, 2013 02:33 PM IST | Source: CNBC-TV18

Infotech Ent expects FY14 to turn out better than FY13

Krishna Bodanapu, President & COO, Infotech Enterprises told CNBC-TV18 that he still believes that the company will have a better year as compared to last year.

Infotech Enterprises reported a 16 percent dip in profit after tax (PAT) for the quarter ended June 30, at Rs 54 crore for quarter ended June 2013. Brushing the disappointing of the quarter gone by, Krishna Bodanapu, President and COO, Infotech Enterprises says he expects the IT firm to better in FY14

Below is the verbatim transcript of his interview to CNBC-TV18

Q: This quarter post your numbers brokerages believes you might not be able to stick by the earlier guidance or the earlier estimates which brokerages have put out on the dollar revenue for FY14 and they are assuming around 5 percent growth as oppose to 8.6 percent growth earlier. Do you think that the next three quarters would be robust enough to surpass this 5 percent growth? What would your dollar revenue guidance be for FY14?

A: Yes, the brokerages have their own view of how we will perform for the rest of the year. However, we still believe that based on the pipeline and backlog that we have at this point, the year continues to look like what we had commented earlier in the year or at the end of the Q4 results about three months ago.

We still believe based on what we are seeing with our backlog in the pipeline, we will have a slightly better year this year than what we had last year. That is what we are working towards.

Q: Can you give us some more colour on the engineering segment which bring such a large part of your revenues. We understand that the revenue growth has not been there, it’s down about 0.5 percent. Are you expecting that to reverse? What is the order pipeline over there and what is the yearend guidance?

A: The engineering business which is about 65 percent of our overall revenues is a key driver to how the year pans out. The key challenge that we have had in that business and in a particular segment within that business was the semiconductor or the hi-tech market that we address. There we had some client ramp downs that have led to the lower revenue in that segment that affected the overall engineering business.

In hi-tech business which is about 20 percent of the overall engineering business, we have seen that the ramp downs all over. We have seen last of those effects in Q1 of FY14 and from here we see growth in particular segment. That will be very helpful or will determine the overall growth in the engineering business.

Similarly, the aerospace business was flat this quarter or was essentially flat this quarter. We also see some growth coming back into the aerospace segment, which is important because off engineering, aerospace is about 55 percent of the overall revenue.

So, between both of these segments we are seeing that they will drive the growth of the overall engineering segment.

There are still one-two areas with engineering especially of highway equipment and mining where we are seeing softness. We don’t believe that there is any degrowth over there, but that won’t be any major growth or that won’t drive the overall growth.

However, having said that considering the two critical segments of aerospace, hi-tech and the third, which is rail, which also is driving a lot of the growth are looking stable. We believe the engineering business will grow in the next three quarters and we will grow fairly significantly in the next three quarters. If you look at the engineering business last year, in dollar terms the growth was about 3 percent or so in dollar terms and we will do better than that.

Q: Could you put a number to it?

A: I cannot put a number to it. It is difficult to quantify the word much, but I will still say it is much better than last year.

Q: You managed to sustain your margins at 16.6 percent and this was despite wage hikes. Can you tell us what the guidance for the margins would be going forward?

A: We ended at 17.6 percent last year and we had said that margins will at least be flat at those numbers for this financial year. We still hold that. It will be at least at that number considering especially that we have got some tailwinds because of the currency depreciation of the rupee. We believe that it will be at least in that range.

Therefore, compared to last year, we will at least have a flat year in terms of margins. But at this point my sense is it will be better than last year because of the currency upswing that we have.

Q: Is there anything that you can guide us in terms of order book and pricing. Will the order book look better than it looked last year and are pricing pressures over and done with or will they persist, maybe shaving off 1 percent or so that the rupee gives you?

A: In terms of the order book, it is better than even last quarter. Our order book compared to last quarter is about 10 percent higher than what it was this time last quarter. So, that gives us a fair sense of confidence of what the numbers will be for the rest of the year.

In terms of the pricing, we have not seen any negative pricing pressure. We are not seeing price decreases or request for price decreases.

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