May 29, 2013, 05.35 PM IST
Infinite Computer Solutions (India) Ltd, a global provider of software solutions has said that its board of directors will consider on June 5 a proposal for buyback of equity shares.
Upinder Zutshi, CEO & MD, Infinite Computer Solutions, in an interview to CNBC-TV18 says the company has Rs 170 crore cash on books. “We will seek what is the best way of utilizing it and what would be the extent of the buyback,” he says.
In terms of the business, he expects, Infinite’s operating margins to be lower by 15 to 20 percent in FY14. Reason for the fall is the investments, which the company plans on making this year. As the business is concerned, it is growing even in FY14, he added.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: You have scheduled a board meeting on June 05, to consider a buyback. You are sitting on cash a little over Rs 100 crore could you tell us what is the extent of the buyback that the company is considering?
A: As you mentioned, our board meeting is on Wednesday. As part of that meeting, we will discuss what the extent of the buyback going and the price is going to be. So, right now since the board meeting has not happened, I won’t be able to talk about that.
In terms of cash, we have cash on books of about Rs 170 crore. So, we have quite a bit of cash. We will seek what is the best way of utilizing it and what would be the extent of the buyback.
Q: Is this essentially a confidence building move because after your numbers the stock had crashed quite a bit?
A: It is a combination of various things. If one looks over the last four years in terms of the performance, in my view have done extremely well. Our revenues Compounded Annual Growth rate (CAGR) over four years is about 30 percent. Our operating margins CAGR was about 40 percent, cash per share is almost 40 and earnings per share (EPS) is more than 30.
The stock at the level at which it is at right now, it is less than 3 times cash. We have also in addition to the delivery in the financial performance always have been cognizant of the fact that how do we return the value back to our shareholders.
We have a very good dividend policy. We have a stated policy of 30 percent profit after tax (PAT) as dividend. We first did first buyback year and a half back. So, this is the second one which essentially has two objectives. One, is to demonstrate that we are confident about the company Second is that we have cash. Since we do not have major utilisation of our cash in terms of mergers and acquisitions (M&A), we would return some of the value back to the shareholders.
Q: What is the current dividend policy and any possibility of increasing the dividend payout given the cash on books and as you said you don’t have utilization for the cash like M&A?
A: The current dividend policy is 30 percent of PAT and we have been following that for the last two years. We will continue to follow that this year as well. What we were doing this year is combination of the dividend policy of 30 percent, plus the buyback which we are taking up for consideration during our board meeting on Wednesday next week. I would think that it would be a combination of both these. We will continue with our stated policy for dividend and see how we supplement that with a buyback.
Q: Any kind of guidance you may want to give us in terms of your operating margins going forward?
A: The performance for last year was very good. Our revenue grew more than 30 percent. Operating margin also grew in rupee terms more than 15 percent. As far as this year is concerned, I stated that last time also- it is a year for rebuilding. We have to continuously evolve ourselves, we have to adjust to the market environment and we are all aware that market environment is challenging.
The customers are expecting more than just providing offshore services to them. As a response to that what we were hearing from the customer, we decided that it is time that we need to make significant investments into the business this year. That is why in the last board meeting we decided to invest about USD 12 million this financial year and in that USD 12 million are being expensed out.
From a business point of view if you do comparison with last year and if we had not made these investments this year, even our operating margins will be very good in FY14 as well. But taking a long-term view looking at 3-4 years ahead and how we can continue to establish our position in the market place, we thought that it is very important and necessary for us to make those investments into the business.
This would results in short-term hit that we are going to take this financial year, which is what we had guided for is a revenue growth of 12 to 14 percent in FY14. Operating margins would be down 15 to 20 percent in FY14. The margin is down essentially because of the investments that we are making this year. As the business is concerned, it is growing even in FY14.
Infinite Comp stock price
On December 10, 2013, Infinite Computer Solutions India closed at Rs 121.45, down Rs 0.65, or 0.53 percent. The 52-week high of the share was Rs 145.00 and the 52-week low was Rs 76.30.
The company's trailing 12-month (TTM) EPS was at Rs 21.98 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 5.53. The latest book value of the company is Rs 106.83 per share. At current value, the price-to-book value of the company is 1.14.
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