See EBITDA in 22-23% range in FY12: Take Solutions

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In an interview with CNBC-TV18, HR Srinivasan, VC, prime founder of Take Solutions said, the acquisition in Europe of WCI Consulting contributed about 6.5% of revenues in the first quarter. "Our target is that Europe should be giving us about 25% of our revenues over the next three years," he added.

He further said, the company's current order book stands at USD 72.5 million. "During the course of this year, our earnings before interest, taxes, depreciation and amortization (EBITDA) will be in the 22-23% range."

Below is the transcript of his interview with CNBC-TV18's Ekta Batra and Reema Tendulkar. Also watch the accompanying video.

Q: You did an acquisition in Europe a couple of months back. Could you tell us what the revenue contribution from that acquisition was? How much can you scale it up by?

A: The acquisition in Europe of WCI Consulting contributed about 6.5% of our revenues in the first quarter. Going forward, I think by the end of the year we expect it to be around the 10-12% of our total revenues. Our target is that Europe should be giving us about 25% of our revenues over the next three years.

Q: On the operational earnings before interest, taxes, depreciation and amortisation (EBITDA) or on the profitability level, What is the contribution from that acquisition?

A: Life sciences generally show an EBITDA in the range of about 29% totally. The EBITDA for the unit as such is not monitored, but it would go into the division. That is how we compute.

Q: What about your acquisition plans in Europe? Is this the only acquisition that you have made and that is it, you have closed your books there or do you have any inorganic plans.

A: We do have inorganic plans. But there is nothing substantive on the table yet. WCI has given us a very strong foundation in Europe. It comes with very strong domain knowledge, good technology and a good customer base. So, we will use this leadership to build on any further acquisitions that we have as we move forward. But there is nothing substantive as yet.

Q: If you do have any inorganic plans, would it be domestic or would it only be global?

A: It would only be global. The markets that we serve are global. We are very strong in life sciences. Most of the innovative companies are based either in Europe or in US. Our plans would be to look at global organisations.

Q: What does your order book currently stand at?

A: It stands at USD 72.5 million. That would be executed in a six-eight months time period.

Q: That is a year-on-year, sequential increase of how much?

A: Sequential increase of 2%. But year-on-year increase is fairly substantial. At this time, last year, we were a little over USD 40 million in order book. This year we are USD 72.5 million at this point.

Q: Could you tell us the cash on books, if you do say that you would be open to inorganic plans?

A: The current cash on books is about Rs 113 crore.

Q: If the global markets are actually more lucrative for you ahead for an inorganic, could you tell us the difference in the EBITDA margins for domestic vis-à-vis maybe something that we get in US and Europe?

A: I won't be in a position to comment on domestic business, less than 3% of our revenues are from domestic customers. So, we as such focus only on global companies and that is the space because we service innovative companies and medical device companies in the life science segment.

Q: You have already managed to increase your EBITDA margins in this quarter. Could you tell us how much further headroom is there for you to increase your margins?

A: I think during the course of this year we will be in the 22-23% range, so maybe another 0.5% point.

Q: You mentioned only a sequential increase of around 2% in your order book, can you just give us the trends that you are facing with regards to that, is there any amount of slow down that you are facing?

A: No really. US and Asia continue to be strong. There are challenges in Europe, but we are also new in Europe.