Zensar Tech likely to exceed Rs 1600cr FY12 guidance

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In an interview to CNBC-TV18, Ganesh Natrajan, vice chairman and chief executive officer of Zensar Technologies spoke about the latest happenings in his company and the road ahead

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: How is the second half panning out for you? Will you be able to maintain or possibly even exceed your guidance?

A: I think we will certainly maintain or exceed because the market is still looking good. I am just back from a trip to US and Europe and all our customers are positive about spending during this year.

So, we will definitely exceed the Rs 1,600 crore revenue guidance. We had been a bit under pressure in terms of profits, but I think that's also turning around.

Overall, we will have an excellent year and I am also positive about next year because given the order book and the kind of deals we are chasing today, I think we should have a fairly good start to the next year as well.

Q: Is your confidence because of the rupee that has become more attractive to an exporter?

A: We are being faced with bigger tax this year because of rupee fluctuation and that will compensate the tax for us. What we are seeing is a different perspective as huge deals are not happening and of course the TCS deal was substantial. There were not too much of major deals, but people like us who grow and get a very strong story in Oracle applications or infrastructure management, continue to see good traction.

We don't do many multi-million dollar deals but we will get enough deals to justify our confidence both this year and next year. It's the difference on prospective on what kind of deals people are chasing and what they see in the marketplace.

Q: People talk about contra-trend when economies are deep in trouble there is even more need for cost cutting and the outsourcing that will have to be done to a lower priced economy is higher?

A: That's transient. We are seeing for the last 15 years is that when there are cost trends in the marketplace, yes there will be a move towards outsourcing. People will look at best practices.

We have done a lot of deals in 2008 with a new service we launched - First Time Offshoring which is very good and continues to grow today. In the longer term looking at the trends in Europe, at completely stupid politics that is being played in America, they will have pressures of overall spending next year. So we are very watchful.

We today have a very poor clarity. We are working on what is the USD 1 billion Zensar plan for 2016 and that includes going after mission critical business areas, increasing our depth in verticals like manufacturing, retail, insurance and healthcare.

You can't be foolish and say that the overall market slowed down with lot of factors, but look at adjacencies, if you look at specific opportunities, you can continue to grow and that's where our confidence comes from.

Q: Tell us how exactly that Cisco is panning out for you and what revenues could we expect in FY12?

A: The good news is it continues to grow. I am just coming from a meeting with their CIO and she was very, very positive about the kind of work we do for them. We were recently awarded the Top Partner Award and that includes across all global and Indian IT and BPO firms. We have a very strong endorsement in our capabilities.

A couple of large vendors have lost market share and we stand to benefit from that because being a favorite partner. This way they will grow in our volumes and rupees with Cisco. Cisco as a company did much better in the last quarter. We are very sanguine about growth prospects in them.

The good news for is that our dependence on Cisco has come down substantially. We are hoping that we are going to maintain Cisco at less than 20%, grow the other sides of the business and continue to have an overall very good growth story.

Q: What would you do by way of margins for the full year and for the next year?

A: We have a three year plan. We have breached the 13% profit after tax level. Then we bought this company called Akibia because obviously being an onsite player much smaller margins.

We are working with Akibia to take them offshore, for integrated service to ensure that their own margins double, over the next few years. We are back into double digits certainly not this year but PAT will be at 10% target for next year and we will continue to grow that.

We are on track in terms of what we have set out to do and what we are achieving.

Q: You would better that Rs 1,600 crore revenue guidance. How much better you think?

A: We are looking at certainly better in the range of Rs 1,600-1,650 crore and we have the order book to back-up that confidence.