Taksheel Solution to use part of IPO money for acquisitions

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Information-technology firm Taksheel Solutions' (TSL) Rs 80 crore IPO has opened for subscription today.

In an interview to CNBC-TV18, Pavan Kumar Kuchana, chairman and managing director, Taksheel Solutions said, the company is raising Rs 82 crore at the upper band and Rs 71 crore at the lower band.

He further said, the company will use Rs 22 crore of IPO proceeds for acquisitions. "We are going to use around Rs 9.15 crore for Hyderabad development center, Rs 8.65 crore for Warangal development center and incremental working capital would be Rs 12.8 crore," he added.

Also read: Subscription for Taksheel Solutions IPO begins today

Below is the edited transcript of his interview with Latha Venkatesh and Ekta Batra of CNBC-TV18. Also watch the accompanying video.

Q: What are you raising in terms of a quantum? How will you utilise the funds?

A: We are raising Rs 82 crore at the upper band and Rs 71 crore at the lower band. We are going to use around Rs 9.15 crore for Hyderabad development center, Rs 8.65 crore for Warangal development center and incremental working capital would be Rs 12.8 crore, Rs 22 crore for acquisitions. The rest is for general corporate purpose.

Q: Your operating cash flows have been negative for the past several years, why is that? If you are making profits, why is it that the operating cash flows are negative?

A: We as a company we are using the money for expansion.

Q: When do you see it becoming positive?

A: It is positive. It is positive from going on.

Q: Also, with respect to your clientele, we understand that your clients are concentrated in the US.

A: Right.

Q: Would that pose some kind of a risk because that is the country which is headed towards perhaps a recession or atleast serious slowdown, are you likely to see that in a number of orders you book?

A: I just want to brief about the company. We are actually a technology company providing into the wealth management. That means any large financial institutions, which are looking to expand in the wealth management business, and that is where we are coming deep domain expertise and providing the technology support to them.

If you see from last decade, the wealth management industry is actually growing. Even if you see in India last five years it is growing. There it is a good opportunity. If you see all the financial institutions, traditionally they are making transaction based revenues and they are moving towards the fixed fee revenues. That was the major revenue stream for the financial institutions and they are spending on technology.

Q: Can you tell us who your top clients are?

A: The clients that we are working with are LFG, Merrill. But we work with channel partners. We work with their prime vendors, but our relationship with clients is direct and where we deal with their business guys, technology guys. That is where the domain in technology we use it.

Q: Considering that you are so closely related to the financial space, are you seeing some amount of budget cuts coming across, loss in clients etc?

A: Yes. Definitely, there will be a freeze or there will be little bit slowdown on the budget. Generally, we deal with fund managers, wealth managers. In our sector, what happens is whether the investment is in equities, mutual funds or fixed income products because the wealth management industry will not affect the way it will affect the rest of the sectors within the financial services.

Q: How are you planning to hedge yourself against this, considering that there has been some amount of concern coming in? Are you diversifying into new industries what is the plan going forward.

A: No. There are two things. We have a telecom sector where we are nurturing. We do not have revenues right now in that space. But we are foreseeing that we are going to grow in that.

In the wealth management, there is diversification. We are coming go the Asia pack and India and wealth management is still in nascent stage in India and it is going to grow. We are going to put our efforts to grow these regions.

Q: Can you tell us how much of your business comes from top two, top five clients?

A: Top two is around 28% and top five it is 60% and top ten it is 90%.