Capita deal ramp down to continue to hit company: Mastek

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Capita deal ramp down to continue to hit company: Mastek

In an interview with CNBC-TV18, Farid Kazani, group chief financial officer of Mastek said, in Q4, the bottom-line has been pretty flat. He further said, both the revenue and the bottom-line got impacted because of the ramp down in the Capita deal. That, he said, is going to continue going forward.

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In an interview with CNBC-TV18, Farid Kazani, group chief financial officer of Mastek said, in Q4, the bottom-line has been pretty flat.

He further said, both the revenue and the bottom-line got impacted because of the ramp down in the Capita deal. That, he said, is going to continue going forward. "So, definitely the Capita deal ramp down is going to hit us in the next three-four quarters," he added.

Below is the transcript of his interview with CNBC-TV18's Kritika Saxena. Also watch the accompanying video.

Q: Can you take us through your numbers?

A: This quarter, the bottom-line has been pretty flat. We have seen a few basis points dip. Both the revenue and the bottom-line got impacted because of the ramp down in the Capita deal. That is going to continue going forward. So, definitely the Capita deal ramp down is going to hit us in the next three-four quarters. But certain new deals that we have in the UK will start making up for it.

Q1 of this fiscal, which is the July-August-September quarter, we will see transition of these deals. So, there won't be much revenue addition, but there will be cost addition. But over Q2, we would finish the transition and we would actually see a ramp up in terms of revenues. And that should translate into better margins.

Q: Taking into consideration wage inflation, certain amount of currency volatility, what is the scope for margin expansion in the next one or two quarters?

A: The margin expansion drivers for us are three fold. One is definitely the top-line growth because that leads to better SG&A productivity as well as better utilisation of all the fixed overheads that we have in our corporate functions, in our facilities and so on. So that's definitely going to kick in the next financial year as we get back into a growth momentum as a company.

Second, newer deals that we are signing up. We expect to sign up at better rates, especially if we get product deals and the transmission deals, they tend to be more fixed priced. So, if you see the fixed price position of our portfolio has come down in the last year. We expect that to go back as these new deals come into play. And that has a better scope for margin expansion than a pure capacity deal.

Third, we are taking very aggressive measures, keeping our discretionary cost low. So, over the last 24 months we have made substantial progress in our cost management and that will continue to play a role in margin expansion. As far as currency goes, it is very difficult to predict. So, we don't even take a guess there.

Q: When we talk about acquisition, you do say if at all you would be looking at acquisition, it would be for specific asset, it could be niche acquisition and smaller acquisition of around Rs 20-30 crore. What is the outlook?

A: We would continue to look at acquisitions, which are about USD 20-30 million, not Rs 20-30 crore. So that would remain the focus. Our sector focus is insurance. Government, you are less likely to make an acquisition. If you want to enter into the healthcare, for instance, in US or North America, it would be through an acquisition. Those are the kind of things we are looking for in terms of acquisition. So, we remain on the lookout.