Expect FY12 revenue growth at 20-25%: Infotech Enterprises

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Expect FY12 revenue growth at 20-25%: Infotech Enterprises

Chairman and managing director of Infotech Enterprises, BVR Mohan Reddy breaks down his company's second quarter results on CNBC-TV18.

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Excerpts from Reporter's Diary on CNBC-TV18 Watch the full show » ALSO READ See latest News about Infotech Enter See previous management interviews See what other Experts & Brokerages are saying about Infotech Enter Infotech Enter BSE | NSE 30/05/12 Are Mutual Funds betting on Infotech Enter?

Infotech Enterprises reported a rise of 21% quarter-on-quarter in consolidated net profit of Rs 30.8 crore in the July-September quarter of 2011. The company had posted a net profit of Rs 25.4 crore in the previous quarter.

Chairman and managing director of Infotech Enterprises, BVR Mohan Reddy breaks down his company's second quarter results on CNBC-TV18. He says to expect better margins in the coming quarters.

For FY12, he outlines at least a 20-25% jump in revenue.

Below is an edited transcript. Watch the accompanying video for more.

Q: What have the volumes been this quarter around? How are you expecting to see it from hereon?

A: We showed you a 7.5% growth on revenue for the last quarter out of which about 2.2% came primarily because of the foreign exchange headwinds. The rest of it, about 0.3% came because of price increases and the other 5% is because of volume growth. We see our order pipeline as very strong. It couldn't have been any better than what we have at this point of time.

The interactions that we have had with our customers indicate that they do not have any intentions of either stopping any of the projects or cutting down the budgets at this juncture. Therefore, we have an extremely positive outlook which says the momentum will continue in the coming quarters.

Except for the fact that Q3, which is the current quarter October-November-December has a lot of holidays between Thanksgiving and Christmas. There could be potentially a few more holidays, but otherwise the growth momentum seems to be very positive.

Q: At 15.7% your margins have been higher than what analysts were expecting. Do you think you could maintain this 15-16% level or was this quarter just an aberration?

A: No, in fact we will improve on what we are doing at this point of time. This 15.7% has not been our benchmark. Our benchmark as a company has been at 18%. From the last quarter which was at 12.2%, we took it all the way to 15.7% that's about 350 basis points. Out of this about a 100 basis points came on account of foreign exchange headwinds.

The 2.2% on the revenue increase was because of foreign exchange translated back into about a 100 basis points on our margins. If you then take that 100 basis points, you are still left with 250 basis points, that's all on account of the volume growth that we saw, which is 5% and also the different levers that we operated to make sure that our operating margin comes back to our benchmarks which is 18%.

So we have operated some of them and we continue to work on them. Both our verticals - have two major initiatives. There are two vice-presidents who are in charge of these initiatives in terms of operational excellence. I am fairly confident that we will further improve our margins in the coming quarters.

Q: In terms of volume growth in specific verticals, what is the road ahead like that you see with respect to your NCE growth and your engineering vertical?

A: We have always maintained that we will grow between 20-25% this year. Our quarterly growth rates would be somewhere in the range of about 5-7%. Q3 has got a few more holidays because 97% of our business is export business, you have Thanksgiving and you have Christmas coming up. So, potentially, this quarter could have somewhere in the lower than 5% number or around it where growth will come by. But annually we will see between 20-25% growth.