Rolta aims 15% margin in revenues next year

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Rolta announced its first quarter results for FY12. The company posted a rise of 5.5% quarter-on-quarter (QoQ) in profits for the fourth quarter of FY11. During the period, net profit of the company increased to Rs 88.6 crore as against Rs 84 crore in the previous quarter. The company's net sales moved up to Rs 477 crore from Rs 460 crore quarter-on-quarter.

Chairman and managing director, KK Singh gave guidance for the next year that they would do 15% for both, margins and revenues.

The company had begun an Intellectual Property (IP) oriented company and saw an improvement in its margins. Singh said, "Margin for the software sales have always been better than the services." The company's order book is also getting healthier now, he added.

Here is the edited transcript of Singh's interview. Also watch the accompanying video.

Q: Can you take us through the first quarter numbers? Your margins look surprisingly strong. How has your performance been?

A: We end our year with June 30. It has been our fourth quarter (Q4). In this quarter, our revenue has been about Rs 475 crore up about 15.7% year-on-year (YoY) and 3.5% sequentially.

Our EBITDA went up almost 20.8% to Rs 193 crore. Our Q4 profit after tax (PAT) has come to Rs 88 crore which is about 28% YoY and sequentially about 5%. For the whole year, we did revenue of about Rs 1,800 crore, which is up about 17.8% from last year.

Q: What would you do in the margins? In the past five quarters, we have seen a gradual improvement of around 280 basis points. What can you do in FY12?

A: We have been changing our business model for last couple of years. We have begun an Intellectual Property (IP) oriented company. We have become more non-linear with IP being introduced. We are not very linear like many IT companies. Therefore, our margins have been improving. If the annuity comes in, margin gets better. Margin for the software sales have always been better than the services.

Q: What would it be in terms of guidance - 40% margins and 15% revenue?

A: For the guidance, we will keep 15% for both margins and revenues. This has been appearing as a difficult year with the US S&P downgrade, etc. We would be rather conservative. As we go forward, we can look to improve it. We gave 12-15% guidance for the year which went by, both in topline and bottomline. We have exceeded very well in both.

Q: Has this started playing out the sentiment? Your order book, on a sequential basis, has only grown around 0.4%. What are you expecting in terms of order inflows? Can we expect any sort of price negotiations from your front?

A: Our order book is getting healthier now. There have been some delays in finalising of contracts. We take the contract into account than the order. For example, if there is a large contract of almost USD 26 million for our 3D work in Middle East that has been taking three-four months for finalisation, we would finalise it in this quarter.

Q: Was there some billing pressure?

A: Billing pressure has always been there. At this stage, the customer wants the best. We have been trying to go up the value chain and hence, will be able to withstand the billing pressure.

Q: You have some Rs 500 crore of debt coming up for payment next June. The total debt on your books also is at Rs 1300 crore.

A: We have been very cautious in terms of raising finances. We have gone through the equity route less number of times. Last GDR which we did was in 2006 and have been almost debt free after that.

Over the last four-five years, we have funded our growth through this route instead of going through equity route. In this year, we will be happy to raise the equity and pay some of this debt. We have lined up ECB credit lines to meet the FCCB conversion.

Q: What will be the approximate interest payment that you will have to make for ECB to repay the Rs 500 crore debts?

A: We are getting about 5% from ECB, which is fairly good.

Q: What about the equity issuance? How much will you raise?

A: We have an approval from our AGM to raise almost USD 150 million for equity issuance. We can raise that anytime we like.

Q: What route would you adopt and by when?

A: In today's market, it doesn't look like a tomorrow or day after situation. Its difficult. In the next three or four months, the markets should settle. Once they are settled, we would raise through QIP or GDR. We are looking at those two routes.

Q: What would that mean by way of an equity dilution? Are you mentally prepared for it?

A: Overall, it will mean about 15-18% dilution, which will take care of all this FCCB conversion and more.

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