I would like to start by thanking all our stakeholders for their support to this Company. This includes our shareholders, employees, customers and vendors.
The IT Industry continues to forge ahead, even though its growth rate has reduced. As per NASSCOM, Indian Software Exports in FY2018, grew by over 8% and increased to USD 126 billion, comprising 25% of India’s total exports. India’s Software Exports growth in FY2017 of over USD 116 billion is commendable, given the increasing protectionism.
I believe that the IT Industry in India, and your Company is faced with several challenges and we need to address them.
First, the western world, our principal markets, are getting protectionist and creating barriers to trade, movement of our professionals, and a free flow of both goods and services.
Second, India is facing margin pressure with MNCs having high captive utilisation and financial institutions still leading the way with around 24%. Conventional IT Services and BPO are gradually becoming a commodity, with relatively low entry barriers, resulting in lower margins.
Third, there is a need to broaden our geographical reach and explore more markets. Today about 80% of our Software Exports are to the USA and UK, who on a combined basis form only 6% of the world population and contribute about 25% of the world’s GDP.
Fourth, to circumvent reducing margins in both BPO and Software Services, we need to move up the value chain through development of intellectual property and Software products. Traditionally, Indian Software professionals had been accustomed to providing services against developing Software products. Today, products need creativity, rigorous testing, ergonomic orientation, larger marketing / sales budgets, and longer gestation periods.
To address some of the easier points and enhance our growth visibility, your Company made two acquisitions during the year. We acquired 71% stake in TechJini (Now Datamatics Digital Limited) in July 2017, with an option to buy the remaining equity by 2019. Datamatics Digital, headquartered in Bengaluru, is in the Mobility Software space, which is becoming immensely important worldwide. In April 2018, we also acquired RJGlobus Solutions Inc., a voice-based BPO company headquartered in Manila, Philippines. The objective was to address the growing demands of our customers globally and further strengthen our BPO offerings.
For FY2018, I am happy to report that the consolidated revenues were Rs. 9,103 million (USD 141 mn), as compared to Rs. 8,524 million (USD 131 mn) in the previous year, reflecting an increase of 6.8%, in rupee terms. Our consolidated EBITDA was 9.01% i.e. Rs. 820 million (USD 13 mn), against Rs. 830 million (USD 13 mn) in FY2017. Our net profit stood at Rs. 715 million (USD 11 mn) as against Rs. 640 million (USD 10 mn) last year.
Your Company derived 54% and 46% of its consolidated revenues from its IT Software Services and BPO segments, respectively.
Your Company has been developing several software products over the past decade. One of these is a Robotic Process Automation solution named “TruBot”. This has been successfully launched and has received good response from customers in India and the USA. In the long run, software products have both better margins, a brighter future and are less prone to both tariff and non-tariff barriers.
We attribute this success to our people, who are our greatest asset. They have continued to play a pivotal role in your Company’s progress. Our HR policies and Training Programs continue to win accolades and awards. Significant among them are the ‘Best HR Organisation of the Year” to Datamatics Global Services; ‘Best HR Strategy in line with Business’ to Lumina Datamatics both by the World HRD Congress; and ‘Best Employer Brand’ and ‘Dream Employer of the Year’ to CIGNEX Datamatics at the Employer Brand Congress Awards. It is important to note that we were once again certified as a ‘Great Place to Work’ by the Great Place to Work Institute.
Sectoral Opportunities and Outlook
The Software industry remains a beacon to the rest of our country. Our IT professionals continue to chart new paths and make significant contribution towards raising our GDP and Per Capita Income and providing employment. Even in the USA, in Silicon Valley, the hotbed of innovation, one third of new start-ups are led by Indian Americans.
The world is witnessing a rising impact of Digital Technology. The market cap of just 4 of global digital giants, Google, Facebook, Amazon and Apple is US$ 3 trillion, which exceeds the GDP of India.
I would like to add that with an extensive suite of services and our focus on developing intellectual property, we are in a good position for growth and improved margins in future.
I would once again like to thank all our stakeholders for their valuable support.
Dr. Lalit Kanodia