Dividend declared is as per payout policy, says Sasken‘s Mody

While the company will continue to evaluate merger and acquisition opportunities, he says adding there are no prospective deals right now.Below is the verbatim transcript of Rajiv C Mody’s interview with Ekta Batra & Nigel D'Souza on CNBC-TV18.Nigel: The street was excited that you had come through and you had settled that arbitration case. They were expecting a big dividend, it has come in at around Rs 25 it entails that a total payout of around Rs 45 crore odd. The street wants to know is there any more dividend that is likely to come about? Is there any more reward there for shareholders?A: Not at the present moment, we have considered all aspects before declaring the dividend and keeping all aspects in mind it was prudent for us to give a dividend of Rs 25 as a special dividend and Rs 4 as an interim dividend totaling to Rs 29 for now.

Ekta: You have a total payout of around Rs 29 per share but even if you look at it, it’s much lesser than what you have in terms of total cash in books. So what was the real rational that you undertook in order to assess that Rs 29 would be the payout when you have just received Rs 300 crore in terms of an arbitration amount in terms of damages.

A: We have a policy of declaring dividend to the extent of about 20-30 percent of the net profits and that’s what we have stuck to up till now. If you look at the amounts that we will receive on the settlement of this arbitration we will receive about Rs 300 crore by end of the month and part of the taxes also need to be paid out of that. So keeping all those factors in mind I think we arrived prudently at the board meeting on giving a dividend of Rs 25 as special and Rs 4 as interim dividend.

Nigel: You are saying you are going to get Rs 300 crore by the end of this month. What exactly was your cash balance that you already had and what will that take your total cash balance to and second, just last year you did a buyback. Are there any hopes at this time around as well you could do a buyback or you will be looking at that as an option.

A: So have about Rs 200 crore of cash with us as of now and we will receive Rs 300 crore less the taxes which should be somewhere in the range of about additional Rs 200 crore. So total of Rs 420-430 crore will be left before paying the dividend. The dividend payout would be somewhere in the range of, including the dividend tax, about Rs 50-52 crore that would be paid out. So total of about Rs 350-360 crore will be left with the company and definitely looking at ways in which now we use this to further propel the company in the way forward.

It’s too early for me to comment on that because today the meeting was focused on delivering on the dividend and in the subsequent board meeting also I am sure we will consider any of those things. You know we did a buyback last year, and there is a one year moratorium and that moratorium would come to an end sometime in August-September because one year from the date you close the buyback, so total timeline is typically 15 months from the day you start it. So we have time for it to contemplate and if there is any, we will definitely announce it to the market.

Ekta: Any other means or methods that you have though in terms of cash utilisation which we could possibly see in FY17 maybe via the merger and acquisition (M&A) route.

A: We have done M&A in the past; we continue to evaluate possibilities where it makes sense for us to do that. However, we don’t have anything specific in mind as of now to go after with regards to M&A. We have been successful in terms of organically driving our growths and today we can say that this year is a turnaround year for Sasken with regards to the growths. I think we are going to deliver about 8-9 percent dollar-term growth and going forward we see that growth continuing and even better growth rates that what we have seen now as well as better EBITDA margins going forward. So we will continue to invest into newer areas because that is our forte and that’s what we understand best, that’s what we have delivered. However, into the market, all these settlements and arbitration and are all kind of reflections in terms of the core competency or the focus that the company has and we will able to successfully show the results over a period of time. We not necessarily fit into the quarter-on-quarter thing but overall with this 45 million coming in and earlier 45 million from a single intellectual property rights (IPR) we have delivered about USD 90 million which I think is pretty good story.

Ekta: Since 2014, there have been two arbitration proceeding where you been paid damages for. Any more that we could expect in the coming quarters, any more arbitration proceedings which are currently ongoing for the company? 

A: No I don’t think there are any more proceedings that are going on.

Nigel: In last quarter we did see the product business particularly was under pressure, we saw negative margins as well over there. Was that a one-off, do you expect things to improve from here? Could you give us some guidance?

A: The project business primarily is whenever we license our IP and do the customisation services around it is what we classify as product business. So it’s a combination of licensing plus the customisation that we do. We not actively licensing any more of our IPs unless there are specific requirements. So, significant focus is on feeding IPs and then possibly doing services around it so at some point we may fold that into and showcase it mostly as services rather than separate product line item.

We don’t see much of a challenge in the business environment. I think we have seen successful growths both in the automotive as well as in devices that are serving the markets like retail, logistics. I think the key driver for us has been Android and acceptance of Android as an operating system in those segments and we continue to see good traction in that. So I see that in the coming years we will see good growth as well as significant improvements in the margins.