Europe to become second-largest revenue generator: Kellton

Kellton Tech is on course to meet its Rs 600 crore revenue target for this year, Niranjan Chintam, Founder and Chairman, tells CNBC-TV18.He says Europe will become the second-largest contributor to the company’s revenue in the next two years and that Kellton is looking to acquire companies in the US.The company recently had set up a new office in Ireland.Kellton shares have risen nearly fivefold since the start of this calendar.Below is the transcript of Niranjan Chintam’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18. Sonia: It has been a great year for the company, at least for the stock, but tell us about what the triggers are in 2016. A: Talking about 2015, 2015 we were at 133 the last year when it comes to revenues and the last year we showed 237. That is close to 100 percent gain in the revenue side. The space that we are in is the Internet of Things, Social, Mobile, Analytics, Cloud (ISMAC) space which is the digital space everybody is talking about now. We have been the market leader when it comes to, if you can call it, we started earlier than anybody else in this digital space. So, that is the reason why the market is recognising us and that is how the stock price is reflecting. Coming to 2016, we gave a target of Rs 600 crore revenue, but August-September of next year and we are in line to achieve that. As a part of this, we are doing both organic and inorganic. For the organic side, we have just recently announced a European office or European launch and Europe is going to be our second largest contributor when it comes to revenue within the next two years. Latha: What is your year-end? Are you a March-April company? A: We are a June company. So, June was our closing, but for the next year, we will have to close in March, because of the 2013 company law. So, it is going to be a nine month closure of revenues. Latha: Nine months, you are going to do Rs 600 crore or in a year? A: I was talking about August-September is where we gave the target of next year will be Rs 600 crore. But for the nine months, we will not be achieving the Rs 600 crore. Sonia: You spoke to us about your organic expansion into Europe, but what about the inorganic route. Are you looking at any kind of acquisitions in the next three to six months, and if yes, what are the geographies that you would be targeting? A: US is the geography that we are targeting for our inorganic growth. And yes, we are looking at a few opportunities, but they are still in the discussions stage. We are not anywhere close to announcing a deal. So, yes, before March, there could be one or two, but again, that is purely driven on how the negotiations happen. Based on that, we will decide. Latha: You also did fairly well in terms of a margin improvement both in FY15 and in the first quarter of FY16. So, should we expect 14.5 percent to remain or will you do even better? A: From an earnings before interest, taxes, depreciation and amortisation (EBITDA) point of view, 14.5-15 is what we have targeted for this financial year and the bottomline, when it comes to the profit after tax (PAT), we were looking at 11-12 percent. We are in line with the last numbers we showed in the last quarter, so we are going to continue that, but improvement we will look at it for next year, but not for this year. Latha: What is your free cash? What should be the size of acquisitions we should expect? A: The size of acquisitions varies because when we are looking at acquisitions, we do it for two reasons. One is we buy customers or we look for buying capability. So, when it comes to that, I do not have a size as such, but I would say that 10-15 million target is the revenue that we are looking at and we will look at something smaller too, but if it gives us that capability of the customers that we are targeting. Sonia: You were looking to raise some money this year, about Rs 120 crore. Can you give us an update on that? A: We are still in line with that. We were thinking we will close by December, but it looks like it is going to happen by March end, we will be closing on that equity round. Latha: It is an equity round, so how much dilution are you prepared for? A: We were looking at 15-20 percent is what we were looking at to dilute, but we will base that based on what the price is or what is the amount that we are raising. Latha: So, I should assume that you do not have much of a free cash? A: We do not have free cash, because we are using that cash that we have to pare down the debt. So, that is how we have been able to buy companies as well as to raise debt. Latha: What is your debt now? A: We are close to around USD 11 million and that is reducing every quarter.