13.6% rise in margins up on initiatives, adjustment: Mastek

Mastek has announced its quarterly results. CFO Farid Kazani explains to CNBC-TV18 about the various aspects of the company’s performance during the quarter.

Below is an edited transcript of the interview on CNBC-TV18. Q: Margins have come in significantly strong for the quarter. How are you looking at margins going forward? Are they sustainable at the current levels and what was the exact impact of currency on margins?
A: Let me just quickly take you through the year's results. We recorded a growth of 21-22% in rupee terms in this year which ended with Rs 739 crore as compared to Rs 614 crore.
The EBITDA for the full year is at around 5.6% as compared to a break-even last year. If you look at the quarter, we have recorded Rs 217 crore in total income as compared to Rs 188 crore in the previous quarter. The quarter also witnessed a 15% growth in the topline.
EBITDA margins in the quarter were higher at 13.6% as compared to 9.3%. Yes, the improvement in this quarter’s EBITDA has come from various areas including the definite increase in topline which has helped the margins.
Some of out initiatives that were kicked off at the start of the year also started to pay off. Albeit, there is also a year in adjustment on the incentive at the end of this quarter, so that has given some positive momentum.
Now to answer your question regarding the sustainability of the margins - Going forward we are looking at improving margins on a QoQ basis. But as you are aware, next year we are to announce an increase in salaries.
So, there will be some impact of this salary-increase in the next quarter and certain mega projects that have been initiated, that will have some transition cost in the next quarter.
To this extent, there will be some impact of the margins in the next quarter. But hopefully, if you are looking on a y-o-y basis between this year and the next, we are definitely looking at improvement in margins next year. Q: You spoke about wage hikes. What is the kind of wage hike that you plan to initiate from an onshore as well as offshore perspective and if there will be an impact on margins next quarter? Can you quantify how significant it would be?
A: We are in the midst of finalising the increase in wages. I will not be able to give you the exact impact because it has not yet be issued to the employees. It is going to happen any moment.
But to give you an indication, it is going to be in line with the industry as far as the offshore employees are concerned and pretty much similar to what the industry has given for onsite employees. The way I see it, the impact on the margins in the next year is going to be much lesser than what it was this year. Q: For the quarter, the in revenue and PAT have significantly benefited from the movement in currency. What was the impact of the forex on the quarter?
A: If you look at the impact of forex movement on topline which was around Rs 51 last year and Rs 54 this quarter. So, there definitely has been a 6% upside on the topline. But that does not translate tremendously in the bottomline. There's just been a 0.7% improvement on the margins at the bottom-level. Q: How have volumes performed for the quarter?
A: We have seen volumes increasing. In North America where we posted around USD 15.4 million in the previous quarter, we ended up with USD 18.3 million. As far as the other geographies are concerned such as UK, India and the Asia-Pacific region, growth in volumes in the UK has been kind of flattish in this quarter as compared to last quarter, but in India volume have posted a marginal increase.