Expect over 14% growth in FY13: Infotech Enterprises

Infotech Enterprises came out with its first quarter numbers. The net profit was down by 9.5% quarter-on-quarter. The margins also slipped to about 15.7%.

In an interview to CNBC-TV18, BVR Mohan Reddy, chairman and managing director of Infotech Enterprises says, the company will do better than the industry norm. "The industry norm is running at about 10-14%, we will be more than that 14% number," he adds. Below is the edited transcript of his interview on CNBC-TV18. Q: What kind of margins are you confident to maintain from hereon in the next couple of quarters? A: First, I would like to say that it’s not a lacklustre performance. We had a 9.4% growth in revenue. We are not denying that the foreign exchange helped us by 7.3%, but we showed a clear 2% volume growth and 0.1% price increase. So, therefore, certainly it’s not a lacklustre performance. It’s a strong performance. The second thing is historically if you look at Q1, it has always been a quarter, which would have a pressure on margins. Hundred percent of our employees got a wage hike this year, 10% for Indian associates and 3% for our foreign associates. Inspite of that, we have only lost about 180 basis points in our margins. That effectively means that if you look at our performance in the last three quarters, our margins have been between 18-21%. So, we continue to maintain those margins between 18-21%. We will certainly have a strong year. Q: What kind of growth will you hold for FY13 in constant currency terms? Last time, you mentioned a growth of 17-19%, does that hold? A: We said we will do better than the industry norm. The industry norm is running at about 10-14%, we will be more than that 14% number. We will be definitely higher than 14%, that’s what we are tracking at this point of time. Given the uncertainties that are around, we should be in a position to better than that number that I have said so far. _PAGEBREAK_ Q: Can you just elaborate more in terms of volumes? How exactly have you done in terms of volumes this time around, pricing as well as in terms of key verticals? A: If you look at the volumes, we grew by 2% quarter-on-quarter on the constant currency terms. On pricing, we have grown by 0.1%. On foreign exchange, we have grown by 7.3%. So, if you add these three numbers, it will become 9.4%. In terms of our verticals, we had a very strong quarter with our UTC vertical, Utilities Telecom and Content vertical. The growth has been very strong in this particular vertical compared to our traditional engineering vertical. But then quarters are not something which can make a lot of meaning out of it. We continue to have a fairly strong order pipeline. There were two customers where the ramp-up got a little delayed. That’s the reason why we did not show the growth in our engineering vertical. But, moving forward, we think our engineering vertical as well as UT and C vertical will continue to grow very healthy during the financial year. Q: What about geography wise? We have seen a consistent pressure coming in from European markets for most companies. Can you give us a sense is terms how exactly did you do in the geographies? What would your outlook or guidance be for FY13? A: Certainly, we had some pressure in Europe also. If you look at it, there was a 3% shift that happened from North America in to Europe in the current quarter. Earlier, it was because of the challenges we had with two of our customers in Europe. It is not a close down of a particular contract, but there is a delay in terms of ramp up that happened. If you look at our star performers this quarter, it was North America. Within that, the vertical was telecom. That performed the best. The performer, which was at the bottom end of that list, was non-aero engineering in Europe. So, Europe is exhibiting certain amount of softness to us. But we don’t think it’s a systemic problem. It’s more a one of kind with our customer and that can get corrected as we move forward into the financial year.