Confident of double digit revenue growth in 2013: Hexaware

After posting in-line Q4 earnings, PR Chandrasekhar, chief executive officer, Hexaware Technologies says he is optimistic on the company posting double digit revenue growth in 2013. The stock surged more than 5 percent after the company posted its Q4 results.

Chandrasekhar says he is bullish on the company's performance in the CY13. "The past year, 2012 has been a good year. This was our year ending on all fronts. Revenues were up 18 percent; margins, EBIT were up; numbers of people were up, customers were up. All our key verticals have performed well, notwithstanding the issue and the challenge that we did have in Q4," he says.

Below is the edited transcript of Chandrasekhar's interview to CNBC-TV18.

Q: You are talking about double digit growth in CY13. Now that could be 11 percent or 20 percent. Are you going to be closer to 10 percent with double digit or closer to 20 percent?

A: We would stick to a double digit of about 10 percent. We will come back once we know where the industry is at with National Association of Software and Services Companies (NASSCOM) and hopefully in April, we will be able to give a better number. However, 2012 has been a good year. This was our year ending on all fronts. Revenues were up 18 percent, margins, EBIT were up, numbers of people were up, customers were up, all our key verticals have performed well, notwithstanding the issue and the challenge that we did have in Q4. We are probably one of the top performing companies and we remain confident about going into 2013 simply, because fundamentally, all the aspects of the organisation remain strong.

Q: Your margins had actually taken a big beating over the last two quarters. You are saying in the first quarter margins will recover by 150-200 basis points but even that would be only 18 percent, not anywhere close to 22 percent where you slipped from. How many quarters would you take to get back to the old margins?

A: The challenge that we had in Q4 with regards to a specific situation with a particular customer is now under control which was the reason we had to go and pre-announce Q4 numbers. We are well in-line with those. In our customer mix, the top 10 is still above 50 percent. Our number one customer is where the decline has been, but even there we did win in other areas and we expect that to recover in Q1. We will get our utilisation which took a little bit of a hit and our onside offshore ratio also took a bit of a hit driven by this situation. All other customers, all other situations look right. I think we will improve in Q1 and we will continue to improve in Q2. We see our self getting back to our normal state, somewhere in the middle of Q2 or so.

Q: For the first quarter - you are guiding to a revenue growth of between 1.7-2.8 percent. What kind of trajectory do you see through the course of this calendar year in order to get to a double digit performance?

A: We have numbers that we will have to be in four percent quarter on quarter with the kind of range going into Q2. Based on our pipeline, based on our discussions with our customers including the one where we have this challenge, we feel comfortable that things will look good. North America is very positive as you saw in the last quarter. Europe is getting good for us, it is a Hexaware specific situation. Asia-Pacific has been quite strong. So, all in all, we feel quite comfortable that what is required to hit that 10 percent plus is within our reach.

Q: Which vertical it is that is pushing the hardest for you in terms of where you see the growth because as you mentioned, geographically, Europe is pretty poor compared to the US. So, both - geographically and in terms of businesses, which ones are pushing?

A: If you look, North America was very strong. If you look at Europe, we did decline as a percentage of our overall revenues. However, we will see it revert back to norms in Q1 itself - both that client as well as Europe. Overall, North America will continue to contribute and grow. In terms of verticals, we grew 28 percent last year including in Q4. We have introduced a lot of new solutions in that area and we think banking and financial services, notwithstanding the commentary in the market, will remain strong for Hexaware. So, we are actually quite bullish on that sector.

Q: In FY11, you grew at 33 percent. In FY12 it was 18 percent and next year, probably you will be closer to 10 percent. You are not a multi-billion dollar company yet. At your size, should you not be growing faster? Is the business losing steam?

A: In our guidance for 2013, to some extent the math really is working against us. Our momentum entering in 2013 Q4 and to a little extent Q3 started getting off the blocks a little slow. Whatever we do to make up, it is still not allowing us to get to the kind of growth rates that we would like.

Our growth rates will be a bit stronger in order to get to the 10 percent plus annual guidance that we have given, which we hopefully will come back to later in April. So, we will be back in a trajectory which is fairly strong and I would say it will put us back amongst the leaders in the industry from a quarter on quarter standpoint. The momentum in Q4 and the Q1 start will set us back on a year on year basis but on a quarter on quarter basis, we will sign off the year at a fairly healthy clip.