CMC aims to hold margins at 17% ahead

CMC’s EBITDA performance has improved on a QoQ basis. They have done margins of about 17 percent this quarter. In an interview to CNBC-TV18, R Ramanan, MD & CEO at CMC said that our international sales revenue has grown and much of it has been due to SI growth.

Also read: IndusInd eyes Q4 margin growth; expects 25-50bps rate cut R Ramanan was pretty confident that they will be able to sustain this. "We continue to focus on value adding solutions and services", he added. They have added 26 new clients during Q3 across geographies and it has been a healthy mix of SI and ITES clients and embedded system clients. According to him there are good opportunities for growth during this year in the domestic market. Below is the edited transcript of his interview to CNBC-TV18 Q: Can you break up how exactly volume and pricing did for you in this quarter? A: We had a very good quarter in Q3. Our revenues grew up by 8 percent quarter-on-quarters (QoQ). On a year-on-year (YoY) basis, our revenue grew by 24 percent. Our EBITDA has grown by 9 percent QoQ and 38 percent YoY. Our PAT has also grown 24 percent QoQ and 48 percent YoY. This has been due to an all-around growth of CMC in all the geographies that we are operating in. CMC America’s revenue also grew by 11 percent QoQ and we are now operating with about 67 percent of our revenues coming from the international markets. We were able to add about 26 clients during this quarter. It has been a healthy mix of SI and ITES clients and embedded system clients. Those are the key focus areas that CMC has in international geographies. In the domestic market our customer services revenue has continued to maintain its momentum. We were able to add quite a few clients in the Indian market too. Q: Can you tell us about the business mix and how it is improving? Do you think the margins are sustainable? How has the business mix improved? A: Our international sales revenue has grown. Much of it has been due to SI growth. Our SI has grown this quarter both in terms of revenue as well as in margins. In fact, our SI revenue has grown up by almost 3 percent in margins during this quarter. We continue to focus on value adding solutions and services. That has been the reason for improved margins during this quarter. We are pretty confident that we will be able to sustain this going forward. _PAGEBREAK_ Q: What is the guidance for the IT enabled services and what is happening with that segment? A: We do not normally give guidance but our IT revenue has both a domestic and an international component. The international component is generally a long-term sustainable service component. The domestic component is based upon projects that get over in a particular period of time. So, there will be some volatility in the domestic revenue. This we are trying to ease out over the next several quarters. We have been able to maintain consistency in ITES. We see good opportunities for growth during this year in the domestic market. Particularly because of number of initiatives that have been taken up by the government, both at a state government level as well as at the central level. That too with respect to UID and other digitization services which is our main focus in ITES. Q: Going ahead what kind of volume growth targets has CMC lined out for FY13 and for the start of FY14. Within the government space how is the deal pipeline looking at this point? A: To date if you look at the end of nine months, we have had about 33 percent growth YoY on our revenues. We have been able to maintain some good consistent momentum in the growth of our revenues. This we continue to look forward, to maintain in the coming quarter. We also look at the coming year in terms of the opportunities, both in the international market and the domestic market. We see a healthy potential for CMC in the areas, which we are in. In the international markets, America’s revenue will continue to have strong focus on embedded systems, SI solutions and on ITES. In the Indian market, we will be focusing on domestic government projects as well as the private sector. In fact, one of the highlights of this quarter has been addition of clients in some of our key verticals like insurance. Our insurance solution genesis has found new clients in Middle East and Africa. Those are emerging geographies which we will continue to target. Our port solutions have also found new clients in these markets. So Middle East and Africa will continue to form an important part of our strategy going forward.