Buyback offer strong confidence signal by mgmt: Aptech

Shares of Aptech surged nearly 9 percent on Tuesday morning, after the IT education firm’s board approved to buyback its equity shares at maximum price of Rs 82 per share from the open market.

The company also reported strong 40 percent revenue growth in fourth quarter. Its profit at over Rs 15 crore was boosted by an exceptional gain of Rs 8 crore.

Speaking to CNBC-TV18, Ninad Karpe, CEO & MD, Aptech says the company is seeing good traction in its institutional business and continues to focus on geographical expansion. 

He says the buyback is a confidence signal by the company on its performance going forward. “We do have as of March 31, Rs 120 crore in our balance sheet, zero debt and we continue to be cash flow positive,” he says.

Also read: Aptech surges 8% on buyback plan; max price at Rs 82

Below is the verbatim transcript of his interview to CNBC-TV18

Q: If you could start by taking us through the results and where the bump in the institutional segment came from in the current quarter?

A: Yes, we had a good Q4 and we had a top-line of Rs 48 crore compared to Rs 40 crore in last year Q4. The bump in institutional business we are seeing is fundamentally in our testing business, which we have been doing for sometime now.

However, last year on accumulative basis we did 1.8 million tests conducted through the year. We have been in this business for sometime and we are seeing good traction now.

Q: Exceptional items taken out your EBITDA margins have crossed 20 percent in the current quarter. Do you think it is a sustainable margin or will you slide back to a 15-17 percent kind of an operating margin in subsequent quarters?

A: We have had couple of strategies over the last four years which are now playing out. One is to focus on multimedia animation business in India. Two is to again focus on some bit of enterprise business which is roughly now around 19-20 percent. Especially the testing business and international also will play out where we continue to foray into newer countries and emerging markets.

Q: In your previous interaction you had pointed out that international retail operations continue to struggle. On the retail side what do you think you can guide to in terms of growth you hope to see in the next few quarters?

A: It is a long-term strategy. Last year was little bit flattish on the international retail. This year we are doing a couple of things. Firstly, by the end of the year we will be reintroducing a new content in English in the international market.

Last quarter we have introduced a new product in international retail called Learning Ladder which is fundamentally K12 content for computer education. So, all these new embellishments in international retail plus geographical expansion and focus on emerging markets will play out.

Q: You have set out your buyback details as well. Why has Aptech chosen to do it? Is it a confidence signal from the management? How soon will you open that buyback?

A: Indeed it is a confidence signal. We do have as of 31st March Rs 120 crore in our balance sheet, zero debt and we continue to be cash flow positive. In last three years we have had close to Rs 68-70 crore of cash from our operations itself. This is excluding dividend and interest, so that is the kind of cash we are generating.

The board yesterday accepted the proposal to buyback up to 25 percent and up to Rs 82. This will obviously have a go through the regulatory process in terms of shareholder approval and all the processes. Assuming the entire 25 percent is bought back and assuming everything is up to Rs 82 we have kept aside Rs 65 crore for this. Still after that we have Rs 120 crore in the bank, zero debt and we have also announced proposal for final dividend of 25 percent.

The reason for buyback is a strong signal to the market that we believe we will continue to do well. We also want to give a signal that the price point which the board has approved of Rs 82 is 52-week high. That was the price at which the board had proposed a buyback. This is all subject to shareholder approval and other legal processes. So yes, it is a strong signal.

Q: Earlier Indira Gandhi National Open University (IGNOU) had stopped the alliance with Maya Academy of Advanced Cinematics (MAAC). Can you give us an update on what is happening on that front?

A: It is an abeyance. It has not stopped. We are not taking any fresh admissions in MAAC for IGNOU. However, the old ones whom we have taken before they sent us that letter, that continues to be serviced by IGNOU and by us.