Utilities, autos continue to do well: KPIT Cummins

IT company KPIT Cummins today reported a 26 per cent increase in its net profit at Rs 46.12 crore for the quarter ended September 30, 2012. Kishore Patil, MD & CEO, KPIT Cummins spoke to CNBC-TV 18 about the policies, expectations and the challenges ahead.

The company had reported a net profit of Rs 36.47 crore for the corresponding period last fiscal. Revenue for the company rose 74.51 per cent to Rs 567.20 crore for Q2 of FY 13 as compared to Rs 325.01 crore for the same period last year. Below is an edited transcript of Kishore Patil’s interview on CNBC-TV18. Q: Your numbers seem to be good on the operational front particularly the EBITDA margins which have improved by 160 bps sequentially. What is the reason behind the improvement?  Do you see this marginal improvement sustainable?
A: Absolutely, we have crossed 100 million and the revenue growth as always has been high. So, sequentially we have grown by more than 5%. In constant currency we have grown by 6% Q-o-Q and there is a very strong growth in terms of Y-o-Y which is 53% and above. So, naturally the growth has contributed certainly to the EBITDA margin, but the more important part is the SYSTIME acquisition which we have integrated.
Last two quarters have shown double digit growth and this time it was more like a 5% EBITDA which has grown to 14%. So the overall marginal improvement is driven by productivity, volume, offshoring and some of the platform solutions which we have brought to the market. Q: How will the future for Cummins pan out stating it has cut down its capex plans? How are you looking at the contribution and therefore your own growth for FY13 as well for FY14?
A: I would currently restrict my comments till FY13. We maintain our annual guidance which is both on topline and bottom-line. We believe there are opportunities for everyone. With Cummins there are areas which are more strategic and long-term programs. We will be in a position to capture some part of the growth.
Naturally, there will be some cuts in some parts of the area. But overall you will see that we have a bouquet of customers both in IT as well as engineering growth areas. So overall that is the reason for us to maintain our annual guidance.
_PAGEBREAK_ Q: Was your rupee guidance Rs 2040-2090 crore? If that is the case you have already done that in first half Rs 1100 crore then why aren’t you improving your guidance?
A: As a policy we do a guidance change only at the end of December because most of the people don't give annual guidance. We give guidance both in top line and bottom-line but we revisit it only at the end of December. Q: In the pro rata you have done better than what you have guided. So, should we continue to expect that?
A: Yes. It clearly shows that we will do better. But, for complete details we will certainly come back at the end of December. Q: There is one week area, rest of the world has been driving the business. Europe actually declined by 13-14%. What is the outlook on the decline? The utilizations have been slightly better than the expectation. Do you see utilization rates being maintained at these levels?
A: From the Europe perspective we have a small de-growth in European market. It has come due to some extra-ordinary items. So, our growth in Europe is still soft, but we believe that in line with our focus we will certainly get growth in Germany and Scandinavian countries. So, we are sure of the growth and investment in that region.
On the utilization front we continue to hire people from campuses. We have not cut down on campus hiring and that is why there are always cycles in terms of utilisation, but we continue to maintain our inflow from the campuses. Q: Which sector is improving expectations in terms of source of orders?
A: Utilities and automotive continue to do well. But utilities have done well as compared to industry as well as our own expectations, overall on the larger side automotive has also done well. Q: That gives you some billing advantage or is billing still a pressure?
A: We do not see a big pressure on billing.