Expects strong order book, margins to improve: Rolta

K K Singh, chairman and managing director, Rolta, says that the company has changed their business model and is currently only focusing on high-end business model. Both on domestic and international front, the company has good client visibility. The company expects the margins to improve with the good order book and strong growth.

He also says that with the current credit line we are in a good position and there will be no more interest rise expect for fluctuations in interest rates which we have seen in the last year. Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: What is the reason for the fall in revenues? You mentioned that you are declining low margin business is that the reason and how long will this decline continue? How many quarters? A: Yes, our revenue has declined as we have changed our business model and we are focusing on high-end solutions, we are not undertaking low-end business. This is in line with what we have been doing for the last 4-5 years. We have created many IPs and high-end solutions and we moving away from low-end services. On the other hand, our profits and margins are improving. We expect to control our fall in revenue by the end of this financial year which ends in June and thereafter see growth and profitability to stabilise and improve in times to come. This is as per a very conscious policy and decision, which we have taken and implemented and we have seen the good results. We are able to keep our headcount and expenses in control and margins improving. This is in line with our expectations. Q: In a scenario where even the bigger players are struggling to get good client visibility, does refusing any business doesn’t it bother you? Are you likely to get better order inflow on the business that you plan to operate aggressively on? A: Absolutely. We have much better visibility of the high-end business. We need to take a conscious decision to keep our capacity utilised for high-end business. We have won a very prestigious nuclear plant project in engineering, which will be completed in this quarter. Similarly, in international businesses, we have won many projects, which are on the value chain, where we want us to be, which utilizes our IP and the strengths we have.
We believe to have good visibility, revenue and bottom line in next year. Q: How does the order book look like? Has there been a quarter on quarter decline and what is the figure outstanding right now? A: Yes. We have an order book of Rs 2,100 crore which is improving marginally from the last quarter and as we approach June we will have even a stronger book.  The pipeline is improving even better. Both domestically and internationally, we have visibility of large projects. In domestic circuit, there are large projects in defence sector in terms of Tactical Communications Systems or large multi-billion dollar programmes where the company is involved and shortlisted. We believe to have a great future in the areas which we have picked up and as we go forward, we would be able to see a very robust growth on both sides. Q: What is the current status of the FCCBs? How much is outstanding and what is the interest cost for the company? A: The FCCBs which we took in June 2007 will mature and retired in June 2012. In the meanwhile, we have organised about USD 135 million for repayment of FCCBs through ECB line of credits. The money is already disbursed through this line of credit. In fact, we made an open offer to buy if there was any willing seller of FCCB as per the RBI guideline. Q: How much higher is the cost for the company? A: The cost is not higher because we have taken it at LIBOR plus 5.5%, which effectively stands less than 6.5% overall cost compared to 6.75% or 6.8% earlier. The cost will be low and we have a long period of 5-7 years to repay ECBs and we don’t have to dilute our shareholding. Q: What was the interest outgo in the January-March? What will be the quarterly interest outgo for FY13? A: Overall, the quarterly interest outgo will be in the range of USD 8 million. Q: What quarterly interest number you are looking at for FY13? A: The quarterly outgo on account of FCCB will be in the range of USD 8 million on annual basis. With the current credit line we are in a good position and there will be no more interest rise expect for fluctuations in interest rates which we have seen in the last year. The frequent change in rates in last 18 months was the major reason for increase in the outflow. So, now with FCCB also tied up, we believe that the final figures will be stabilising.