Likely to see strong growth in H2FY13: Sasken Communication

After improved EBITDA margins in the company's services and products business, Neeta Revankar, CFO, Sasken has a positive outlook for the second half of FY13. In an interview with CNBC-TV18 she said that the company is headed for growth and is also set for an open market buyback in the second or third week of May.

Sasken's consolidated revenue for Q4FY12 stood at Rs 130.3 crore and its consolidated PAT for Q4FY12 was Rs 17.7 crore. Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video. Q: Could you provide us an update on Nokia? What it did by way of revenue? How much of pressure did you face on account of your top client and going forward what can we expect from Nokia?
A: Very difficult for me to specifically talk about one customer. But yes, we have seen declining revenues from customers in the handset space. The focus of the company is really to figure out how we can ensure growth in spite of declines.
Declines happened last year. We expect these to continue next year. So a lot of our actions are on growing business in adjacency, so that we can counter these declines. Q: Have you been able to reduce the impact of Nokia as a share of the total business from your clients?
A: Actually it's a natural phenomenon. As business from one customer goes down, it forms a small proportion. And we expect the proportion to decline in the coming year too. Q: Is there any compensatory improvement from other clients or is this fall only because this is shrinking?
A: No, actually there are a few customers where this is declining and there are a number of other customers which we have added in the last quarter. We continue to focus on adding more customers, so that our revenue gets much more diversified. That has been the focus in the last year and will continue to be the focus in the coming year. Q: So how would FY13 be? FY12 is a tough year for you all. You lost about 5% in terms of revenues. In FY13 can we expect any growth in Sasken or the pressure on account of few clients will continue and it won’t be such a great year?
A: Actually it's very early to say that. We expect the pressure to continue, especially in the first half. But all the efforts over the last 12 months and in the coming six months will improve things in H2 of FY13. So, FY13 we believe will be better than FY12. Q: You think there will be a growth in FY13?
A: We should see a growth, that's correct. Q: You announced a buyback. Can you give us some update on that? Is this directly from customers, so your number of shares shrink or is this a market based purchase of shares?
A: We have announced a buyback and we will do it by the open market method. We have just received shareholder approval earlier this week and we have made the public announcement two days ago.
We will be filing our papers with SEBI and once we get their approval we expect to commence the buyback by second or third week of May. Q: Your margins improved in this quarter. It now stands at about 19.5%, EBITDA margins. Going forward in FY13 where do you see your margins? Do you still have levers to improve it or it should be at that 20% mark?
A: Actually EBITDA margins this quarter improved both in services and in our products business. The improvement in our products business was largely because we had large royalty revenues coming from an old customer.
Improvement in the services EBITDA margins came because of a lot of efficiency improvement. It’s going to be very difficult to sustain it because this is the period when we are looking at increasing the benefits to employees. Starting from April, benefits will go up and from July, salaries will also go up.
I expect EBITDA in the services business to be under pressure in H1 and improving in H2, but EBITDA in the products business will continue at these levels or improve from here. Q: How much more by way of a royalty are you expecting in the products business?
A: Actually this customer who got us large royalties seemed to be doing extremely well, doubling year on year. If we go by market reports then we should see a lot of royalty revenues in the coming year. Q: Has attrition dropped at all from 30%?
A: Actually it does in some quarters, but I don't think there is a trend. Somewhere we have sort of realized that this seems to be the rate at which we will be able to manage. We have taken a number of actions over the last three-four years and we have a subsidiary company which actually has higher attrition. So that tends to be a drag on Sasken's attrition.