IT solutions company Infotech Enterprises is fairly confident of delivering strong results going forward. In Q3FY14, the company’s net profit (Q-o-Q) declined 4.3 percent to Rs 69.39 crore versus Rs 72.5 crore. Its revenue in rupee terms increased 5.3 percent to Rs 578.4 crore verus Rs 549.3 crore, sequentially.
Speaking to CNBC-TV18 about the financial performance of the company, President and COO Krishna Bodanapu said three out of its four verticals had a record quarter, but he sees see muted growth in utilities and telecom segment for next few quarters. “About 1 percent growth seen in this quarter may be attributed to seasonality,” he added.
Meanwhile, the company expects its margins to remain flat going ahead since it has invested heavily in hiring, salary increase, sales force optimization and organizational efficiency, which will deliver good results. Given the optimism, the company would be reinvesting excesses capital back into its business. Its Q3 EBITDA (Q-o-Q) stood at Rs 113.6 crore against Rs 108.8 crore.
Below is the edited transcript of Krishna Bodanapu’s interview with CNBC-TV18
Q: There is a 15 percent estimated growth which is expected going into FY15 versus around 11 percent that the analyst community was working with. Would you concur, is your guidance possibly around that level for 15 percent growth in FY15?
A: It is a little too early to comment on the guidance for next year. Based on the commentary various analysts have come up with their scenarios. We are quite confident of the future. We are quite confident of how things look both in terms of our order backlog and order pipeline.
Q: Let us talk about the next couple of quarters. 6.5 percent quarter-on-quarter dollar revenue growth, the base of course will inch up as we go forward but is that sustainable?
A: There was about 1 percent of that, which in a sense was a one-off negative. We have also had a one-off positive in terms of year-end budgets. We had some opportunities to get some work. Even in a place like US, most of our employees work out of our own offices, therefore when there is a purchase order available we can actually do some additional work at the end of the year to fulfill that order.
This 6.5 percent was a little higher than what would have normally happened. But we are fairly confident. Even if you knock off that 1 percent 5.5 is the number. Therefore these numbers are not really an aberration; we will be close to where we are going forward.
Q: How did your verticals performed this quarter and what would your visibility on all three of your verticals be?
A: The four verticals i.e. aero space was up 3 percent this quarter. Going forward, we will continue to do well over there. The 3 percent will accelerate a little bit. The non-aerospace engineering business grew at about 11 percent. We have had one of the one offs in that space. The visibility looks quite good over there. It will not be 11 percent quarter-on-quarter (Q-o-Q) going forward but the visibility looks good. I am talking about the next couple of quarters or so.
Utilities and telecom, we grew 5.4 percent or so. There we will have a little bit more of muted growth in the next couple of quarters but again there is good visibility to make sure that things look good and then D&A which we used to call content also grew 10 percent. We are fairly confident of the pipeline. Three out of the four i.e. except aero has the best quarters ever. Aero space was about USD 800,000 short of the best but we are confident that all of them will have their highest ever quarter next quarter.
Q: Morgan Stanley raised a concern on your EBIT margins remaining flat over nine months despite the big currency depreciation and the point being that the hiring has been quite aggressive without a commensurate increase in revenues, what is your comment on that?
A: We had a very aggressive salary increase last year between 12 percent and 13 percent in India and above 3 percent in US. Obviously that took off some of the margins that was offset by the currency gains. We have been aggressive on hiring. The business looks good and the reason why we are able to seamlessly deliver 6.5 percent this quarter was also because of the hiring of previous quarters.
There is branding, sales force optimization and organizational efficiency, which will deliver some good results. At this point in time, flat margins are what we will look at because whatever additional is coming in is being invested back into the business. We see that because while utilisation is up offshoring is up, the margin is flat. That is because some of these initiatives are taking money but they are for the long-term. We are quite confident investing in those.
Q: In terms of geographies where you are seeing the incremental increase coming in from, will it be Europe, will it be US or maybe Asia and Australia?
A: At this point it is all three. Last quarter it was US grew about 7 percent, Europe grew about 11 percent and Asia-Pacific was down but slightly down. Going forward all three geographies look fairly well. They will all be within plus or minus of what the overall growth. It is quite broad-based at this point.
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