Geometric’s second quarter consolidated net profit declined by 15 percent to Rs 16.3 crore against Rs 19.2 crore, while the consolidated net sales increased to Rs 279.7 crore against Rs 269 crore on a sequential basis.
Discussing the earnings details, Manu Parpia, Managing Director & CEO, Geometric, said one vertical got impacted due to a delay in contracts, however he expects the second half of the financial year to be better than H1.
Parpia expects margins to improve on better utilisation, realization and sees billed utilisation to improve 3-4 percent. He expects industrial to do well in coming quarters and growth to continue in automotive segment.
Below is the interview of Manu Parpia’s with Ekta Batra & Sonia Shenoy on CNBC-TV18.Ekta: Starting with the company indicating that it will not be able to meet the NASSCOM industry growth of 13-15 percent odd this year. Will the growth according to you then be possibly in high single digits in FY15?A: Yes, high single digits or very low double just above double something like that. What we believe is the second half will be better than the first half. So you are seeing increasing momentum but it didn’t match because as we indicated actually one of our verticals didn’t do well on account of a delay in certain contracts. So that’s really the main cause of the problem.Sonia: Let’s talk about aerospace vertical which witnessed a revenue decline of 7 percent quarter-on-quarters. Do you expect growth to pick up in that particular segment going ahead?A: I wouldn’t give an exact figure of growth but it really depends on these; of course there are some other businesses that are coming in. So we expect growth in the coming quarter but it really depends on these delayed contracts. When you are dealing with large companies they manage to delay for one reason or another and both of them are fairly large multi deals. So you can imagine it is really critical for the company to get them.There are other transactions so they will kick in. But overall to get in, to really build this sustain business we have to wait for these two contracts to come through. So I unfortunately can’t predict, even I am very anxious that they come through.
Ekta: What is your sense in terms of the combine size of the two deals in the aerospace segment which got delayed?A: I won’t speculate on the size but they are fairly large and importantly multi-year, so that’s very critical that these are not one time transactions. So it is really important that the company wins them we believe we have a good chance. Now the decision is neither taken or nothing is happen.So there is been a delay and on account of that at least one of them we should get some part of it definitely. So it all depends so that is why we are accounted on the revenues and they did not come.Sonia: The margins this time around were also impacted by lower billed utilisation rates and wage hikes. What’s the outlook as far as margins in the coming two quarter?A: Margins should improve as I have indicated because there are no wage hikes forth coming and also both utilisation should improve, realisation will improve as well as the influx of a lower cost people so all set I would expect margins to improve consistently in the next two quarters.
Sonia: What about the outlook on other verticals like automotive, emerging software what’s the prognosis there?A: I see that automotive is growing well and will continue to grow. I believe that in the coming quarter industrial will do well as well as our own technologies. So I see that these verticals will be on a growth path and we see even aerospace should resume some growth which is why I believe that the second half will be much better than the first because we see that there is visibility in each of the verticals for growth.Ekta: Just coming back to the little bit on the guidance while we understand that’s the second half will be better than then first half Q3 is generally or seasonally weak quarters. So do you then believe that Q3 will actually be better than Q2? A: Yes indeed it should be because that’s the only way if we are going to achieve a better H2 than H1 then Q3 has to be stronger. As I said we expect very vertical to grow in Q3.Sonia: Can you give us an update about the deal pipeline and how is that shaping up?A: We don’t give that figure exactly but I can say the deal pipeline is up 15 percent over the previous quarter and what I can also say is that more deals are towards the closure end. So it is really critical the next two quarters in terms of building the bases for a sound business going forward. As we close these deals and we have a number of larger deals that we are pursing as well. So I look at it the pipeline has improved the maturity of the pipeline is good so that’s another things that leads me to believe that second half will be better than the first.
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