Hexaware Technologies is on track to grow in-line with industry average this year and further expects CY16 growth to be higher than industry, says company executive director and CEO R Srikrishna.
He also says margin improvement is not the main focus of the company. The aim is to deliver sustainable growth, he adds. He says the company is happy with margins in the 15-17 percent range.
Below is the verbatim transcript of R Srikrishna's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: Q3 missed street estimates, the next quarter usually is weak for the industry, so what should we expect in terms of growth?
A: We feel good about the growth during the coming quarters. There are some seasonal issues in the current quarter. Some seasonal issues, furloughs which are normal, perhaps there is some higher than furloughs, which is possible this quarter but if you leave out this quarter, we feel pretty good about growth.
Sonia: So looking ahead will growth in calendar year 2016 be higher than the industry average?
A: That is what we are going to aim for. Even this year we said, our goal is to beat at a minimum the NASSCOM average and we are well in target to do that based on last quarter this quarter and that will remain our goal in CY16 to do better than industry.
Latha: What do you mean by the margin improvement and could you all do even better in the coming quarters?
A: Obviously there were some tailwinds on currency but outside that, margin improvement has not been the main focus. The main focus is delivering sustainable growth quarter-on-quarter (Q-o-Q). We think margin improvement will follow. We are quite happy with the margins where they are.
Latha: The margins should be in the range of 15-17 percent?
A: that is the range that we are happy with.
Sonia: Tell us a little more about the deal pipeline, how many deals are you pursuing now and what was the total contract value of the deals you won in this quarter?
A: Only on new deals, new customers not counting growth from existing clients in the past nine months through the first three quarters, we are booking cross to USD 100 million which is kind of a first for us in crossing that from new clients. So that will translate to -- the current growth you are seeing is not as a result of that new customers. There is a little bit of that but most of the growth till now is from existing customers. However, starting from CY16 early to mid-CY16, you will start seeing this booking pan out into revenues. So we have had some good booking performance. Even though we have closed some of the deals in the funnel, we will continue to have an expansion of the pipeline. Still at any point of time, there are two-three decent size dealers and a number of small to mid-sized deals that we continue working on even though we keep winning some every quarter as well.
Latha: Utilisation has been in the range of 72-74 percent in the past quarters, is that a comfortable range for you?
A: We are very comfortable of that range.
Sonia: In terms of geography then Europe drove growth with 6 percent growth while Asia contracted, can you explain what was the reason for the contraction in Asia?
A: We followed a deliberate strategy of walking away from some of the smaller projects and deals that we were executing in the past going after larger customers and more material deals. So that is the reason and it is a very deliberate strategy. What you will see is in two quarters from now, you will see a U-turn that of some new customer acquisition will happen and that will start contributing to growth in the next two-three quarters in APac.
Europe we have always been bullish on growth. There was a currency issue that led to difficulties in the growth but that has past us now as the currency is rangebound at least so we are going to see growth again. So we remain bullish about the headroom available for growth in Europe because there is a lot of underserviced markets there.
Latha: Let us talk about Q4 and the impact of seasonality. Will furloughs be higher than normal and hence would growth in Q4 be lower than last year?
A: Last year we had a fabulous Q4, which doesn’t happen always. Our last year Q4 was very good.
Latha: Any acquisitions that you are planning?
A: We have a very structured process to create a pipeline, evaluate them so it is an ongoing process.
Sonia: Are you in talks with anyone currently?
A: We are not in an imminent stage, we are not negotiating with any potential target.
Sonia: What kind of an acquisition would interest you? What would the capabilities be that you are looking to acquire now?
A: More than capability, I think our first kind of dimension is vertical. We are looking very closely at two verticals for strengthening healthcare, especially US healthcare and banking.
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