Expect good growth in coming quarters: Cyient

If you look at the core business what we call the engineering and the data transformation, network and operations (DNO) business, that grew 1.6 percent. There is another business called Softential within the DNO business that has some seasonality so between these two issues around seasonality we have the drop. The core business remains strong, which showed 1.6 percent growth in dollar terms and we continue to be quite bullish about that. Also in terms of these two businesses around seasonality we believe that based on pipeline and what we are seeing from the order book and so on so forth, it is just a Q1 issue and it is not a structural issue and have some good quarters going ahead.

Anuj: For your core growth and I am reading from a Morgan Stanley report which believes that even then it was quite a bit of deceleration for you. 1.6 percent quarter-on-quarter (Q-o-Q) growth and 10 percent year-on-year (Y-o-Y) growth compared to 15 percent in FY15 so that is a concern they have raised. The other concern they have raised is that your margin outlook which you have maintained is a bit too optimistic right now.

A: In terms of the growth compared to 15 percent it is a little bit slower obviously or it is a little bit lower. However, again if I look at how the next few quarters look to be panning out we are quite optimistic. We will see better numbers in terms of quarterly growth. It is quite difficult to comment at this point, if the year will be a 10 percent year or 15 percent year but we are quite confident that it will be somewhere in the middle. Last year was obviously a very good year for the business and there were some structural things that happened last year that enabled growth also. From a growth perspective we continue to be quite confident based on how the pipeline and backlog looks like.

Coming to margins if you look at it, margins for this quarter were about 12.6 percent at an operating level. That was a little bit better than what margins were last quarter. Now, Q1 had a fairly significant salary impact. The salary impact itself would have affected us by about 250 or so basis points (bps). Because all salary corrections in the company as a policy are done at one go, they are done on effective April 1st. So, it was a quite a significant headwind because of salary increases that have happened. In spite of that we got to be little bit better on margins. Typically if you look at Q1 our margins used to drop by about 200-300 bps because of salary correction and then they used to come up over the course of the year. This time around we were able to maintain margins in spite of a salary correction.

So what I had said is last year we did 14.6 percent overall margin, 14.9 percent in the core business so having coming of relatively good quarter, looking at what things look like, having at least a flat year in terms of margins is quite reasonable. However, also getting margins to improve by about a 100 bps Y-o-Y which is what we had commented as the outlook is quite possible. We are starting off with a pretty good quarter compared to what it was previously.

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