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Last Updated : Oct 20, 2016 12:30 PM IST | Source: CNBC-TV18

Expect to achieve margin of 15-16% in next few quarters: KPIT

In an interview to CNBC-TV18, Kishor Patil of KPIT Technologies spoke about the results and his outlook for the company.

In an interview to CNBC-TV18, Kishor Patil of KPIT Technologies spoke about the results and his outlook for the company.

"Last year we had reached a margin of 16-17 percent and that is where we should get in few quarters," he said.

Patil futher mentioned, "We have made some long investments for sustainable growth and we believe that we have turned the corners".

Below is the verbatim transcript of Kishor Patil’s interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: Growth significantly better than what the street was expecting, what went well?

A: Yes, last few quarters we have been working on few areas. Such as we had made investments in terms of putting more people in the market, account management, we have invested into engineering, we have invested into products and slowly but surely in all these three areas we could see some traction building up. Naturally some other areas like digital and infrastructure and software automation these are some of the other investments we have made.

So, overall during this quarter we saw the benefit of automotive doing well. We saw the benefit of Asia doing well. We saw the benefit of products doing well. So, these were the main reasons we could do little bit better than expected and the good part is it is based on sustainable investment we have made. There is nothing one time in this. So, we look at it very optimistically.

Sonia: Can you just take us through what the operating levers could be for the company over the next 2-3 quarters and will that result in better margins for you. You have already done about 11 percent. Do you think you can better that?

A: Of course we can and last year we had reached a margin of 16-17 percent and that is where we should get in few quarters. But the thing is there are 2-3 major levers we have. Basically we had made investments into lot of growth and hopefully some of that investment we can leverage for growth.

The second thing is that if you look at the utilisation we have hired lot of substantial people and that is why our utilisation is down. So, there is good leverage available there.

In products, we have been investing and if you look at our services margin, it is reasonably higher than the company margin and we believe that as the products catch up in terms of revenues that can get leveraged and hence the overall earnings before interest, taxes, depreciation and amortisation (EBITDA) margins will go up. So, these are 2-3 important measures.

Latha: Give us some visibility and guidance for the full year both revenues and margins?

A: I would not like to give specific numbers in view of where we are coming from. But 2-3 things. We are pretty certain that automotive will continue to do well and we are seeing the tractions. So, that is for sure.

The second thing we believe that energy utilities, which have not been a bit of soft over last few years due to lower oil prices, I believe there are some segments which are doing well. So, we can look at some growth coming back there. We also see Europe which has not done particularly well during this quarter, we have enough opportunity to grow there. So, I believe there are a little more levers in these areas that can help us to grow in future in the rest of the year.

We also see the traction in terms of pipeline, we never give the numbers, but the pipeline is pretty strong. So, overall from that perspective we believe that while we are not saying that it is a very buoyant market but we have reasonable visibility into growth.

Latha: Has Cummins rebounded in terms of orders as well your 2 to 10 clients they showed a decline of 4.6 percent.

A: We would not like to pick up on one client and talk about it while we are doing very well in many of these accounts superficially in light of their businesses. Some of these businesses depending upon how they are doing, they cut down on the IT budgets etc but our overall positioning as well as market share is growing in most of these customers. So, we are not worried about that. Our basic strategy is to grow in top 50 accounts and that is where we have made a lot of investments. There are accounts, which have been there for the last 10 years. So, then there is only finite growth prospects in some of these. So, our goal is to have it more broad based, focussing on 50 customers, focussing on the key market segments and we see a reasonable momentum in this.

Sonia: Are you guys looking to raise any money because there are some reports indicating that you are looking to raise about USD 150 million or so. Any truth to that?

A: It is not something which is anything concrete or anything we are not there yet.

Sonia: The market has been a bit worried about KPIT Technologies in the past because of how volatile the earnings have been for the company. Can you say with a fair degree of certainty that the worst may be over at least in terms of the margin performance?

A: Markets are very punishing, I know that. From 1999 to 2014 we get significantly consistent growth ahead of markets and yes we did face certain challenges in last few years. But I do believe that we have gone back and made some long term investments sustainable for sustainable growth and we do believe that we have turned the corners from that side.

Latha: It is just that a marquee investor putting in money, ChrysCapital putting extra money or someone like them will always boost investor sentiment, that is why the question are you looking to raise capital?

A: No, as I told you we do not need any particular business -- for business expansion in that sense we do not need any specific thing but naturally if there are any particular reasons why we need it we will always raise that.

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First Published on Oct 20, 2016 12:27 pm
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