Focussed on improving profitability going forward: Majesco's MD

A: The revenues were lower than the previous quarter and this was something that we guided to in the previous quarter. Linked to a drop in revenue from one of the clients that have put its transformation programme on hold and to which extent we have had an impact this quarter.

Sonia: What is the expectation for the next quarter?

A: We are not giving any specific guidance but we do not see any major downtrend from this particular client. However, we are seeing good traction on our order book and pipeline. In fact, our order book, the trailing 12 month order book has grown 12.6 percent from 154 million to 176 million.

Anuj: So, this is a client specific issue? When does this get resolved?

A: These are transformation programmes and this is something where the client has to work back and improve its steadiness at their end. We are working very closely with the client. We do not have any clear indication of how soon they will come back and restart the programme but we will keep our efforts on.

Anuj: But there is a risk of losing this client or losing this order?

A: There is no risk of losing it. There will be some work which will go on, but from a transformation programme, where we were expecting that we would see a good ramp up, has been put on hold.

Sonia: So there is a risk of the project getting delayed further. So, even in Q3 we could see an impact?

A: There is no major impact in Q3; whatever impact, has largely been taken care of in the last quarter itself.

Sonia: What about on the margins? The margins have been pretty decent this time, almost at 6 percent. What is the expectation?

A: Margins have improved significantly; 240 basis points on earnings before interest, taxes, depreciation and amortisation (EBITDA) and a significant improvement on net profit. It has come around in terms of improvement in the overall operational areas. One of the areas that we saw good benefit was where we were able to get in some of the outsourcing work in house which has given us significant benefits. Second, some of the projects that we were at a lower profitability, we focused in specific areas to improve profitability on those projects. However, we were able to manage the other programmes with lesser headcount and therefore, we did not have to backfill some of the attrition. So, all these have helped us in improvement in profitability in this quarter. We are focused on improving profitability going forward and we will continue to do that.Anuj: This margin improvement. Is it sustainable? It is still a pretty low base. So, there is scope for improvement. But do you have any trajectory in mind which you can report going forward?

A: There are a couple of them. One is, as you are aware that we are at an investment stage. We are spending 14.5 percent on our product development and the margin which I mentioned is after having spent all that and is reflected in the profit and loss (P&L). There is definitely scope for us to improve our deliver led operations further and we will continue to do that going forward, so we will definitely get benefits from our operations perspective. Second, as revenue starts building up, you will get a good amount of leverage benefits from both the product development expenditure which is right now at 14.5 percent and our selling, general and administrative expenses (SG&A), which is significantly higher. So, I see benefit coming as we see revenue growing from here.

Sonia: Can you tell us a little bit about how the IBM partnership for developing those new cognitive applications. How will they add to your revenues or your growth Q4 onwards?

A: This is a very strategic partnership and it is a tie up with IBM on their Watson Analytics and Cognitive capabilities. This is the first of the tie-up that IBM has done on platforms partnering our core project management consultancy (PMC) platform for the North America market and we will take that globally as we see the traction. We are looking at offering an embedded solution of our core solutions on the cloud with the IBM cognitive capabilities and this is something which will give a new way of business offerings that the insurance companies can do. It will help them both in terms of improving processes, reducing their cost and also improving their analytics area. So, overall it will be a great offering to insurance companies.

You would be aware, IBM works with almost 90 of the 100 top insurance companies and they have a very strong sales force. So, we will have the ability to tap their sales team to grow the business, especially in the Tier one side. So, we are looking at good traction coming up especially in the next calendar year.