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Last Updated : Aug 31, 2015 02:18 PM IST | Source: CNBC-TV18

FY16 profit growth seen 10-11%; weak rupee helping: Kellton

Niranjan Chintam, Founder and Chairman, Kellton Tech says QIP will be used to raise USD 15 million, of which USD 5 million will be used for debt reduction and the rest for future acquisitions.

Kellton Technologies is planning to reduce its debt through a qualified institutional placement (QIP) by November.

Speaking to CNBC-TV18, Niranjan Chintam, Founder and Chairman, Kellton says the QIP will be used to raise USD 15 million, of which USD 5 million will be used for debt reduction and the rest for future acquisitions.

The company has a long term debt of USD 6.5 million due to acquisitions. Of this, USD 2 million was repayed from internal accruals, he says. 

The company has benefited from the rupee depreciation on account of its exposure to North America, he says, adding that he expects the company’s profit to grow 10-11 percent this year.

Below is the edited transcript of Niranjan Chintam’s interview with Reema Tendulkar and Nigel D’Souza on CNBC-TV18.

Reema: While the topline looks good, your margins have come under pressure on a quarter-on-quarter (Q-o-Q) basis, so it has fallen from 17.5 percent to 12.3 percent. What was the reason for the margin decline?

A: If you look at the growth point of view, our net profit went up by 58 percent if you look at it that way. If you are looking at just the earnings per share (EPS), EPS also went up by 48 percent.

Reema: I agree but I am talking about the Earnings before interest, tax, depreciation and amortization (EBITDA) margins, the EBITDA margins have come down from 17-18 percent to 12-13 percent.

A: It is about 14.5 percent but on the standalone basis. Looking at the standalone, we had taken advantage of Prosoft for two months, so because of the consolidation there is going to be some margin pressure there. As we grow, as we take advantage of the economies of scale, that margins would improve.

Nigel: So you said that there was some benefit coming in from the Prosoft group, that is the acquisition that you have done. So, going ahead could you give us what is the quarterly run rate we can see in terms of revenue, this time around you did Rs 104 crore, would it be safe to assume that you can maintain this run rate of around Rs 110-120 crore and also on going through your profit and loss account, your employee benefits are at around Rs 54 crore, so that is a big jump if you just look at it on a sequential basis as well as on a year-on-year (Y-o-Y) basis, so can we look at revenues of around a Rs 110-120 crore and employee benefits, do you believe that it will stabilise at around this Rs 54 crore?

A: Yes, the revenue point of view is going to be around Rs 110 crore and the employees is going to be about Rs 55 crore around that change; so what we are targeting for a year on growth is about 60 percent from the cost point of view because as we are growing, the employee cost will go up because of inflation, because of what is going on in Indian market as well as the US markets but our target is to keep it around the low 60 percentage of the revenue is what we are looking at.

Reema: For the full year the performance has been very strong, what are you targeting for and FY’16 revenue as well as the profit performance?

A: For FY’16, we already announced a target of about USD 100 million run-rate. So, we should be around the Rs 650 crore mark if you want to look at it from the Indian rupee terms and on the profit after tax (PAT), we are looking at around 10-11 percent is what we are looking at from a PAT point of view.

Nigel: Take us through then some details in terms of how is your balance sheet shaping up? You have done a couple of acquisitions. So, what exactly is the cash on your books? What is your total debt number? And has it peaked out? Are you looking at any more acquisitions going ahead?

A: There will be some minor acquisitions or increase our bench strength, is what we will be doing. Looking at the balance sheet from a cash point of view or a cash equivalent, we have close to about Rs 16 crore.

And if you look at the debt, the long-term debt is about 43 percent, or if you look at it, USD 6.5 million; majority of that is due to the acquisition that we recently did.

We have funded it in about USD two million is what we used from our internal accruals and as well as the recently announced warrants, we have funded about USD two million. The rest came out of debt.

As we go ahead, we are planning in October-November timeframe for a qualified institutional placement (QIP). That will reduce our debt as well as to keep some cash aside for future acquisitions.

Reema: So, you are planning a QIP in November of this year, what would be the rough size that you are looking to raise?

A: About USD 15 million is what we are looking at; about USD five million we want to use to retire debt and USD 10 million we want to keep it aside for acquisitions.

Nigel: I need to ask you about the Indian rupee. It has moved from around that 62-63 per dollar mark all the way to around 66 per dollar. I think you have a fair bit of exposure to North America. Could you tell us how that works in your favour?

A: It works to our benefit. With the depreciation of the rupee, I do not have to go back to my customers and ask them to increase our bill rate because automatically with this depreciation, it is good for the company, maybe it is not good for the country, but we are benefitting out of this.

Reema: Your trade receivables stand at close to about Rs 76 crore. Is that in a comfortable range for you or are you looking to bring it down?

A: We want to bring it down, but two and half months to three months revenue is typically what the industry averages. When it comes to India, it is slightly little bit higher, three months plus, but in the US, having US revenues, and US customers, two and half month is what a typical average is and we are in that average.

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First Published on Aug 31, 2015 01:07 pm
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