Hope to improve margins in svcs biz in few quarters: Mastek

Below is the transcript of Farid Kazani's interview with CNBC-TV18's Sonia Shenoy and Senthil Chengalvarayan.

Sonia: Can you breakup this quarters revenue growth for us. You have done a growth of around close to 9 percent quarter on quarter (QoQ) but what was the breakup between services and insurance?

A: We have had a very good quarter. We have ended up with Rs 273 crore, up by 8.5 percent in rupee terms and 9.8 percent in constant currency. There has been an improvement in topline in both the geographies, in the US and in the UK. US has grown by over 11 percent and UK also has grown close to around 9 percent. US is more insurance-dominated. So, it has been on the back of a very good insurance performance in this quarter. On the other hand UK which is more government dominated or solutions dominated has also shown a pretty good improvement.

Sonia: Can you tell me a little more about the services business. In 9 months performance your margins have come in at about 9 percent which is lower than what your last years margins were at around 14.5 percent. Do you expect your services business margins to improve further?

A: Yes definitely. In the first 9 months the margins have been impacted by a higher onsite sub contractor hires that are required to manage some projects that we are doing for the UK government. Since we are actually ramping up those projects it is something that will happen for a short period. We hope to improve the margins in these projects and hopefully in the next few quarters you will see a much better margin scenario for these solutions and services business.

Sonia: The situation is similar in the Majesco business as well. In the 9 months gone by you have done about 3 percent margins which is once again lower than your FY14 margins of close to 6 percent. Is there an expectation of an improvement here as well and can you give us any guidelines on what the margin growth could be?A: Margins in this quarter are significantly better. At the end of the last quarter it was much lower. So, there has been a fair bit of improvement in this quarter. Mind you the margins that you mentioned about for Majesco or the insurance business is after the product development expenditure and that expenditure is roughly around 13 percent to the revenue in the 9 months. Going forward there should be an improvement in the topline which should also lead to kind of an improvement in the margins. However we have to keep the product development expenditure on in terms of trying to complete some of the products that we need to kind of deliver to the market. So, in the short term there may be a margin around this level but when I look at it on a long term basis there will be an improvement in the insurance business margins.

Sonia: If you can tell us what the prognosis is for the next quarter? Do you think Q4 will be better than Q3? There will be consolidation in Q4 and you have seen two consecutive quarters of a marked improvement, will this sustain?A: We have completed the acquisition of Agile insurance business on January 1 2015 and we will get revenues from that business starting in this quarter itself. So, there will be an uptick in the revenue with Agile insurance business being completed. In the pipeline we are seeing good kind of robustness if that converts quickly we should see an improvement in the topline also. However we are not giving any specific guidance for next quarters revenue.

Senthil: You must have some kind of outlook, what kind of risks have you factored in, in Europe because your solutions business has large exposure there? A: We are UK dominated, there is no business outside of UK. There is an event that is going to happen which is the elections in the UK and during the period pre elections around 3-4 months and a month or two after the elections there will be a period where the government projects will not be there in terms of releases but we have got a good amount of pipeline which is getting built. So, hopefully before the elections if we win some good deals that would help us to grow the government business in the UK and hopefully the kind of proposition that we are building in, in those markets across certain verticals should also help us to grow the UK business in the next year.

Sonia: If you can give us a timeline on the listings of Majesco India and Majesco US? When can we expect that to happen?A: As far as demerger and listing in India is concerned, it is pretty much on track. We have made our applications and filed that to the High Courts both in Gujarat and Maharashtra. If things go well we should see the entire thing getting completed around June-July period.