IBIS acquisition to add $10 mn to FY17 revenue: Sonata Software

A one-off provision for bonus weighed on fourth quarter margins, said Prasanna Oke, CFO of Sonata Software.The company posted 4 percent dollar revenue growth at USD 28.5 million and 3.6 percent revenue growth in currency terms to Rs 540.9 crore. The operational efficiency slightly fell to Rs 50.03 crore as against Rs 56.14 crore quarter-on-quarter.Oke expects growth to come from the US and Europe. International business is expected to do better than the domestic one. A robust pipeline as well recent acquisition of US IT solutions company IBIS will aid growth in FY17.IBIS will contribute about USD 10 million to FY17 revenues, Oke added.Below is the verbatim transcript of Prasanna Oke’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.Nigel: Just looking at your numbers things look quite good on the topline itself, there was a good strong growth over there. You have increased your contribution coming in from the United States as well going ahead we expect more of the same and what kind of a run rate you can maintain on the topline?A: This has been a good quarter for us and a good year. We showed about close to year-on-year (Y-o-Y) 15 percent kind of a growth, on the bottom line it was about 19.Sequentially, also we have been growing, so as we are continuing to build up the pipeline we do see growth coming in from the US as also Europe. These are two main states and Europe is strong, but US will continue to be equally strong for us.We have got a robust pipeline and what we see is that we will build upon the strategy that we have been putting in place both on the IP-led Strategy. We acquired a company called as IBIS in the last four or five months. So, that is also expected to add to the topline for us.Reema: How much will the acquisition add to your topline in FY17?A: FY17 we should be in the range of close to about 10 million or so that is what it should add to the topline on estimate that we have as a run rate.Obviously, what we are going to see is that there is going to be a spinoff effect of that acquisition on some of the Sonata offerings that we have. Even as we go to the customers off the acquisition and try to sell Sonata offerings as also take those offerings to various geographies.This acquisition happened in the US what we are seeing is that the IP that we had applied supply chain software, which is the distribution space you will be able to sell in to Europe and other geographies also. So, there will be a multiplier effect of that but that is the objective of the acquisition.Nigel: For the year though the margins look pretty good at around that 10.5 percent or thereabouts. For the quarter itself margins came down around 9.2 percent or thereabouts. What caused this is it because of the increase exposure to the United States and going ahead as well what could we see the margins stabilise at?A: In fact, this is a one-off for this quarter. There is a provision that we had to take on account of the bonus act. If you add that back, there was a growth in both the lines of the businesses that we have. We expect that our margins would continue to be in the similar ranges as we go ahead.Reema: 10.50 to 11 percent margin you saw in FY16?A: In fact, we have got two separate lines of businesses. One is the international businesses where we get about an EBITDA in the range of about close to 24-25 percent. The other is the domestic part of the business where our margins are much lower.What we expect is that we will continue to grow our business on the international segment on the side of the business. So, the blended margins on the consolidate basis are about 9 or 10. We expect to grow significantly on the international side. International business comprises a third of our revenue and 80 percent of our margins.Nigel: Give us some guidance; our viewers want to know what you are going to do in FY17? This year you have done close to around 15 percent as you have alluded to earlier. You told us there is going to be an acquisition as well that will be accounted for in this year. What will your revenue look like come FY17?A: What we have been trying to do for the last two or three years is put together a strategy of increasing the management, increasing the IP and technology led growth, growing our business in both America and Europe. We will continue to build on that while we don’t give a guidance, we have a very robust pipeline. We do see that we will continue to grow at same rate if not higher.