Intellect Design eyes 22-26% annual rupee sales growth

Intellect Design Arena reported disappointing set of numbers for the first quarter. In an interview to CNBC-TV18, CMD Arun Jain shared details on the performance and expectations for the upcoming quarters. Below is the verbatim transcript of Arun Jain's interview to Sonia Shenoy & Anuj Singhal on CNBC-TV18.Sonia: The start to the year has been very disappointing. You have indicated that some of the deals got impacted because of the Brexit, can you quantify the slippage for us on a dollar revenue front in this quarter?A: Let me just tell the investors that this is annual game so quarterly numbers do matter but it is doesn’t make much difference because deals do postpone quarter-on-quarter (QoQ) and we can’t track QoQ numbers. So, important point Brexit definitely we were expecting at least USD 3-4 million more number than this one so we are disappointed also on QoQ perspective. However, on annual guidance basis we will be growing fastest, almost fastest in the IT industry. 22 to 26 percent growth, last year we grew 33 percent in Indian rupee growth which is fastest among IT industry. So, company is set to grow at the fast pace in this business. Anuj: Even if we add USD 3-4 million of revenue loss at the EBITDA level there is still EBITDA loss for the quarter may be around Rs 12 crore. Can you explain that for us?A: IT product companies are monitored on operating margins. Our operating margins over 50 percent from last 14 quarters in a row , so at this level we have shared with our investors that sales and marketing cost is minimally required to be invested, what we are investing around 30-40 percent. So, if you are looking at Amazon.com they made losses for first ten years so this EBITDA is not the measurement, it is about growth and market shares. So, we need to educate our investors that this is a new industry segment starting. The way IT sourcing started sometime in 1997-1998 now product segment is starting now. I think we need to give a time for them to look at it. We are tracking today’s topline going 22-26 percent growth and we are tracking that whether we can able to attract the best talent are we getting the best deals like we won the two large deals on digital. Like digital bank we are converting a small finance bank to completely digital bank. We are converting a largest insurance company to be the completely digital. I think these are the things which are lead indicators for product company, are they getting a market share are they making a technology differentiated in the market place. Those are things which needs more attention from the investor perspective then the EBITDA margins, because after 2018 I think this is not a EBITDA margin game.Sonia: The other income looked quite strong at almost 16.50 crore. Can you tell us how much of this was on account of the Mumbai property sale and what would be the value of the companies non-core assets now?A: We will sell some other non-core assets and Mumbai property contributes Rs 7-8 crore into the non other income. We have some other real estate assets which are not being used so we will use for our cash generation because this business is a hungry business for cash and it requires to accelerate our business as we grow forward. So, if you look at the way IT you are seeing start up companies where they need a lot of cash to survive one on working capital requirement even if we are growing faster. The more you grow faster the more working capital will be required for that need we need cash. We may be off loading some of the real estate which is non-core for us. Anuj: Can you give us any rough valuations on these assets and also you have taken an approval to raise Rs 300 crore. What is the progress on that?A: Chief Financial Officer (CFO) is working with fund raising. He is balancing the act between what is the right time for fund raising and what is the kind of a real state which is non-core asset can he fund it immediately or debt. So, he just building a detailed plan. Last two weeks back we got an approval from shareholder, so he is working with various investment banks to look at it, what is the possible alternative are there. So, we will share with you as soon as we are through with the plan.