New biz contributed nearly 84% to topline: Prime Focus

In an interview with CNBC-TV18’s Reema Tendulkar and Ekta Batra, Vikas Rathee, Group COO of Prime Focus talks about his Q3 figures and the road map ahead.Below is the verbatim transcript of the interview:Q: This was a good quarter, your revenue went up 18 percent, you managed to improve your margins as well but on the whole in the last nine months, the revenue growth for the company has only been about 5-6 percent, what are you hoping to close FY14 with in terms of revenues and your expectation how FY15 is likely to be in terms of the topline growth?A: It has been a good quarter. We continue to drive momentum in the business. On our side in relation to what our strategy is, in relation to growing our new age businesses which is VFX/3D part of the business on the creative services side and then the technology centric services business, which is under Prime Focus Technologies. Both those businesses demonstrated great growth both on the revenue side as well as on the EBITDA side.You talk about consolidated revenues being only up about 6 percent. It is partly because we continue to manage our legacy business for profitability and ensuring that we keep the profitable business growing. So even with about 6 percent revenue growth, I think the EBITDA growth is almost more than 30 percent. That is fundamentally the focus, not just growing the revenues but growing revenues profitably and driving more efficiency in each of our business segments.Q: Focusing on this quarter you have generated sales of Rs 214 crore. Can you take us through what was new business generated this quarter? For example, which projects you worked on and hence you got revenues and how much did you generate from legacy and what does your legacy revenue even comprise of?A: We have about Rs 214 crore. This quarter we have about 84 percent of our entire consolidated revenues coming from our new businesses. It is up from about 60 percent about a year or so ago. So with this, we continue to grow the new age businesses. To give you the sense, our 3D and VFX business generated about - in this quarter - Rs 136 crore. We had Rs 43-44 crore from our technologies business again growing at about more than 100 percent and then on the legacy business, we were down almost half.When I say legacy, it is a typical that equipment rental, is that some of the post production work that we do both in India and abroad and that business -- pieces of it continue to be at commoditize and I think we have been a dominant player in the Indian market especially and I think we want to do large projects, profitable projects and not really compromise on pricing there. So that is where the discipline is coming in, it generates cash for us and that is what the focus is and driving our customers towards more packaged services where we can provide a technology platform, the VFX/3D business, that part of the work along with traditional equipment rental and the other post production work.Q: Finance cost for the company is still quite high. This quarter you paid about Rs 16.3 crore, could you tell us what the debt on the books is and any plans with respect to reducing that?A: No absolutely. I think you will see there are debts on the gross basis in the companies about 120 million, which is flat and it is the same kind of level which we had about 12 months ago. In that period, the company has grown significantly both in the revenue side, we were generating more profitability but we have also grown our employee base by about 25 percent in that period. So despite us growing and again asset base has grown significantly, our businesses require high end equipment, we set up our one of a kind technology services cloud platform in Mumbai which is one of its kind in the world with a significant investment through which we are providing services to companies like Star and Zee and Disney and the whole platform that has been offered. So significant growth on the asset base and we haven’t grown our debt. There is some fluctuation you will see in the cost as some of the lower cost goes away and new lower cost comes in. So it is more of a quarterly variation. On a yearly perspective, we continue to be on a fairly stable situation on the interest cost side.

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