Spill-over in execution of Rs 100-crore deal with Fintech Grid to the next quarter led to the fourth quarter revenue missing estimates, said Arun Jain, Chairman and Managing Director of Intellect Design Arena, in an interview to CNBC-TV18.
The company reported dollar revenue growth of 24.5 percent for FY16, less than the guidance of 26-30 percent. However, it managed to post the industry’s highest rupee revenue growth of 33 percent.
Jain said the company is on track to achieve its revenue guidance of Rs 1200-crore by FY18, adding, the target is to maintain gross margin between 50-53 percent.
He also highlighted the company's growth in the digital space within a short timeframe with presence in corporate banking, consumer banking, treasury and risk and insurance spaces.
The company is currently chasing 9 deals and will look to close at least 4-5 by the end of the current quarter, he said.Below is the verbatim transcript of Arun Jain\\'s interview with Reema Tendulkar and Nigel D'Souza on CNBC-TV18.Nigel: Yesterday we did a good reaction then the stock did come off the high point of the day. One of those details that I wanted to get from you is that there was a particular deal which couldn’t be signed in Q4 but that is likely to be reflected in the next couple of quarters. Could you tell us what is the size of that particular deal?A: One deal, which is there is about Fintech Grid which is a software service. It is Rs 100 crore deal we got the order last quarter but we couldn’t able to account in the last quarter and that carried forward for the current year. So that has marginally missed our guidance on that, which provided discomfort to the investor.However, that revenue will continue to accrue in Q1-Q2-Q3 accounting deal on seven years for Rs 100 crore. We won RBI deal 5-4 years back and now this deal, which is crossing billion rupee as a single deal, that will be very interesting for us to watch as to how many such deals we can participate in coming years.Reema: What about for the next year, you have guided for 22-26 percent, mid-point of that is 24 percent and it implies no acceleration compared to 24.5 percent growth, what is the reason for that, what is the visibility that you have considering the dealwins have been quite good?A: If I analyse 2015-2016, which is a first full year of Intellect Design as an independent company, some of the thinking process has shifted based on the full company to be competing against global player. We grew 24.5 percent in dollar terms and 33 percent in Indian rupee terms, which is highest in the industry. We could have able to get a 50 dealwins in a year individual space we could take leadership in individual space by IGTB which is a corporate banking space, consumer banking space, in treasury and risk and insurance -- all of four spaces we are able to establish our leadership during the year.These four levers which we invested in 2015-2016 is giving us a confidence to go and tell the market that we can still meet more than 20 percent growth target for the next year in spite of the slowdown on the financial sector in Europe and America and we are still bullish about more than 20 percent growth because of the investments, which we made in 2015-2016.So we won and we have grown and demonstrated that we can grow 24.5 percent in one year and we can sustain that momentum for next two years. So what we guided to the market when we went public will move from Rs 600 crore revenue when we went to the market to Rs 1,200 crore in three years by March 2018, we are on the proper path to make it Rs 1,200 crore company in March 2018.Nigel: Your margins this time around, they have come in at around 18.5 percent approximately. Your R&D expenses are likely to stay lower as we have seen in the last quarter approximately so last quarter margins are you likely to maintain it at around that 18-19 percent, do you think you can better that?A: I think to guide the investor since the product business is a new business, similar to software service business, which was in 1999-2000, if you monitor an operating margin level, that will be better that we have operating margin level moved up from 49.7 percent to 51.7 percent, I think that is a margin you should look at it from measuring he metrics of your product companies. Below that is the SG&A cost, those goes up and down depending upon how much investment we are doing and what products are getting the leadership quadrant.As soon as we spot this product as a potential to hit the market and the product is there in the place. Our sales investments -- we would like to invest substantial number there so that take a leadership quadrant. In product business, one important metrics is the leader product takes 60 percent of the market share and rest of the five products takes 40 percent market share. So it is very important to qualify the product into 60 percent bracket.Reema: You are saying gross margin at 51.7 percent that you will be able to scale up to 60 percent, is that your guidance to investor?A: 200 bps in a year was quite a large number so we will grow by another 200 bps maybe but it will vary between 50-53 percent. So we want to keep it constant.Reema: You are chasing nine deals between USD 3 million and USD 7 million we understand, how many of them are likely to close in the current quarter?A: We are expecting at least four-five deals to be closed in this quarter. That is what we are optimistic about.
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