Midcap IT player Polaris Financial Technology is gung-ho on its product business and expects it to grow 20 percent in FY15. With Q3FY14 EBITDA margin at 22 percent, this segment’s EBITDA has grown 3 times over the last four quarters, Chairman & Group CEO Arun Jain told CNBC-TV18 in an interview.
The company reported 24.8 percent increase in net profit at Rs 50.75 crore for Q3FY14 versus Rs 40.66 crore during the corresponding period of previous year. The income from operations for the October-December 2013 quarter rose to Rs 643.39 crore from Rs 572.88 crore during the same period of previous year. For the year ending March 31, 2013, the income from operations stood at Rs 2,308.33 crore. Its services business reported an EBITDA margin of 18 percent in Q3.
Confident of company’s future financial performance, Jain added that investors are assured of good returns in FY15, FY16.
Below is the edited transcript of Arun Jain’s interview with CNBC-TV18’s Sonia Shenoy and Latha Venkatesh.
Q: This quarter looks like it is a slightly weak quarter for you because you have seen a net profit degrowth of 15 percent. Just take us through the quarterly performance and how the different segments have done?
A: In July, we did the restructuring for services and product business. There was a time which we have focused internally to gear up for the next change in the company and leveraging opportunity that market offers. In that regard, service business from last six quarters is stable around USD 81-83 million. It is not a significant shift happening, it is almost flat from last six quarters. I would say this one quarter results are not significantly we are considering. What we are considering is how to prepare the organization to leverage the opportunities available in services business to move from USD 80 million per quarter to close to USD 325-400 million.
Similarly, in product business which is healthily growing over the last four quarters, EBITDA margin has grown three times in product business. It was around Rs 10 crore and now it is Rs 32 crore. Revenues were close to USD 20 million and in this quarter, it was close to USD 23.6 million. There is a growth of almost 20 percent. We are looking at two businesses separately, providing a good front face to the customer, enhancing their capacity there so we may require some more investment in services front end as well as product frontend.
Q: What can you guide in terms of revenue growth in your services business, would this be a 12 percent tick or do you think that in the current quarter and in FY15 going by your order book you can guide for something better?
A: I will guide for the service business little later because we are still putting the teams together in the geography. In the sales team, we are hiring more people and sometime mid of March we will be more clear about growth pattern for the service business. First focus for them was to service the existing customer with a significant mining potential. Now the next stage is to leverage that. We would like to accelerate our growth engine better than our competitors.
I can guide investors that we could be growing 20 percent next year FY15. In FY15, investor can get two advantages, one on hedging loss. This year we have a hedging loss of Rs 110-120 crore cumulative loss will be there, that will translate into Rs 11 EPS, which may get added because FY15 we have hedging at 60 plus for USD 100 million. For FY16 we have a hedging at the rate of 71. So, for these two years we assure that investor has a good return for the next two years.
Q: What were your exact margins this quarter around? Last quarter you had reported a margin of 19.3 percent, where does it stand this quarter?
A: The total EBITDA margins for the services business is around 18 percent and EBITDA margin for product business is close to 22 percent. Operating margin of product business is close to 55 percent and operating margin of service business is close to 31.5 percent.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
