Q2 to be softer; QIP plans to aid aquisitions: Majesco

Majesco reported a profit after tax (PAT) of Rs 1.46 crore in the first quarter as against a loss of Rs 1.97 crore in the previous quarter. The company’s total income fell 0.7 percent to Rs 220.1 crore. Slowdown in one of the large projects weighed on Q1. Speaking from the sidelines of the Emkay Confluence, Farid Kazani, MD of Majesco said the second quarter is likely to be softer as full impact of slowing project will be felt. However, the company is expecting strong growth for the fiscal on back of strengthening organic business and order pipeline. The management has guided to achieve for USD 200-225 million topline growth by FY18 aided by acquisitions. On the company’s plans to raise USD 250 million via Qualified Instituional Placement (QIP), Kazani said the funds raised will used to to back its US subsidiary for acquisitions. Below is the verbatim transcript of Farid Kazani’s interview to Reema Tendulkar & Nigel D'Souza on CNBC-TV18.Reema: In quarter one the company got hit on account of the slowdown in one large project which you are saying will eventually pick up in the second half of the year so the question is that on track? Do you believe this slow ramp-up of the project that you saw in quarter one has resolved itself and therefore will reflect in your numbers in second half?A: Just to correct you out here, we indicated to the street that there is a slowdown in one of our large programs. That typically happens in large transformation because it is all linked to how ready the client is in carrying out the transformation and there is obviously some kind of work to be done before they get on stream completely. So, while we did not have the impact on the quarter one, we said that the impact will be there in the following quarters. We are hoping that things shape up in the next two or three quarters with this client and it will take some time. Right now we can’t give a certain time when this will come back in a normal phase. However these are variables that do happen in our business and it does get offset with other businesses that starts shaping up. So, while we have said we have grown this quarter pretty well in quarter one. We grew almost 46 percent on a year-on-year (YoY) basis on the topline and 14.6 percent on an organic basis. So, we have done well in the quarter one. We also improved our margins to around 3.50 percent as compared to the previous year and previous quarter. Our expectations that we will end up well in-line with our expectation on the organic business for the year and clearly we stated it is not important to look at it on a quarter-on-quarter (QoQ) basis but measure us on a YoY basis.Nigel: For FY17 what can you do, I think you have ambitious targets for FY18? First quarter you are saying that let us compare it on a YoY basis that shows a big growth. On a sequential basis it is more or less flattish with a bit of a down tick. So, for FY17 what kind of numbers can we work with?A: We are not guiding very specific on FY17; we did put out our financial goals for a three years basis and FY18 we said we will want to get to the USD 200 million mark. That is clearly predicated on some acquisitions that would happen. We are working on that, they are in flight it will all depend upon how soon and what size of acquisitions that we close. Some of the things are clearly not within our controls in terms of in the end wining the deal and putting out the right value for the acquisitions. However, clearly if we are able to do good level of acquisitions at the right time we should be able to kind of meet our financial goals. However, our organic business is looking pretty strong. We have grown our business with the opportunity pipeline actually increasing. We have seen our order backlogs last year improving tremendously. We are working towards in expanding that further, so while we will grow we do believe that there will be an impact if the acquisitions don’t happen on time. Reema: You have outlined 2018 goals, revenues of USD 220 to 225 million, earnings before interest, tax, depreciation and amortization (EBITDA) margins of 12-14 percent how much of that will you be able to achieve by the end of FY17?A: I did allude to this earlier that we are not guiding YoY guidance at all. Since this is predicated on some of the build up that is going to happen on the inorganic side. So, it is difficult to kind of give any number for FY17 at this stage. You look at our growth that has been there on first quarter on an organic basis that will give you some kind of sense of how we will shape up in the year FY17.Nigel: Let us talk about the qualified institutional placement (QIP) Rs 250 crore approximately what is happening on that you were evaluating various options, various acquisitions maybe can you quickly tell us what is the update on that front?A: We will come back with a much better update in the next two to three weeks. We have got a board enabling resolution to do 250. We will figure out the investor interest in another couple of week’s time to see if it is going to work for us. Our expectation that we should be able to do that with good ease once we get the investor interest and that funds are going to be used towards capitalising our US subsidiary to kind of support acquisitions in the US.