Rolta India confident of maintaining margins at 35%: CMD

KK Singh, CMD of Rolta India is confident of maintaining margin growth of around 35-36 percent backed by good traction seen in most of its products.The company is expecting the government to notify Rs 50,000 crore order this month for which they have been one of the stronger bidders along with BEL and are optimistic of winning the order.  The order is expected in the next 15-20 days. Singh is also hopeful of other software orders from defence.For the third quarter ended December 2014, the total income for the company was up 9% at Rs 966.8 cr versus Rs 885.3 cr quarter on quarter (Q-o-Q).  EBIDTA was up  6% at Rs 344.8 cr versus Rs 325.1 cr Q-o-Q. The EBIDTA margin came in at 35.7% verus 36.7% last quarter but net profit was  up 8% at Rs 76.56 cr verus Rs 70.8 cr quarter on quarter.

Below is the transcript of KK Singh's interview with Latha Venkatesh & Ekta Batra on CNBC-TV18.Latha: How are things looking? Do you think you can maintain this run rate of 35-36 percent margins and an annual growth of over 20 percent?A: Absolutely. We are bullish about what has been happening because our IP strategy has been validated quarter after quarter and now we are seeing that our software especially Big Data Analytics is having tremendous traction across the world and that is something which is giving us tremendous confidence that we will be able to see this kind of margins and we will be able to grow like what we have been growing.Latha: On the other issue of defense orders, your press release said that you all are now in receipt of a big defense order. Can you take us through exactly what are the orders you have got and have you already started implementing anything. How long does it go?A: We continuously get defense orders because that’s a business we get but what we mentioned and what you are asking is about this larger order which is pending, which we have not notified yet, so that has not yet come. We are expecting that the ministry has been taking proactive steps to assess it and they will be probably coming out with a notification as early as this month. Latha: The order you applied along with BEL in a consortium. The results are not yet been announced?A: Yes, in consortium. The results are not announced yet.Ekta: What is the revenue potential from that?A: This programme is for about Rs 50,000 crore and there will be two consortiums which will be shortlisted for this – one will be the consortium out of four. So, these two consortiums ultimately one will do 70 percent of the order and the second consortium will do 30 percent. We feel optimistic only because we have been doing this kind of work for more than 20 years. We have our indigenous software, which have been used in defence and condition here is it’s a ‘Make in India’ programme, it has to be indigenous. Therefore, we feel confident from that angle.

Ekta: Who are you competitors, who are the other bidders that you know of?A: The other bidder is a consortium which is through L&T and Tata, which is a second consortium. There is another consortium which is ECIL and some other parties and the fourth consortium is ITI and some other parties. These are the four consortiums which are there. Ekta: When would you hear back?A: We believe that it is on advance stage and it should be happening anything in next 15-20 days.Latha: If it comes, how does it boost your order book?A: If it comes then it certainly boosts our order book to the extent that we can then start recognising this as a kind of an order which is in place and so it will take about 12-18 months before the revenues start coming because the first stage will be POC which will have to be done. We will have to show exactly what we have proposed can work; it’s a pilot that we will have to do and once the pilot has been done then the orders will start flowing and that will take three-four years after that the full order to be implemented across.Ekta: Are you hearing more such orders from defence space or from the Make in India campaign? A: There are lots of them because there is another programme which is for soldiers. We believe a part of that is being added into this programme itself and so this programme may become larger. There are programmes for software defined radios. All these are ‘Make in India’ programme and ‘Make in India’ programmes are getting tremendous fillip after this comment. Latha: Give us an idea of the scale – at the moment what is your annual rate of growth, at 9 percent quarter on quarter what should we assume is your full year rate of growth and what will it be over the next two-three years?A: We are expecting the revenue growth for this year to be the region of 20 percent. Latha: EBITDA?A: EBITDA will also grow about 18 percent plus, annual rate.Latha: In the next three-four years when you expect more defence orders, what may the annual compound annual growth rate (CAGR) EBITDA grow to?A: We will expect it to go to 25-30 percent and that is a kind of improvement which we will see because what will be getting is software and the beauty is that it is not only one time implementation but then we will be supporting it for the life cycle which will be another 15-20 years. So that will give us 15-20 percent of annuity return year on year. Etka: You spoke about the expansion of this order because of an inclusion of the soldiers programme in it. Rs 50,000 crore is what it is currently estimated to be. What could it expand to and how much of that portion could you benefit from?A: It could be expanded to another Rs 15,000-20,000 crore and that will be because the soldier part of this programme will go into this and so that will become little larger programme and that’s what we are expecting.