Rolta sees FY17 revenue at Rs 3000 crore

A: To some extent it is foreign exchange which is fluctuating, this time it was positive, so it certainly has an impact there and also we have taken steps to cut out our other expenses in line with the system integration type of work which we have been trying to cut down, the low-end system integration work, so that has gone out and therefore the expenses.

Nigel: Going ahead what is the sustainable level in terms of margins because the street is just reading the headline number that margins have gone up and the stock is rejoicing that but what can be a sustainable level because forex definitely cannot be sustainable?

A: Yes, but having said that the fundamental strategy that we have adopted is to cut down the system integration work which is very low-end work some times and sometimes system integration work is good in which our own intellectual property (IP) also goes into. So we are consciously taking steps in that direction and that lower-end of the system integration work, when we are cutting down, certainly cuts down the expenses, improves the market margin, also improves our contribution because our IP goes into them. So that is how we believe that this should be the trend as we go forward.

Reema: What about revenues. For the last four-five quarters your revenues have been progressively declining. One or two years ago your revenues were close to Rs 1,000 crore mark and now they are down to a little more than Rs 700 crore. How many more quarters of revenue decline do you foresee and are we at the end of cutting down your system integration projects?

A: Almost. I would say that the kind of revenue topline we are seeing should be in the range of about Rs 3,000 crore this year compared to what it was. So it will be 15-20 percent cut from that side but the overall profitability will be better. So we are looking to stabilise profitability and improve that as we go forward because if IP type of work is introduced then need to start taking away the non-IP type of work and that is what we have been trying to do.

Reema: When you say improving profitability. Could you give us some numbers? What is the company's target in terms of net profits or in terms of margins on Rs 3,000 crore revenues?

A: Fundamentally we want to do at least an EBITDA of about 30-31 percent, so we are trying to go into that level and try to maintain that level though some time, as I again mention on cost of repetition that system integration, low-end type of work use to take EBITDA margins down to 10-12 percent. So if we cut that down then we will probably stabilise more at 30-31 percent and that is what we are trying to do.Nigel: You are shifting your focus from software segment and moving to IP segment. Could you tell us currently how does revenue breakup, what is the percentage coming from both these two segments and also in terms of margins. You are confident in terms of improving your margins. How do the margins defer?

A: The margins in the IP business are little better, about 45 percent or so. When we come down to the simple system integration, which also includes IP, there the margin comes down; it comes to about 27-28 percent. However, we are trying to maintain it all the time and we just cannot do only our IP business. So that is a kind of combination which gives us about 31-32 percent and that is what we are trying to maintain and as we go forward, as we go forward in next one or two years with a lot of large defence projects which are very IP oriented which we are doing and when they start kicking in then our overall margin picture will be tremendously different and then we will be 100 percent IP product oriented company.

The Government of India has just announced a software policy for the products for the first time. The policy says that it is encouraging the guys who are putting IP products and we are one of the very few companies in the country who have IP products and we feel very upbeat that this kind of policy has come for the first time.

Reema: Could you give us an update on debt and bond situation. How much has been the working capital which has been given to the company and second, the negotiations which are taking place on the bond and the default that Rolta had. When are we likely to see a resolution and what could be the nature?

A: We have already appointed leading advisors for a discussion with the advisors of the bond group; the legal as well as the financial advisors. They are doing that discussion right now in a very vigorous manner. I believe that in next one quarter or so there will some solution which should come in and once that solution comes in, then I will be able to give better update as to what that is and how that will go forward.    

Reema: The working capital which has been given to the company?

A: The working capital we got for additional facilities is about Rs 600 crore and that has enabled us to take care of all our needs and this shows the biggest strength in terms of confidence with the consortium banks have in the company. So we are very well happy that we have been supported well.