Polaris undertook some organisational restructuring during the fiscal year. It demerged its product business. But despite that the company’s performance remained steady, says Arun Jain, chairman and managing director at Polaris.
Polaris Consulting reported second quarter net profit at Rs 49.15 crore. The company, which was formerly called Polaris Financial Technology Ltd, had reported a net profit of Rs 59.81 crore for the July-September 2013 quarter, it said in a statement.
As a testimony to its new strategy, Jain says the company saw nine new order wins during the quarter. Jitin Goyal, CEO of Polaris too adds that the company expects medium-term EBITDA margin in 15-16 percent range.
Goyal adds that he sees the company achieving industry standard growth level soon.
In management changes, Jain relinquished his position as managing direction to focus on mentoring as chairman.
Below is the verbatim transcript of Arun Jain and Jitin Goyal's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: I am comparing like-to-like after your demergers, the revenue quarter-on-quarter (QoQ) is a little muted. Dollar revenue is down 0.7 percent. What is the trajectory, why is it muted and when can we expect you to come to industry level growth?
Jain: Some of the revenue which is shown which I clarified on investor call, it was USD 76.22 million. We moved to USD 77.5 million in actual terms but because of consolidation of subsidiaries it appeared muted one. It is not something big; I would say it is still a flat quarter.
However, even appreciate that it is a major shift in the organisation and the new leadership team has come and we created two companies. So, it is first time happening in the industry where one IT company is being demerged into two different set of businesses.
I am very happy that these two companies remain stable during this period, nothing has gone wrong during this lifecycle of the change and the change was too big for me and for everybody who was there in the company. So, I am happy to remain steady and that is what we have planned for when we took this journey two years back.
Sonia: What is the outlook as far as the margins are concerned and if you could tell us specifically for the services business what kind of trajectory are you hoping to see as far as margins?
Goyal: Let me put it like this, this is a new dawn for the services company and the management of the company is absolutely laser focused on three very clearly defined agendas – to achieve consistent and predictable growth to pull the margins back up to 15-16 percent EBITDA range in the next financial year and to push accretion down to levels where we can be industry leaders in that space.
These are very clearly defined agendas and we are taking all the necessary actions so that we are able to come back to the market and deliver numbers that will make all of us feel good.
Manoj Sharma (Viewer): What is the medium-term EBITDA margin guidance for the services business?
Goyal: I think I have already addressed that to some extent. The internal targets that we are setting for medium-term EBITDA margins for the next fiscal year are in the 15-16 percent range. That is what we are targeting and all of the actions that are being taken are driven towards making sure that this is the kind of range we should be able to deliver in the next fiscal.
Sonia: Is the company done mostly with its portfolio rationalisation that it has been undergoing for the last many months?
Jain: Yes, it has been done. Jitin has put that strategy together in the Q1 and with that the Q2 has shown a minor increase. So, portfolio rationalisation is done. The new nine wins during the quarter is a signal that the strategy starts showing some results and it may take one or two more quarter to translating into coming back to the industry norms in next year.
So, definitely this demerger has helped the company to bring back into the differentiated space of digital risk, payment and data and that is where the new company is focusing on under the leadership of Jitin and his management team.
Latha: When is it likely to list?
Jain: The product company is likely to list, we have filed our Information Memorandum with National Stock Exchange (NSE). We are just waiting for their approval, so, once the approval comes it should be listed within two weeks time as soon as we get the approval. Most likely before the end of this calendar year we should be listed.
Sonia: Since this is the last time we will be speaking with you as the MD of the company what was the reason for which you relinquished this position?
Jain: I think 21 years of my time was spent on building the business model, when outsourcing was not even existing. First report of McKinsey came for USD 85 billion and nobody believed into it. The model has been established, world class delivery has started happening, now it is the time when I feel there is a team that can handle it, a team that is mature.
I as a Chairman can give a different perspective to the company on three dimensions; one on strategy side, second on mentoring side and third on connecting customer with solutions. So, keeping slightly at 5000 feet away from day-to-day work I believe that I can contribute better connecting solutions with the customer which in a role of CEO when you are daily running on the quarterly numbers you may sometime lose the focus on the customer or lose the focus of investor or a strategy.
Latha: You gave us a fairly clear idea of where your internal target on margins is, what is the internal target on growth itself because you are still a distance away from the industry average and after this rationalisation what has been the feedback from clients, do they see you as a fitter team or are they still waiting for things to settle down at your end, are you able to force better realisations at all or even get more orders?
Goyal: I can say without any ambiguity whatsoever that the clients love what we have done. The reaction from the clients is fantastic. They see us as a fitter and then fitter can be also said in more precise term as a more agile company, as a company that is a lot more laser focused on providing real expertise and with a lot of accountability. That is some of the things that come from being relatively small, so, small can be beautiful. Many of our clients are seeing us that way and they just love it.
To reiterate some of the points that Arun was making earlier on if you look at the last quarter we have signed up nine new clients and these clients are ranging from insurance companies to central banks to tier II banks in place, ranging from Australia to Singapore to United States to Canada and so on and so forth. So, there is a fairly wide acceptance of our strategy to be a specialised company that delivers digital solutions and digitising the enterprise is really what our mission is and that is a mission that we are very well equipped to deliver to our clients.
So, therefore, when we are talking about internal target for the next fiscal I would like to see my team take the company back to industry standard growth levels and also bring the EBITDA numbers to the range that I was talking about. So, we feel very excited, very energised and as I keep telling Arun that we are now a USD 300 billion re-startup and it is a company with a fantastic DNA, it has got a great track record and at the same time with all the changes and then the demerger it almost feels like a fresh start. It is a great place and we feel really good about where we are going with this.
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