See flat FY17 revenues, to focus on IP business: Rolta India

Rolta India reported weak set of first quarter earnings, with revenue falling 18.6 percent to Rs 800.4 crore year-on-year (YoY) and net profit dropping 29 percent to Rs 217.9 crore (YoY).In an interview with CNBC-TV18, KK Singh, CMD of Rolta said that the company has been consciously cutting down software work to focus on its intellectual property business and does not expect more erosion of revenue due to pruning of system integration work.He further said that FY17 revenues are expected to remain flat compared to last year.Below is the verbatim transcript of KK Singh’s interview to Prashant Nair and Reema Tendulkar on CNBC-TV18.Reema: What is happening? For the past two years at least your revenues have been in this band of Rs 800-900 crore. There has not been any improvement, we keep waiting for it but that has not happened for over two years now. This quarter in particular you have seen an 18 percent drop in revenues on year-on-year (Y-o-Y) basis. What went wrong and when should they turn around?A: Nothing is going wrong. As a matter of fact that is a part of strategy, nothing is going wrong. The whole issue is that we have been doing things, which we have been doing as part of a service company and now when we are changing our model, which we have been changing for the last couple of years and we are going towards solution company, towards IT centric company, so we are cutting off the kind of services and the system integration, which we were doing earlier consciously and that is something which is the reason why you don't see the topline going up but the bottomline is certainly getting better and better.Even in this quarter we see the first quarter of this year, compared with the last year quarter four, of course these are down in the revenue but certainly if you see quarter four of last financial year, which is just a sequential basis this is only about five percent down -- if you see the profit from the last sequential profit it is up by about 55 percent. If you see the earnings before interest, taxes, depreciation and amortisation (EBITDA) from last quarter four compared to this quarter one EBITDA is almost up 34 percent.So, things are getting better as we go forward and as a conscious strategy, we are taking away things which are lower margin which were something which were not part of a long-term strategy and not a part of our solution strategy.Reema: But Q4 comparing it with quarter-on-quarter (Q-o-Q) is not really fair right, because those were I-GAAP now it is Ind-AS but that is another point. Could you tell us how much more of this conscious cutting down of software work, how much could it erode your revenues and for how many more quarters will it continue?A: We are there and now we are not going to see much erosion per se. So, we are there. The kind of system integration, the kind of work which we used to do which was very system integration oriented in which there will be lot of third party stuff is going away and that has gone away and more and more solutions are coming inside and more and more IP is coming inside. Therefore our margins are to some extent better. In this quarter, it had been almost about 28 percent margins compared to about 19 percent last quarter and if you compare it to the last year it is even better than that. So, that is the difference.Prashant: Could you provide us with some numbers, what should we work with for the year?A: For the year, I will not be able to make a real forecast as to how much it is but what I am saying is if you start comparing with the last full year, it may look like almost flat or it may look like small increase but qualitatively I believe that the bottom-line and margins will be better and I am sure what we are doing is going to take us to a different trajectory as we go forward because the solutions, which we are going are getting traction. We are doing work, which is in absolute digital transformation across in all our solutions, whether it is in big data analytics, whether it is in IT, whether it is in defence. Even in defence the kind of things which we are doing is complete digital transformation kind of stuff, not the traditional kind of things which we used to do.Reema: You had defaulted on a coupon payment in the month of May and June of 2016, what is the update on that and how is the working capital? You were facing some liquidity stress, could you provide us an update on that?A: Yes, as far as the bonds are concerned, we are in active discussion with the bond holders and we have appointed international advisors who are working with the advisors of the bond groups and we are trying to find out a solution, which will be a long-term solution as to how do we handle this bond and this is something, which is underway and it will take another few months before some solution can come in. Once that solution is there then certainly we will be able to give you a much better insight as to what it is.