Targeting revenue growth of 10-15%: Infinite Computers

Infinite computer’s revenue is expected to grow 5-10 percent, but its operating and net margins are likely to remain flat in FY16 year-on-year (YoY), Upinder Zutshi, M-D & CEO, Infinite Computer Solutions told CNBC-TV18. The company's largest client has requested a 50 percent reduction. If agreed to, this will have a USD 8-9 million impactThe company has signed a large deal with one of its client, Zutshi said. He expects revenue of Q3 and Q4 last year to be in line with first two quarters in FY16. 

Below is the edited transcript of Upinder Zutshi’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Anuj: I am just looking at your numbers, it looks quite bad, your sales are down quarter-on-quarter (QoQ) in fact dollar revenue is down 13 percent, your EBITDA is down as a result; your profit after tax (PAT) is down 80 percent. What went wrong, you also missed your guidance for the financial year?A: Q4 has been particularly a challenging quarter. Essentially if you look at the overall year we have done fairly well in terms of margin guidance. We have exceeded that but we have fallen short of the revenue guidance for the year. As far as quarter is concerned there are two reasons for profits and the revenues for this quarter being so low. One is if you look at our Q3 quarter some of the licensed revenue that we had planned and expected in Q4 actually came in Q3. That is why Q3 was completely out of line. We made operating margin of 12 million against an average of 7.50 for the first two quarters. Then that revenue which directly goes to the bottom-line did not come in Q4 so that was a hit of about 3.50 million. That is one which was basically a shifting of revenue between two quarters so that does not impact too much over the business but impacts the quarters. If you look at the average of Q3 and Q4 it is inline with the first two quarters. So that is not that much of a drop. As far as the business is concerned the second hit that we unfortunately took in Q4 and which will have impact for next year as well is the support fee for one of our messaging platform has been reduced as of now by 50 percent so that has an additional impact on Q4 as well as impact on the next financial year.Ekta: Can you give us more sense in terms of the second reason for the lower revenues and that it will spill over into FY16 as well? This report fee reduction of 50 percent that you have seen, give us more details on it?A: It is one of our largest clients for our product and platforms in a messaging space. So we at the start of the calendar year in January – February, so in first quarter really, we negotiated the support fee with them for the rest of the year. So, that particular client has been obviously a challenge right now and we are working with them and what we have on the table right now is the support fee for this year they have requested to accept a 50 percent cut on that and that it will be restored year after next. We are discussing that with them how as far as the numbers are concerned for next year but I assume that we will have to face a cut. So from that we are taking a hit of about USD 8-9 million.Ekta: Per quarter?A: No, for the year. However our business we have recently signed a very large deal with our client. So we expect that to contribute next year which was not there this year but unfortunately whatever we are gaining from that client we are losing from this client. So, overall that is why the guidance that we have given for next year as of now is that our operating and net margin will be flat while our revenue may grow 5-10 percent.Anuj: For the first quarter, is there any kind of guidance that you would like to give?A: Come back, as I said both Q3 and Q4 are very typical quarters so 12 million in Q3 was unrealistic, 4 million in Q4 is again not inline. So as far as Q1 is concerned it will comeback to an average margin that we have been looking at which is around 7-7.50. Ekta: How is business X of this client looking according to you because you have spoken about one client what about acquisition of new clients?A: Since we have acquired new clients and signed new deal so we are still managing to maintain the same profit margin. As we progress during the course of the year and if we are able to negotiate better terms with this existing client then perhaps we may see a little upside. As of now given what we have the new clients that we have signed and the contribution from them is upsetting the loss that we have to plan and incur from this client. Anuj: You have got quite a bit of cash on our balance sheet about Rs 180 crore thereabouts. How do you intend to use it?A: We have no specific plan as of now but what we are looking at, obviously if you look at the industry and also us the last year and a half or two years have been quite challenging because the whole market condition is changing. We are trying to re-invent ourselves and try to become solution of based company. So as a part of the strategy the thought process is that we may have to supplement our organic growth with some kind of opportunities that will give us an inorganic addition to the efforts that we have already put in place.So that is one of the reasons and that is one of the areas we are looking at and we may need cash for that. Nothing specific as of now but it is just a thought process right now.