Will target 20% organic growth: Quess Corp

Quess Corp has announced three acquisitions -- Comtel, Terrier and Simpliance. These acquisitions are strategic in nature.In an interview to CNBC-TV18, Ajit Issac, CMD & CEO of the company spoke about the results and his outlook for the company. "Comtel acquisition will give us a good springboard in to developing a professional staffing business in the Pan Pacific area", he added.Isaac further mentioned, "Our target internally is to try and maintain a 20 percent growth rate in our operating assets".Below is the verbatim transcript of Quess Corp’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: The stock is reacting very well to your numbers, but before I come to earnings can you tell us a little bit about these acquisitions that you have made Comtel, Terrier and Simpliance are they profit making and how have you funded these acquisitions?A: These three acquisitions are strategic in nature for us. Comtel is promoted by a gentleman called Vasudev Gopal an IIT, IIM Engineer with a terrific track record as an entrepreneur. He has run this company for the last 17-18 years. It is Singapore’s largest professional staffing company with about 1,400 associates working for them with marquee clients. We are happy with the numbers that they have delivered. We think that this acquisition will give us a good springboard in to developing a professional staffing business in the Pan Pacific area.The other acquisition we did is of Terrier; Terrier is a security services company. Security services and man guarding has annuity revenue streams and fits right in the middle of our business model. The company has brought almost 16,000 deployed guards today. Founded about 27 years ago and run by an ex-servicemen called Capitan Ravi. A very well reputed company with a solid track record of operations. In the South it is very strong and there is some operating leverage in the company too, so we are hopeful that we can take this out into the North of India.Sonia: Can you give us the numbers please? Comtel and Terrier are they loss making, are they profit making?A: No, they both are profit making together they deliver almost about Rs 750 crore of revenues on a full year basis, may be at about 7-8 percent EBITDA level. So, about Rs 50-55 crore of EBITDA they will deliver. So, it is also margin accretive to us. It takes us up from where we are today at about Rs 5.4 percent and both these companies together are at about 7 percent. So, it is both margin accretive and earnings per share (EPS) accretive to us.Latha: Will you focus on expanding your business lines?A: We are expanding our business lines to security services -- as we said in the past it is an area of focus for us and we are happy to announce the first acquisition in this. We want to strengthen our play in security services as a platform company in business services security and man guarding is the key component of that. We are hopeful that we can add to Terrier over periods of time.Latha: What I meant was outside securities services, so will you all look at other kinds of human services rendering?A: We look at logical extensions. For example security solutions using technologies in area that we would like to get into, we have already got some investments through Terrier in that. In our industrial platform also we are making some progress. What was previously an industrial asset management platform only doing maintenance services of machines and equipments we are moving it into the most solutions platform. So, we are doing now more maintenance solutions.We are getting into plant management and manage agency operations of manufacturing facilities. We are looking at the area asset life extension where assets that have completed their investment cycle and their lifetime cycle of maybe 22-25 years can be extended through a series of actions that we can do in our workshops.Lastly, our technical and consulting business in industrial asset management will also start seeing some traction.Latha: I was just wanting to know what is the EBITDA margins you are expecting from Comtel and Terrier. will it be better than the 5.3 that you have posted now?A: Yes, you are right. Together they will be at 7 percent versus the 5.4 percent we are at right now.Sonia: What kind of a topline run rate do you think you can clock because this quarter has been very good at almost 30 percent topline growth? For the next couple of quarters what are you targeting?A: This quarter has been good on many counts. We have grown topline by about 26-27 percent. Our EBITDA has grown by about 45 percent and our profit after tax (PAT) has grown by about 66 percent. So, before the public listing we had a compounded annual growth rate of about 50 percent and we are happy to note that we are able to maintain the same rate of growth post listing.Our target internally is to try and maintain a 20 percent growth rate in our operating assets. So, whatever we do with acquisitions will come and stay on top of that, so our internal target is to try and grow at about 20 percent.