The markets reacted strongly to the weak results declared by Tanla Platforms Ltd on July 25 as the stock tanked more than Rs 180 on July 26 and locked into the lower circuit on the National Stock Exchange.
The company reported a sequential decline of 28.6 percent in its profit after tax (PAT) for the quarter ended June. Compared to the corresponding quarter of last year, the PAT is down 4 percent.
The revenue for the quarter stood at Rs 800 crore, down 6.2 percent sequentially. On a yearly basis though, the company managed to grow its revenues by 27.7 percent.
The year on year growth in revenue was led by increased volumes in domestic business and faster growth in OTT channels, while the sequential growth was impacted by seasonality.
“Q1 had some operational headwinds in the Enterprise business, but we have our building blocks in place to accelerate our momentum in the coming quarters. We have a strong balance sheet and are excited by the opportunities ahead of us,” Uday Reddy, founder chairman and CEO had said commenting on the performance.
The enterprise segment grew by 28.2 percent on year to Rs 7,321 crore while revenues from the platform segment grew by 22.7 percent on year to Rs 68 crore.
“Overall, it reported mixed performance and the margin came in below estimates on several operational headwinds”, said a note from Yes Securities. “The management commentary on margin outlook going ahead is key thing to look out for”.
The EBITDA (earnings before interest, tax, depreciation and amortization) margin too, declined sharply by 530 bps on quarter to 16.3 percent, which was well below street’s estimates.
The company faced operational headwinds such as pricing pressure in select pockets, and downtime due to platform modernization of its legacy systems. Salary cost increased by Rs 7.2 crore on year, driven by new hires, RSU (restricted stock unit) cost and salary increase. Salary cost rose to 18 percent of gross profit during the quarter, as against 15 percent during the year ago period.
The cross currency headwinds also impacted the margin in its international business.
The gross margins in its enterprise business which constitutes 65 percent of total gross margin, contracted by close to 700 bps on a sequential basis from 23 percent in previous quarter, however the company managed to hold on to the gross margins in its platform business which remained stable at 96 percent compared to 95 percent during the previous quarter.
However, the company remains debt free and had cash and equivalents of Rs 990 crore compared to Rs 720 crore it had at the end of the same period last year.
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