Wednesday, October 17, 2012  Economic Times

ET Now: What has worked for you for the quarter gone by and, more importantly, what has not?

Ganesh Natarajan:The answer is obvious. Operations-wise, it has been excellent. Our growth in revenues was 31.4% over last year. EBITDA growth was 40.7%. But like most other companies, we have suffered because of very wild exchange fluctuations. In fact, we had unrealised exchange loss of over Rs 21 crore this quarter, but apart from that operations have been excellent. The outlook looks very good. Today, we are chasing new deals of close to 140 million. So, this year will end on a very positive note. Of course, nobody can say what will happen next year.

ET Now: How do you propose to do that, because your revenue has a shown a de-growth of 1.3% for the quarter? How would you compensate for the slump to meet your target of the substantially above industry average growth that you had initially guided for?

Ganesh Natarajan:This quarter to quarter swing is primarily because of the infrastructure management business, because we had one deal shutting down this quarter. That said, that is contributing to the biggest share our pipeline. So, if you look year on year for the first six months of the year, our core business, which is the application service business, has grown 14.7% in volume terms.
The IM business, because of this low quarter, is only about 3%. So I am still confident that a 12.5% volume growth on the year on year basis is very much on the cards. So, this is the reason I am saying that if the industry is looking at 13% growth, then we will certainly be higher than that. And given the deal pipeline, I have tremendous confidence in the IM as well as the application services business.

ET Now: Q3 always is a slow quarter for the Indian IT industry because of bunched up holidays in and around Thanksgiving and Christmas. So, in order to grow and grow higher than the industry average after Q2, you need to report a very strong Q4?

Ganesh Natarajan:It will be a very strong Q4 because of two things. One is our IM business which is a combination of product and services. The product business traditionally has been huge in Q4 because that is when people start using all their budgets. So that will happen. Traditionally our Q4 has been very strong and this year, given the pipeline we have had which is better than anything we have seen in the past, it looks very good.
Just to give you an example, we have closed two $5-million deals in the last one month. Today there are close to 12 $5 million deals in the pipeline, four $10 million deals and one deal approaching $20 million. I am very confident that we have closed 7-8 of those and if these close in this quarter, you will see some benefit obviously in the last quarter of this year and going on to the next quarter. This is why we are very bullish.
We have not seen slowdown in customer spending. Most of our existing customers are giving us good new business and of course new deals, particularly because of some of the new arrowheads we have in our business are doing well. This is why our confidence is very strong at this point.

ET Now: Give us a ballpark estimate in terms of what the order pipeline is looking like. What do you hope to clock in the near term from now onwards?

Ganesh Natarajan:For the entire year, we are certainly looking at 12.5% in terms of volume growth. It is difficult to predict currency, but I would expect that for rupee growth in the region of 25% to 30% and the overall pipeline, as I mentioned, is almost 160-165 million in new deals. In addition to that the component of that, which is IM, infrastructure management, is close to 120 million. So given that and given the fact that we tend to close approximate pipeline at 40% or 50% of the deals, we are confident.

And this is also because the integration of our application services business and the infrastructure services business has gone extremely well. We got a company two years ago which has been integrated. We had a slow quarter for all the reasons I mentioned, but it is just a quarter. In the next six months and certainly into next year our deal closures will bring us back on track in IM, and the application services will continue to grow.

ET Now: If the rupee goes to 50, would you like to re-visit your dollar guidance?

Ganesh Natarajan:If the rupee goes to 50, our rupee guidance will be 25% and above. Of course, it makes no difference to dollar guidance; I am seeing a minimum 12.5%, which is unconnected to the currency.

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