Highlights of the call
- The management is seeing cut in discretionary spend. There is more impact of this on Applications segment and lesser on ITO and BPO segment.
- The effective tax rate for the Company is 3.2% up 40bps over sequential quarter. The lower tax rate is due to higher capitalization. Going forward, the tax rate would increase with loss making subsidiaries turning profitable and would also depend on the capitalization of assets. 20-25% revenues done from SEZ.
- In the industry verticals, BFSI is seeing vendor consolidation and the Company has not lost any clients as of now. In Telecom vertical, RFPs are being floated. Manufacturing vertical is seeing ramp ups, ramp downs and new deals. Healthcare vertical is seeing good traction. However, decision taking is slow.
- For the quarter ended January 2009, volume growth was 4%, rupee depreciation benefited 3-3.5% and balance on higher realization. Growth in revenues in rupee terms was 9%.
- BPO segment saw dip in revenues of 1.6% mainly due to GBP depreciation against rupee and ramp downs. Applications segment saw volume growth of 6-7% with revenues up 11.4%. ITO segment saw volume growth of 10-12% with revenues up 20%.
- The blended utilizations for Application segment excluding trainees was down at 76% from 81% in the sequential quarter and including trainees was down at 74% from 78% in the sequential quarter. The utilizations in the sequential quarter were unsustainable and the dip in utilizations was as per plan. Utilization is a lever for margin improvement.
- EDS/HP channel contributed about 45% of the revenues. The number of clients added through channel was 6.
- Onsite rates for application segment were up at US$ 71 against US$ 69 in the sequential quarter due to higher billing from Europe with Europe having onsite higher rates than US. Other average rates were stable: ITO onsite rates at US$ 70, Application offshore rates at US$ 22, BPO offshore rates at US$ 10 and ITO offshore rates at US$ 21. There is pressure on pricing.
- Revenue contribution from Europe increased 25.3% at Rs 213.3 crore (22% of revenues), US increased 7.3% at Rs 663.8 crore (67% of revenues), APAC dipped 4.8% at Rs 37.3 crore (4% of revenues) and India & Middle East grew 6.6% at Rs 70.9 crore (7% of revenues).
- The Euro/GBP billing is 8-9%.
- The realized rate for the quarter was 48.5-49/US$.
- The Company has changed its auditors inline with HP and the new auditors are E&Y.
- There would be no cut in salaries. Wage cycle for the company is quarterly.
- For the quarter ended January 2009, consolidated operating revenues grew 9% at Rs 977.66 crore with the operating margins improving 260bps at 21.5% and the net profit was up 15% at Rs 210.02 crore.
- The margin gain mainly on rupee depreciation.
- In industry verticals, BFS grew 7.1% contributing 43%, Technology & OEMs grew 17.7% contributing 25%, Manufacturing & Retail was up 15.5% contributing 13%, Logistics, Airlines & Transportation grew 1.2% contributing 5% and Healthcare & Pharma grew 43.9% at 5% whereas Telecom was down 7.9% contributing 9%.
- The manpower strength in Onsite Application increased by 62 employees at 1581 employees and onsite BPO decreased by 2 at 116 and onsite ITO was at 24. In offshore, Application saw increase of 576 employees at 9648 employees, BPO saw decrease of 14 employees at 13840 employees and increase of 547 employees in ITO at 4779 employees. The Group headcount increased to 29988 as against 28795 in the sequential quarter.
- Overall debtors’ days were down at 43 days from 41 days in the sequential quarter and the Group had cash & cash equivalent reserve of Rs 114.78 crore against Rs 73.12 crore at the end of sequential quarter. Investments in mutual funds were Rs 196.76 crore.
- Top client revenues contribution increased 9.3% at 15%, top 2-5 clients revenue contribution grew 27.5% at 21%, top 6-10 clients contribution grew 2% at 14% and other than top 10 clients grew 5.1% at 50%.
- The Company has forward covers of US$ 274.85 million, GBP 2.59 million, Euro 1 million, SGD 7.43 million and CAD 500000. The forward cover at the end of sequential quarter were US$ 243.64 million, GBP 2.58 million, Euro 1.6 million and SGD 7.14 million.