Infotech Enterprises (Infotech) held a conference call to discuss the third quarter results and future prospects of the company. BVR Mohan Reddy, Chairman and Managing Director addressed the call.
Highlights of the call
- On sequential basis, Infotech reported 5% rise in consolidated operating revenues at Rs 232.75 crore with operating margins dipping 120bps at 19.4%. Other Income for the quarter was loss of Rs 16.64 crore against income of Rs 11.36 crore in the sequential quarter, interest cost was up 15% at Rs 1.3 crore and depreciation charge was up 5% at Rs 11.94 crore. Tax provision for the quarter was down 71% at Rs 3.21 crore and the resultant PAT was down 64% at Rs 11.99 crore. Share of profit from IASI was up 118% at Rs 2.98 crore and the resultant net profit was down 59% at Rs 14.47 crore.
- The revenue dipped sequentially in US dollar terms by 5.7% at US$ 47.7 million due to weakening of INR against Euro, GBP and AUD significantly. On constant currency the growth in US dollar was 2.1%.
- The sequential revenues growth was on the back of rupee depreciation benefiting about 12%, TTM revenues addition of 3% (US$ 1.5 million) whereas volume was down 0.9% and cross currency impacted 7.9%.
- The management has seen slower ramp up of customers. The company did experience de-growth in one of its top 10 customers whereas other customers are showing steady growth.
- The OPM for the quarter was impacted to the tune of Rs 1.32 crore on the back of provision of cheque bounced. Excluding this adjustment the OPM would be at 19.9%.
- Purchase for Products/Re-sale was up 260bps at 3.8% of sales on the back of TTM acquisition.
- Other Income for quarter was loss of Rs 16.64 exchange loss on translation of Rs 12.46 crore (gain of Rs 8.4 crore in sequential quarter), hedging loss of Rs 10 crore (Rs 5.3 crore in sequential quarter).
- The company has a forward cover of US$ 61.25 million and Euro 2 million and GBP 3.5 million against US$ 43.25 million at Rs 40.30/US$ and Euro 9 million at Rs 65/Euro and GBP 3 million at Rs 83/GBP in the sequential quarter.
- On the above forward covers of US$ 61.25 million the hedging losses to date would be Rs 51 crore of which the company has provided Rs 20 crore in the nine months period.
- The share of profits of IASI was up 118% at Rs 2.98 crore due to better December quarter for IASI. The management expects share of profits of Rs 8 crore per year.
- The US subsidiary had revenues of Rs 86.7 crore up 9.7% with OPM of 9.9% up 160bps and UK subsidiary had revenues of Rs 30.6crore up 22% and is profitable. The management would do some downsizing and cost structure change looking at the current environment.
- Infotech added 23 new customers during the quarter with 8 in UTG and 15 in EMI.
- During the quarter, the company acquired 10% stake in Tele-Atlas Kalyani India Limited, Pune, given the tremendous potential for India map data products.
- For the quarter EMI grew 7.6% at Rs 154.63 crore and UTG grew 1.1% at Rs 78.84 crore. More than 35% of UTG and 90% of EMI revenues are annuity based.
- Top 5 clients contribution increased 13.2% sequentially contributing 42.1% up from 39.1% in the sequential quarter. The share of 6-10 clients has increased sequentially by 1.3% contributing 15.8% down from 16.4% in the sequential quarter. Other than top 10 clients dipped 0.6% contributing 42.1%.
- For the quarter under review, North America increased 16.1% contributing 52.9%, Europe decreased 10.9% contributing 36.1% and Asia/Australia increased 21.4% contributing 11%. The company is seeing strong momentum going forward across geographies.
- For the quarter the net addition was 102 people with 122 added in UTG whereas reduction of 7 in EMI and 13 in corporate functions. The total headcount stood at 7974 employees.
- The cash & cash equivalent at the end of the quarter was Rs 295.44 crore down from Rs 333 crore in the sequential quarter. Total current account balance was Rs 88.49 crore and fixed deposit are Rs 206.9 crore. Debt on books is Rs 24 crore all working capital loans.
- Capex for the quarter was Rs 23.9 crore and for the nine months was Rs 71.1 crore. Of the capex: Building constitutes Rs 32 crore, hardware & software Rs 16 crore, plant & machinery Rs 8 crore, furniture & fixtures Rs 6 crore and others Rs 7 crore. The SEZ campus at Vizag would start with 100 seats in May 2009. The total capacity is 500 seats.
- All the preferential shares have been converted and the number of shares outstanding is close to 5.6 crore of face value Rs 5 per share.
- The performance in Q4FY09 would be similar to Q3FY09 and the company targets revenues of Rs 900 crore for FY09.
- The company is not seeing any uncertainty in Aerospace and Rail. However, Marine and Hi-tech (Telecom & Semi-conductor) are challenging. There will be some aberrations in the industry verticals.
- The company is certain about the likely IT budgets of top 5 clients but it will be clear only in February. Large customers would hold budgets steady. EMI budgets would be flat with 2-3 customers might increase offshoring.