ET NowIn a chat with ET Now, Satinder Singh Rekhi, CMD of R Systems, talks about their buyback plan and shares his business outlook. Excerpts:
ET Now: You have announced a buyback of up to 95 lakh shares, which is 15% of the free float at a maximum premium of 23%. What drives this and how will the promoter shareholding change once this is completed successfully?
Satinder Singh Rekhi: We are doing a share back of Rs 6 crore. That is about 0.6% of our share capital. The 95 lakh shares that you are reading is actually an enabling provision. So we will be spending Rs 6 crore to buy shares. The number of shares that we get depends upon the price of the share in the market at that time.
ET Now: Can you tell us how much cash will be left with the company post this Rs 6-crore buyback?
Satinder Singh Rekhi: As of the end of quarter September, we had Rs 104 crore. Then we sold European subsidiary which gave us Rs 33 crore. Thus, we had approximately Rs 140 crore. Cut Rs 6 crore and that would be Rs 134 crore.
ET Now: Your revenues have grown by 13% on year on year basis in the nine months of this fiscal. While profits have jumped 50%, EBITDA margins have expanded 400 bps in the space of three quarters. What is propelling this?
Satinder Singh Rekhi: We are pursuing profitable growth. What we are doing is innovation and R&D. We are definitely providing value to our customers. We go to them with new ideas which help them become more competitive and when they become competitive, they buy more from us. That is our strategy.
ET Now: Can you run us through some targets that you are looking at? What are you expecting when it comes to the top line as well as the bottom line growth through FY15 and 16? Do you think that even when it comes to the margins, we can see an improvement from the current 15% over the next few quarters?
Satinder Singh Rekhi: We do not provide public guidance on this, but I am extremely positive. We will continue to do well. We have sticky customers who have seen value in what we provide and they have been giving us more and more business. As a matter of fact, 90% of our business comes from existing customers. Hence, our aim is to continue to provide them with newer products, newer product applications and that is what we are hoping to do.
ET Now: Can you also run us through as to what the big contracts are as of now for the company? Some midcap IT companies seem fairly optimistic going forward.
Satinder Singh Rekhi: There are two segments of the market - one is the large companies and the other is the midcap or small companies. The larger companies have a challenge today. For them, bringing in growth is a very big challenge. For midcap to smaller companies, that challenge is a little less.
Hence, the coming years will probably be the year of the midcap companies that will grow more in terms of profitability and they will probably get more of the business from the larger companies. That is what you are probably seeing in the markets.
ET Now: Give us a flavour of what is lined up for R Systems. How much is the cash on the books as of now? Are you looking at any fund raising plans?
Satinder Singh Rekhi: We generate a fair amount of cash. We are a cash-rich company and we generate as much as Rs 24 crore every quarter. So truly, we do not need more funds. We have also declared a dividend at Rs 2.5 per share. We are one of the higher dividend paying companies in the industry.
ET Now: You have announced a buyback of up to 95 lakh shares, which is 15% of the free float at a maximum premium of 23%. What drives this and how will the promoter shareholding change once this is completed successfully?
Satinder Singh Rekhi: We are doing a share back of Rs 6 crore. That is about 0.6% of our share capital. The 95 lakh shares that you are reading is actually an enabling provision. So we will be spending Rs 6 crore to buy shares. The number of shares that we get depends upon the price of the share in the market at that time.
ET Now: Can you tell us how much cash will be left with the company post this Rs 6-crore buyback?
Satinder Singh Rekhi: As of the end of quarter September, we had Rs 104 crore. Then we sold European subsidiary which gave us Rs 33 crore. Thus, we had approximately Rs 140 crore. Cut Rs 6 crore and that would be Rs 134 crore.
ET Now: Your revenues have grown by 13% on year on year basis in the nine months of this fiscal. While profits have jumped 50%, EBITDA margins have expanded 400 bps in the space of three quarters. What is propelling this?
Satinder Singh Rekhi: We are pursuing profitable growth. What we are doing is innovation and R&D. We are definitely providing value to our customers. We go to them with new ideas which help them become more competitive and when they become competitive, they buy more from us. That is our strategy.
ET Now: Can you run us through some targets that you are looking at? What are you expecting when it comes to the top line as well as the bottom line growth through FY15 and 16? Do you think that even when it comes to the margins, we can see an improvement from the current 15% over the next few quarters?
Satinder Singh Rekhi: We do not provide public guidance on this, but I am extremely positive. We will continue to do well. We have sticky customers who have seen value in what we provide and they have been giving us more and more business. As a matter of fact, 90% of our business comes from existing customers. Hence, our aim is to continue to provide them with newer products, newer product applications and that is what we are hoping to do.
ET Now: Can you also run us through as to what the big contracts are as of now for the company? Some midcap IT companies seem fairly optimistic going forward.
Satinder Singh Rekhi: There are two segments of the market - one is the large companies and the other is the midcap or small companies. The larger companies have a challenge today. For them, bringing in growth is a very big challenge. For midcap to smaller companies, that challenge is a little less.
Hence, the coming years will probably be the year of the midcap companies that will grow more in terms of profitability and they will probably get more of the business from the larger companies. That is what you are probably seeing in the markets.
ET Now: Give us a flavour of what is lined up for R Systems. How much is the cash on the books as of now? Are you looking at any fund raising plans?
Satinder Singh Rekhi: We generate a fair amount of cash. We are a cash-rich company and we generate as much as Rs 24 crore every quarter. So truly, we do not need more funds. We have also declared a dividend at Rs 2.5 per share. We are one of the higher dividend paying companies in the industry.
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