ET NowIn a chat with ET Now, Ravi Pandit, Co-founder, Chairman and Group CEO, KPIT Technologies, shares his business outlook. Excerpts:
ET Now: Your numbers look okay, leaving aside one or two small concerns. How do the quarters ahead look like?
Ravi Pandit: Our business comprises two components — products and services. In the quarter that went by, the services business grew by about 3.5%. The product business is seasonal in nature, so it is not right to look at it on a quarter-to-quarter basis. It should be looked at on an annual basis.
The focus has been on improving our operational efficiency and bringing in rigour in operations. We are currently working on it. We believe that the quarters ahead should show some good growth. I do not think we will see a dip in incomes going ahead.
ET Now: How does segmental demand look at the start of this quarter? You have taken several steps to bring the business back on track. Has deal flow picked up?
Ravi Pandit: So far, the growth in the engineering services has been very good. I believe we will do well throughout the year in this segment.
As far as business IT is concerned, the traction is in digital technologies. We are working to ensure that the traction continues.
We are seeing some traction in AMS services as well on the back of the newly introduced IMS portfolio.
On the whole, I believe there has been good upward movement in terms of traction.
ET Now: You have grown about 7% when it comes to the US, but the traction in Europe is still a miss. 18%-19% of your revenues come from the energy & utility verticals which have been the worst over there. And what about SAP and Oracle?
Ravi Pandit: The energy vertical has really been a bit volatile, but we are striking new deals there. We work in utilities and quite a bit of the utilities are related to their basic operations. We also have some engineering solutions in that area. This quarter, we did get some good traction in that area.
In Europe, our services revenue — especially on the engineering side — has actually gone up, but the products revenue has not picked up. But going ahead, we do see some traction coming from this area.
Our engineering services are more related to automotive electronics. We make new features for cars — features for safety, security, etc. These have been good traction areas quarter after quarter. We are seeing good growth there. We have also acquired some very good names there. We have the technologies, we have IPs in some areas and the market is rewarding us for that.
ET Now: You said some areas have yet to show traction. Will these get traction in Q2 or Q3?
Ravi Pandit: Yes, they will. They are basically seasonal products. The most likely ones are the intelligent transport systems linked to the Indian market.
Talking of Europe, much of the traction there generates from the ITes side. We do not expect much change there.
ET Now: Your EBITDA margins have improved by 110 bps on a sequential basis. Other than cost control, what else has led to this? With an eye of profitability, what levers are you tightening?
Ravi Pandit: We are keeping a close watch on the contracts we expect, which customers we work for, how we track operations during the life of the project, etc. The second lever is how we manage our people and our pyramid.
The third lever is automation and productivity tools. We have been working on all these areas. So far there has been no substantial benefit from these measures. We believe that the real benefits from this should come in by Q3. We still have some way to cover.
ET Now: Can Q2 be a bit of a disappointment on the margins?
Ravi Pandit: Q2 would definitely have an impact on wage hike. But I believe our productivity improvement measures plus our growth should be able to counter that to a large extent. We will have to see how it pans out.
ET Now: Your commentary shows that the bad phase — the stock price reaction — is behind you. Is it really so, or will the year continue to be challenging? Will the bigger green shoots be visible only in FY17?
Ravi Pandit: The stock price reaction was the result of some of our own performance problems in Q4 and a whole bunch of rumours, which I would not like to comment on.
But if you want to talk of our performance, I am sure that our performance will improve quarter after quarter.
ET Now: Analyst believe FY16 will be a soft year for you. What is you own take on that?
Ravi Pandit: As of now, our focus is on improving our productivity and efficiency. We are entirely committed to that. And I am quite sure that we will deliver.
ET Now: But how would that translate in terms of numbers?
Ravi Pandit: We believe that over the years things will improve in terms of numbers too.
ET Now: In FY16 as well?
Ravi Pandit: Yes, on a quarter-on-quarter basis numbers should improve.
ET Now: Your numbers look okay, leaving aside one or two small concerns. How do the quarters ahead look like?
Ravi Pandit: Our business comprises two components — products and services. In the quarter that went by, the services business grew by about 3.5%. The product business is seasonal in nature, so it is not right to look at it on a quarter-to-quarter basis. It should be looked at on an annual basis.
The focus has been on improving our operational efficiency and bringing in rigour in operations. We are currently working on it. We believe that the quarters ahead should show some good growth. I do not think we will see a dip in incomes going ahead.
ET Now: How does segmental demand look at the start of this quarter? You have taken several steps to bring the business back on track. Has deal flow picked up?
Ravi Pandit: So far, the growth in the engineering services has been very good. I believe we will do well throughout the year in this segment.
As far as business IT is concerned, the traction is in digital technologies. We are working to ensure that the traction continues.
We are seeing some traction in AMS services as well on the back of the newly introduced IMS portfolio.
On the whole, I believe there has been good upward movement in terms of traction.
ET Now: You have grown about 7% when it comes to the US, but the traction in Europe is still a miss. 18%-19% of your revenues come from the energy & utility verticals which have been the worst over there. And what about SAP and Oracle?
Ravi Pandit: The energy vertical has really been a bit volatile, but we are striking new deals there. We work in utilities and quite a bit of the utilities are related to their basic operations. We also have some engineering solutions in that area. This quarter, we did get some good traction in that area.
In Europe, our services revenue — especially on the engineering side — has actually gone up, but the products revenue has not picked up. But going ahead, we do see some traction coming from this area.
Our engineering services are more related to automotive electronics. We make new features for cars — features for safety, security, etc. These have been good traction areas quarter after quarter. We are seeing good growth there. We have also acquired some very good names there. We have the technologies, we have IPs in some areas and the market is rewarding us for that.
ET Now: You said some areas have yet to show traction. Will these get traction in Q2 or Q3?
Ravi Pandit: Yes, they will. They are basically seasonal products. The most likely ones are the intelligent transport systems linked to the Indian market.
Talking of Europe, much of the traction there generates from the ITes side. We do not expect much change there.
Ravi Pandit: We are keeping a close watch on the contracts we expect, which customers we work for, how we track operations during the life of the project, etc. The second lever is how we manage our people and our pyramid.
The third lever is automation and productivity tools. We have been working on all these areas. So far there has been no substantial benefit from these measures. We believe that the real benefits from this should come in by Q3. We still have some way to cover.
ET Now: Can Q2 be a bit of a disappointment on the margins?
Ravi Pandit: Q2 would definitely have an impact on wage hike. But I believe our productivity improvement measures plus our growth should be able to counter that to a large extent. We will have to see how it pans out.
ET Now: Your commentary shows that the bad phase — the stock price reaction — is behind you. Is it really so, or will the year continue to be challenging? Will the bigger green shoots be visible only in FY17?
Ravi Pandit: The stock price reaction was the result of some of our own performance problems in Q4 and a whole bunch of rumours, which I would not like to comment on.
But if you want to talk of our performance, I am sure that our performance will improve quarter after quarter.
ET Now: Analyst believe FY16 will be a soft year for you. What is you own take on that?
Ravi Pandit: As of now, our focus is on improving our productivity and efficiency. We are entirely committed to that. And I am quite sure that we will deliver.
ET Now: But how would that translate in terms of numbers?
Ravi Pandit: We believe that over the years things will improve in terms of numbers too.
ET Now: In FY16 as well?
Ravi Pandit: Yes, on a quarter-on-quarter basis numbers should improve.
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