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The company exceeded analyst estimates with its second quarter (April-June) consolidated net profit growing 23.6 percent quarter-on-quarter to Rs 98 crore. Its consolidated rupee revenue grew by 5.7 percent Q-o-Q to Rs 536.6 crore and dollar revenue rose marginally to USD 94.8 million from USD 94 million.
"We believe the growth momentum should sustain which is reflected in our guidance of 3.5 to 5.5 percent growth in the coming quarter," he added.
He further added that the company has bagged four large deals worth over USD 25 million each Hexaware added 14 new clients in second quarter and its attrition rate was 11 percent.
Below is the edited transcript of his interview with CNBC-TV18:
Q: It is a good performance from both the middle IT companies as well as the large IT companies- tell us how is the business looking. Is it that there are more orders out there? Is there less pressure on billing? Draw up the macro environment for us?
A: This quarter we saw that both in North America as well as in Europe we are seeing the business momentum coming back for us which is a reflection of macro environment that we see the existing clients looking at growth as also new clients coming in our fold so, the environment in our view is clearly improving both in major markets- North America and Europe. We have not seen any pressure on pricing at all. The rupee has helped us but we do not see any pricing issue going forward as well. We believe the growth momentum should sustain which is reflected in our guidance of 3.5 to 5.5 percent growth in the coming quarter.
Q: The thing that surprised me the most positively is the way you held on to your margins and you grew it all the way to 23.7 percent mark what is the trajectory looking like as we head into the next couple of quarters. You think margins could be sustainable and perhaps because of the way your currency is moving etc could improved as well?
A: First to recap- the EBITDA margin improved to 23.7 percent and the gross margin also improved to 39.4 percent. We have been working for improving margin on a consistent basis. The Q3 also and the margin has gone up so much by almost 400 plus points. We expect the margin to sustain at the current level, assuming the rupee-dollar at 59.5 and let us see in the narrow band of one percent plus minus. We expect healthy margins to sustain for longer period.
Q: If that is the call on margins 23.7 or thereabouts what is the basis on which you are giving such a huge uptick in guidance? Your previous guidance was 2 percent for the quarter gone by and now your guidance has been up substantially 3.5-5.5- what is the basis?
A: We acquired 14 new clients this quarter. The top 10 clients have gone up from 51 percent of our total revenue of quarter back to 53 percent now. The momentum that has come back in North America and Europe is giving us the confidence of
going forward. We feel that it is not just one more quarter but we should see the growth sustaining, not giving the exact percentage but growth sustaining over a longer period of time.
Q: Actually your volume growth is muted at this point- 1.5 therefore how much will you have to pep it up to be able to deliver a guidance of 3.5-5.5?
A: We have already seen the momentum coming some time in the middle of the quarter so we won the new business from the existing new client which is reflecting partly in Q2 in terms of 1.5 percent volume growth and the balance will see in the coming quarter. We saw the momentum that came in sometime in the middle of quarter for us that will reflect.
Q: Doubling the pace of volume growth will not be a problem?
A: We have seen towards the end of the quarter the pace had already improved so that gives us confidence that it will sustain plus the orders that we booked during the quarter. Apart, from that the pipeline is strengthening fast, the large deals pipeline is looking pretty good once again.
Q: I am looking for a number on volumes?
A: I don't have the exact number for the next quarter volume but coming back to the large deals we have four large deals over 25 million each in the pipeline two of over 10 million and we expect around two of these deals to close in the next one or two quarters since we are quite well placed there.
Q: What about utilisation levels last time you had indicated to us that because of rational hiring and improvement in growth utilization levels would rise further what kind of a range are you looking at over there?
A: Utilisation improved to some extent to 70.9 percent compared to last quarter. I would say at the moment we would guide for more or less stable utilization. Our efforts are to improve that further. We won't guide for that yet because we are preparing for growth as well.
Q: I just wanted to ask you, this is the question that we asked all the IT guys about the US immigration bill and the risk that it would pose to the onsite revenue growth what could the impact be for a company like Hexaware?
A: First of all, one positive thing out of that, that would happen is that it will force the clients as well as us to go more offshore. Where ever margins are significantly better, stickiness is better and the incumbent effect will only increase in our favour in that case. That would be a big positive in terms of margins and sustainability of business.
As far as Hexaware is concerned, we are at 32 percent non H1L1 and we have done our planning for coming year and we believe that we can cross 50 percent non H1L1.
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