ITeS biz up 70% YoY, to bid for UID project: CMC
Published on Thu, Jul 15, 2009 at 11:46
Source : CNBC-TV18
CMC's Q1 consolidated net sales stood at Rs 210.5 as compared to Rs 237.8 crore quarter-on-quarter. The company's consolidated net profit was down at Rs 28 crore as against Rs 38.5 crore QoQ. R Ramanan, MD and CEO, CMC, said the information technology enabled services business is up 70% year-on-year. He expects the topline to improve in FY10. "We would focus on improving margins."
According to Ramanan, the company will bid for the unique identification cards project (UID).
Here is a verbatim transcript of the exclusive interview with R Ramanan on CNBC-TV18. Also see the accompanying video.
Q: Your margins have inched up quite a bit, to nearly 15%. This has been a process for the last few quarters as you phase out your hardware business which is low margin. Is there more improvement on the cards or are these gains going to plateau off soon?
A: It's been a much focused initiate from CMC to grow the services business, to grow the high margin business, to de-focus away from the low margin equipment sale business. You can see that is paying dividends for us. We have had good start for the year. Year-on-year, our growth both in profits after tax (PAT) as well as in services has been 19%. Our services has grown by 12% YoY. In this market, we were pleased to find that we had grown in the international market, particularly in CMC America by 27% YoY and 5% growth quarter-on-quarter. These are all the result of a very sharp focus on the service portion of the business and the solutions portion of the business which include IT enable services, embedded systems, system integration, and software development. Our Information Technology Enabled Service (ITeS) business also grew by about 70% YoY. These are very strategic areas related to digitisation, workflow management, identity management, and so on.
Q: Along with improvement in margins, your topline of course is coming off as your hardware business gets phased out. Do you see continuing erosion of your topline YoY going forward because of this?
A: Going forward, I do think that we are going to be improving on the topline because we have reached stage of about 85% of our revenues coming from services. We are in the system integration business so are going to be addressing some large system integration (SI) projects where there will be a hardware component, but that will be an integral part of the overall projects. Therefore, the margins on the overall project would be much better than what we have normally being attempting. So, you are going to see definite increases to the topline. I don't think you will see further erosion but the emphasis will again be more on services and improving PAT and margins.
Q: Can you take us through the Passport Seva Project. Give us some details and how you see that panning out?
A: That is very much in progress right now in synergies with TCS. The pilots are going to be rolled out within the next couple of months and then there will be larger rollout at a national level. CMC is involved in the facility management, in the digitisation, in some of the system integration along with TCS. So, it's an interesting project and from the long-term it's a project that's going to be beneficial not only for the country but also for the company.
Q: Are you along with TCS going to be a frontrunner or a strong contender for the unique identity project headed by Nandan Nilekani?
A: Yes, the UID project is eagerly being looked upon by many companies. CMC definitely will be looking at it because of its native inherent strength in some of the areas that the UID project demands which includes identity management, biometric solutions, digitisation, workflow management, and a national presence. These are some of the areas that CMC has conventionally being strong in and in synergies with TCS just like in MCA. W will definitely be looking at that opportunity and are looking very optimistically at that opportunity.