Q4FY17 Concall Notes:
- Added 9 new clients in the quarter.
- Orderbook: 6 Months visibility. Average deal size has gone up by $100k. Managed to reduce the number of customers by only a handful. Hope to reduce the number of customers in FY18 by a more significant number, while increasing the revenue.
- Lenmar acquisition done for customer base (BNP Paribas, Deutsche Bank) to increase the revenue share from the BFSI segment (BFSI segment adopts newer technologies faster than others). Lenmar has $11M Revenue, 10% EBITDA.
- Total Headcount: 1400. Increase in Headcount in the quarter: 130 - out of which 100 from Lenmar (20% on H1B Visa), 30 hired in India (People hired from traditional IT will take about a year to be productive in digital technologies, & hence the hit on standalone margins this quarter).
- Technology excellence Group in Gurgaon is always on the lookout for new and emerging technologies. If we invest in 2-3 emerging technologies, hope is that one of them will pay off. Forayed into AI, blockchain & deep learning which already have paying clients.
- Competition: 1. With regards to Indian IT Biggies: A Bank in Ireland has Indian IT Biggies working on their traditional IT, but has asked Kellton to come up with their digital transformation/strategy. 2. Smaller companies have deeply specialized niches, but they can’t do a holistic big picture digital transformation like Kellton.
- Forex Pressure: Majority of loans in dollars, hence a natural hedge
- QIP/Fund raising will be done only when the market sentiment towards the IT Industry improves. Acquisitions, if any, will be done from internal accruals and debt (Debt is easily serviceable as of now, but don’t want to keep on taking debt to make acquisitions). D/E at 0.6 is same as last year although the debt in absolute terms has gone up.
- Increase in promoter Pledge to raise debt for Lenmar acquisition. No other tangible assets for an IT Company to raise debt from a bank.
- UP Govt still finding its feet, but they are positive about the mSehat platform & may increase it to beyond just 5 UP districts. They also want to use the platform for other services. No specific timeline on when this might happen. Talking to other states to implement mSehat. There are other platforms which have been built for other states which can be leveraged and replicated in any other state. Marketing will done this year.
- FY18 Guidance: 15-18% organic revenue growth, no guidance for inorganic growth.
- As of today still maintaining the 2000 Cr revenue, 16% EBIDTDA, 9-10% PAT margin guidance for 2021.
Disclosure: Invested.