- #Sensex, #Nifty extend decline
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Find out where money is moving in the market today with Hiral Dadia and Agam Vakil on 'Hot Money'. #NDTVProfitLive
- #Zee, #PersistentSystems, #Coforge, #IDFCFirstBank in focus
Find out where money is moving in the market today with Hiral Dadia and Agam Vakil on 'Hot Money'. #NDTVProfitLive
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TVTranscript
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00:02 - Hello and welcome.
00:27 You're watching NDTV Prophet.
00:29 I am Mahima Vacharajani.
00:30 Well, Persistent Systems is in focus
00:33 on the back of Q3 earnings
00:34 and we have with us Mr. Sandeep Kalra,
00:37 MD, CEO of Persistent System
00:39 to guide us through how the quarter has gone by
00:41 and what will be the forward outlook for the company.
00:45 Welcome Sandeep.
00:45 Firstly, congratulations on the positive numbers.
00:48 My first question to you is
00:50 that you've grown your top and bottom line
00:52 in a seasonally weak quarter.
00:54 What are you doing right that the larger players aren't?
00:58 - So first of all, thank you for having me
01:00 and a very happy new year to your viewers.
01:03 Let me first give you a high level color
01:04 on the quarterly financials and I'll answer your question.
01:07 So for Q3, we delivered $300.55 million.
01:10 This represents a 3% quarter on quarter sequential growth
01:13 and 13.7% on year on year basis
01:16 for the reference of your viewers.
01:17 Now, obviously, you know, compared to our viewers,
01:21 compared to our competitors,
01:22 we are a slightly different company.
01:24 We are not a general purpose IT services company.
01:26 We focus on vision and learning.
01:28 We focus on the aspects like product development,
01:31 application development, cloud-based application/
01:35 infrastructure management,
01:36 and bringing the tenets of AI to our customers.
01:40 So from that perspective,
01:41 we are more a modern application/product development player
01:45 and that is what is playing out very nicely for us.
01:48 On the other side, you know,
01:49 we are engaging with our customers to understand
01:51 how they are reacting in a weak macro environment
01:54 for themselves and being a part of their revenue-oriented plans
01:57 or cost reduction plans.
01:59 So that's panned out very well for us,
02:00 both in our existing customers and in new customers,
02:03 and has delivered a significant order book,
02:05 which was at $500 million plus for us in this quarter.
02:09 Okay, your total contract value revenues are at all-time high.
02:13 What is the sense that you're getting from the ground
02:16 on deal ramp-ups at present?
02:19 So look, we have been having good deal wins
02:21 over the last several quarters.
02:23 That is the basis for the revenue growth
02:24 that we see as of today.
02:26 Our pipeline continues to be healthy
02:28 and obviously we'll have to let the quarter span by,
02:30 but we are confident of our revenue trajectory
02:33 based on the deal wins over the last several quarters.
02:36 Okay, also your revenue from the top client
02:39 has declined approximately by 6% QOQ
02:43 after the continued growth of momentum
02:45 in the last three quarters,
02:46 but the total build active customers
02:48 remain flat sequentially.
02:50 Can you tell us as to why is that?
02:53 So look, there is always going to be seasonality
02:55 in certain customers versus the other.
02:57 So we look at our customers as a portfolio of clients
03:01 that we have, and if you look at our top client,
03:03 the top client has done very well
03:04 over the last several quarters.
03:06 This quarter, we saw a planned ramp-down
03:08 of a particular program,
03:10 and that is what contributed to the small ramp-down
03:13 that we have seen in this particular customer.
03:15 But if you look at our overall customers,
03:18 let's take a look at even the top 50 customers.
03:20 The top 50 customers were 3.4%
03:23 compared to the overall 3% at the company level.
03:26 And if you look at the order wins,
03:28 they are good forward-looking indicators of things to come.
03:31 Okay, and in terms of margin,
03:33 you've grown your EBIT margin by 82 basis points
03:36 as well as you've added to your headcount in Q3.
03:40 How did you manage that,
03:41 and where do you want the end of the year to go
03:44 in terms of margin front,
03:46 and what kind of margin levers do you have in mind
03:50 that you're planning to achieve?
03:52 - Sure, so if you look at the quarter gone by,
03:55 we expanded the margins by 80 basis points.
03:57 This was on the back of higher utilization,
04:00 lower travel expenses,
04:01 and more of SD&A and other rationalization,
04:04 the cost containment that we do on an ongoing basis.
04:07 So this quarter benefited from these things.
04:10 As we go ahead, we have very clearly said
04:12 over the next several years,
04:13 we want to expand our margins by 200 to 300 basis points,
04:17 and that is based on optimizing our overall operations
04:20 right from our SD&A,
04:22 which is roughly about 50 basis points higher.
04:24 We compare the nine months of this year
04:26 versus nine months of last year.
04:28 By utilization, we are at 81.5%.
04:31 We intend taking it up to 200 to 300 basis points,
04:36 and then, obviously, we've had a significant amount
04:38 of leadership and built capabilities
04:40 that should give us leverage over the next several years.
04:43 So you should see margin improvement
04:44 over the next several years,
04:46 especially as we go ahead.
04:47 - Right, okay, so margin improvement
04:49 in the next coming years.
04:51 That's the outlook.
04:52 Great.
04:52 Talking about the merger of Capyote Software,
04:55 I hope I'm pronouncing that right,
04:56 has been approved in this quarter.
04:58 Can you tell me what are the synergies
05:00 that you're expecting out of this merger?
05:03 - Yeah, so Capyote is an entity
05:04 that we had acquired a couple of years back.
05:06 So right now, it is more of legal entities
05:10 getting merged rather than any more synergies
05:12 that we expect out of it.
05:13 So from that perspective,
05:15 it is an acquisition that has planned out very well for us,
05:17 and this is just an ongoing activity.
05:19 - Okay, all right.
05:20 In terms of deal-making,
05:21 US clients have just about decided
05:24 on their budgets for 2024,
05:26 and I'm sure your conversations
05:28 with potential clients have already started.
05:30 What is the sense that you're getting out of them
05:32 in terms of deal-making?
05:33 Like, is their decision-making still delayed,
05:36 or when will the discretionary spends return?
05:40 - So if you look at our overall discussions
05:43 with our customers, these are ongoing things.
05:45 Obviously, yes, the December month
05:47 is the end of the fiscal in the US,
05:50 and we have been in continuous discussions
05:52 with our customers.
05:52 They are cautious about the macroeconomic environment.
05:55 Having said that, there are discussions we have
05:58 on their revenue enhancement
05:59 and cost containment programs at large,
06:02 and we have a fairly healthy pipeline
06:03 with our existing customers,
06:05 as well as some good discussions with newer prospects.
06:07 - Okay.
06:08 Also, Sandeep, talk us through the rationale
06:11 for the proposed stock split.
06:12 I believe the shares with face value of 10 each
06:14 will now be split into rupees five each, right?
06:17 - Right.
06:18 So in the quarter gone by,
06:20 rather the board meeting over the last several days,
06:22 there were two significant things that we announced.
06:25 One was the dividend, which initially,
06:27 the interim dividend is announced
06:28 in this particular quarter for us.
06:30 So we announced an interim dividend
06:32 of 32 rupees per share,
06:34 and the second part was the stock split.
06:36 A number of our retail investors
06:38 had been requesting us to split the stock
06:41 to make it more affordable for them
06:42 to participate in the journey,
06:44 and that's the bigger rationale behind it.
06:47 It doesn't change anything much
06:48 on the financial side of it,
06:49 but that's basically the rationale of it.
06:51 - Okay, and in terms of your biggest business verticals,
06:55 BFSI Healthcare and Software, Hitech,
06:57 how are they performing?
06:58 Any signs of weakness in terms of software or Hitech?
07:01 And any green shoots in BFSI,
07:03 given the macro situation in US at present?
07:06 - So look, in BFSI, there are certain dynamics
07:09 that play out in the last quarter
07:11 of every fiscal year from a US perspective,
07:13 and we see traditionally,
07:15 we and all our peers in the industry see some furloughs.
07:18 So that panned out in the last quarter.
07:20 Now, if we look at the current quarter and beyond,
07:23 if you look at the BFSI side of it,
07:25 there are certain things where the dynamics
07:27 in the sector are playing out.
07:30 The fact that there could be an easing of interest rates
07:33 and that would reduce their net interest income,
07:35 it's likely to add more on the cost pressure for them,
07:38 and traditionally, whenever something like this has happened,
07:42 offshoring has been at a more heightened clip
07:45 in the subsequent quarters.
07:46 There are other things like regulatory support
07:48 around fraud monitoring, remediation,
07:50 compliances, et cetera, as well,
07:52 which are time-bound, things like ISO 222,
07:56 by the end of 2025.
07:58 So there's a bunch of things panning out.
08:00 So we hope and expect that over the next two to four quarters
08:03 the sector will also start coming back
08:04 and start seeing some good growth there.
08:07 All right, and my last question to you would be,
08:10 can you give us an outlook for FY24 and 25
08:13 in terms of your top-line, bottom-line growth?
08:17 So we do not give forward-looking guidance,
08:18 but if you were to look at the forward-looking indicators,
08:22 the contract value that we announced,
08:23 the order book that we announced,
08:25 is a very good forward-looking indicator.
08:26 So I would urge you to look at the order bookings
08:29 that we have done over the last several quarters,
08:31 and you can understand from that the trajectory going ahead.
08:34 Right, so a healthy order book
08:35 is what is going to take you further ahead.
08:38 That's awesome.
08:39 Thank you so much, Mr. Sandeep,
08:41 for taking out your precious time
08:43 and speaking with us at NDTV Profit.
08:45 It was a pleasure talking with you.
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11:39 - Hello and welcome to NDTV Profit.
11:45 Joining us today is Mr. Sudheesh Singh.
11:47 He is the CEO of CoForge.
11:49 He's speaking to us a day after the company's
11:51 third quarter earnings,
11:53 where the revenue rose 1.8% in constant currency terms.
11:58 The EBIT margin expanded by 196 basis points to 13.5,
12:03 while net profit jumped by almost a third to about 240 crores.
12:07 Mr. Singh, welcome to NDTV Profit.
12:09 - Thank you, it's a pleasure to be here.
12:12 - Stellar set of numbers as we can see.
12:16 So that also in a seasonally weak quarter, sir.
12:18 So can you tell us,
12:20 has the seasonality affected you in some way?
12:22 There has there been impact with the furloughs
12:24 on your earnings in the third quarter?
12:26 - It has been, this was a pretty tough quarter
12:30 because furlough this time, very, very significant.
12:33 And if I were to even contrast them
12:35 to just over the last couple of years,
12:37 they've been significantly higher.
12:39 The revenue growth has come largely on the back
12:41 of the ability to execute against plans.
12:45 And also on the back of the large deals
12:48 that we've been signing on a consistent basis,
12:50 but furloughs did affect us through the quarter.
12:53 - Okay, we also see that you have a very healthy order book.
12:57 If I'm correct, if I'm not wrong,
12:59 you have clocked about eighth straight quarter
13:02 of $300 million deal wins
13:06 in the October, December period.
13:08 So what does the executable order book look like
13:12 at this point of time?
13:13 And have the deals actually started
13:15 to meaningfully convert into revenues?
13:17 - They have, if you look at us,
13:20 and it's not just eight quarters,
13:22 as you rightly said of $300 million plus deals.
13:24 What's always marked us out is when we do talk
13:27 about large deals, we follow that up with revenue growth
13:29 in the subsequent quarters.
13:30 So as we look at our current pipeline,
13:35 we feel very good, we feel very confident
13:39 about the fact that the deal velocity is likely to sustain
13:42 and that it will continue to drive growth for us.
13:45 If you look at our results at the end
13:46 of the first three quarters, year to date,
13:49 end of the first three quarters, we are growing 14.7%.
13:53 This is constant currency growth, this is all organic growth.
13:57 So we're doing that currently off the back
13:59 of the large deals that we have been signing.
14:01 This year, we've already signed eight large deals.
14:04 Last quarter, quarter three, seasonally week quarter,
14:07 we've signed three large deals.
14:08 So I expect the large deal velocity will sustain
14:12 given the pipeline that we're looking at right now.
14:15 - What is the size of the executable order books
14:17 if you could give us some color on it?
14:19 - It's a $974 million.
14:22 We're very close to a milestone
14:24 that we've been looking at for a while now,
14:26 which is a billion dollars in terms of order executable.
14:29 Our order executable also, interestingly,
14:31 is not just signed orders extrapolated
14:34 over the next 12 months.
14:36 It is just a simple arithmetic addition
14:39 of all statement of work signed.
14:41 So if something's been signed only for three months,
14:43 that's the only period that we add to.
14:45 Currently, it's at 974 million,
14:47 tantalizingly close to the $1 billion mark
14:50 that we've been looking forward to.
14:52 - Okay, so would you say that that overhang
14:55 of the slowdown of the US macros has now lifted?
14:59 How's the demand environment looking now?
15:01 So I'm asking from the point of view
15:03 that this is the time around when US clients
15:06 set out their budgets for the next calendar year,
15:08 that is 2024.
15:10 So what are you gauging from the conversations
15:14 that you're having from clients?
15:15 Are the macros a thing of the past?
15:17 Has the wheel of a slowdown, so to speak, lifted?
15:21 - No, it's clearly not lifted.
15:23 And our performance this year has come
15:25 despite very weak macros.
15:27 As we are planning for the future,
15:29 we hope to turn in robust, sustained, profitable growth.
15:33 But as far as planning is concerned,
15:35 we are assuming that the next year
15:36 is likely on the demand front to be a repeat of this year.
15:41 And I wanna underline this again,
15:42 our performance has come despite very weak macros.
15:45 We do not see any material uptake in demand anytime soon.
15:49 - Okay, but from that perspective as well,
15:52 you're still maintaining your revenue guidance for FY24
15:57 as well as the EBITDA margins for this particular fiscal.
16:02 What is giving you the confidence again?
16:03 I think it's the individual wins that you are seeing so far.
16:07 Will that have a spillover effect into FY25 as well, sir?
16:11 - No, obviously it will.
16:12 I mean, even if you look at this year,
16:13 where fiscal year 24, that's going on three quarters down,
16:17 the macros were very bleak,
16:19 the macros have been depressed,
16:20 and yet we've turned in at the end of three quarters,
16:22 14.7% CC organic growth.
16:27 We believe our revenue guidance for the full year,
16:30 and interestingly, we're one of the very few firms
16:32 that gave a very clear, explicit range for growth
16:35 at the beginning of the year,
16:37 and we've been able to hold onto it and to deliver on it.
16:40 So as we look at next year,
16:43 large deals will obviously flow into revenue numbers
16:46 and will drive growth next year as well.
16:48 - Okay, finally, as far as your human resources are concerned,
16:53 what is the attrition looking like at this point of time?
16:56 Are you going to be hiring this year?
16:58 Because I'm asking because a lot we have heard
17:00 from conversations from other IT companies,
17:02 they're not giving us a very clear picture
17:04 about the hiring plans for this year.
17:05 So can our campuses look forward to CoForge
17:09 on their hiring season?
17:12 - Oh, absolutely.
17:14 They should and they will.
17:16 We are a growth firm.
17:17 We are crystal clear that the number one, number two,
17:19 number three priority for CoForge is driving growth.
17:22 We are confident about the fact
17:24 that despite the weak macros,
17:25 we will again figure out a path to growth
17:27 as we did in the current year.
17:29 So hiring will continue and hiring will be in line
17:32 with our growth numbers next year as well.
17:35 - All right.
17:36 Thank you so much, Mr. Singh,
17:37 for having this conversation with us.
17:39 All the best for the year that's going to come for you.
17:42 - Thanks, bye-bye.
17:43 - Thank you.
17:44 Thank you viewers for tuning in.
17:45 This is Prasad for Indie Profit.
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21:59 - Hello and welcome to NDTV Profit.
22:03 You're watching the earnings review for Tuesday.
22:07 Now we have IDFC First Bank,
22:10 which reported its numbers on Saturday.
22:12 Profit growth of about 18%,
22:14 NII up about 30% year on year.
22:16 I have with me the MD and CEO of the bank,
22:18 Mr. V.Vaidhanathan.
22:20 Mr. Vaidhanathan, welcome to the conversation.
22:22 First question, what is this gap between NII
22:24 and net profit growth?
22:26 If you can explain what happened here.
22:29 - Our optics was a little higher than what
22:32 it should have been, about 70 odd crores.
22:36 So on a post-tax basis,
22:37 let me call it about 40, 50 crores.
22:39 And I think we probably did a little below par.
22:43 - Okay, just trying to get a sense of the
22:47 elevated provisioning number as well.
22:48 That's about 45%.
22:51 I wanted to get a sense as to where
22:53 this provisioning has gone in,
22:54 because you mentioned that AIF was not a problem
22:56 for IDFC First.
22:58 - No, of course we don't have any AIF exposure,
23:01 but the provisions basically last quarter same time,
23:08 the recovery from COVID write-offs were coming,
23:11 while now that has ebbed off.
23:14 So think of this as more normalized times.
23:17 And even these numbers are like 1.3%
23:19 credit loss to average book.
23:20 We already got it for 1.5.
23:23 So it's absolutely normal.
23:26 You should expect these sort of provisions
23:27 every quarter now,
23:28 because that's the nature of the model.
23:32 - Right, sir.
23:35 On the net interest margin front,
23:37 you've reported a 10 basis point upward move
23:39 on a sequential basis.
23:41 I just wanted to get a sense,
23:42 you're already on the higher end of the NIM bracket.
23:45 A 10 basis point improvement would mean that
23:48 basically your lending yield is significantly higher
23:52 than what the rest of the industry is working with.
23:54 - Yeah, it's very simple actually.
23:56 Last quarter we dropped our rates on savings accounts
24:01 from 4% to 3% for up to one lakh rupees.
24:06 So that obviously helped us in improving the margins.
24:10 We feel it to be stable here.
24:12 We don't see any concern on this front.
24:14 And the good thing is that with these margins
24:17 we're also getting very stable asset quality.
24:20 So as a combination, it should be seen.
24:22 Gross NP is only 1.45% on retail,
24:25 retail SME and rural, and net is only 0.5.
24:28 So good asset quality with good yield.
24:30 It's a good combination.
24:31 I think it's a unique position to have in the industry.
24:34 - Okay.
24:35 During the quarter, you also gave a five-year guidance.
24:37 Now guidance one point was done.
24:41 You're looking at the second five-year period.
24:44 Tell us a little bit about the numbers
24:46 that you've listed out in your releases.
24:48 20% balance sheet growth.
24:49 You're guiding for about 17, 18% ROE.
24:53 Looking at about 1.5% on the gross NPN.
24:56 I think 0.4%, less than 4.4% on the net NPA.
24:59 How are you achieving these numbers?
25:02 - We have put reasonably achievable numbers in our opinion
25:06 because what we've done is we've just assumed
25:08 that the loan book will grow by 20%,
25:10 which in this country growing 20% is not difficult.
25:13 We're already growing at 25%.
25:14 In fact, we'll slow down to come to 20%
25:16 if at all we come there, or as we go there.
25:18 So that should be a loan side.
25:22 Deposit was assumed only at 24.5%.
25:24 So we feel it's easy to achieve
25:26 because we're already growing at 40%.
25:28 So if we just meet these two numbers,
25:30 the loan book at the end of fifth year
25:32 by our, let me say, informed guidance,
25:36 informed guess, which is converting to guidance,
25:39 is that we'll have a loan book of about 5 lakh crores.
25:42 We'll have a deposit base of about 6 lakh crores, or 585.
25:47 And then with that, we believe
25:50 we'll still be growing at 20%.
25:53 We believe our return equity will touch 17, 18%.
25:57 And we have fantastic intellectual property
26:01 because it's a unique bank and a very good model.
26:04 So I think that sort of picture we are aiming to get.
26:09 And the numbers are reasonable, we believe, are achievable.
26:12 - But you said that you would have to actually slow down
26:15 from the current rate to match the guidance.
26:18 I'm trying to understand where this is coming from.
26:20 Is it largely because you're probably going to look
26:22 at reshuffling the loan book a little bit?
26:25 - No, no reshuffling
26:27 because we like all our businesses we're building,
26:29 except that currently growing at 24.5,
26:33 our main focus is asset quality, asset quality, asset quality.
26:36 We take big pride in the fact that our gross NPA is 1.5,
26:39 and it is 1.5.
26:40 That's a bit of a, you know,
26:43 that's something we like to state,
26:45 and we want that badge of honor.
26:48 So for us, big focus is asset quality.
26:51 And then we have guided this number.
26:54 If we could go a little bit, maybe a percent or two,
26:56 more than that, we will definitely do.
26:58 Yeah, yeah. Mhm. Mhm. Mhm. Mhm. Yeah.