Infinite Computer Solutions (India) Limited Earnings Conference Call Q1 FY18

Transcription

1 Infinite Computer Solutions (India) Limited Q1 FY 2018 Earnings Conference Call Transcript August 16, 2017 Infinite Management: Managing Director & CEO SANJEEV GULATI Executive Vice President & CFO MODERATOR Ladies and gentlemen good day and welcome to the Infinite Computer Solutions (India) Limited Q1 FY18 Earnings Conference Call. As a remainder all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing * and then 0 on your touch tone phone. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors, thank you and over to you sir. Anuj Sonpal Thank you Lizann. Good afternoon everyone and a warm welcome to you all. My name is Anuj Sonpal CEO of Valorem Advisors. We represent the investor relations of Infinite Computer Solutions (India) Limited. On behalf of the company and Valorem Advisors, I would like to thank you all for participating in the companies earnings conference call for Q1 FY18. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today s con-call may be forward-looking in nature; such forward-looking statements are subject to risks and uncertainty which could cause actual results to defer from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to management. Audiences are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. I would now like to introduce you to the management participating in the concall with us today. We have with us Mr. Upinder Zutshi Managing Director & CEO and also Mr. Sanjeev Gulati EVP and Chief Financial Officer. Without much ado, I request Mr. Zutshi to give his opening remarks, thank you and over to you sir. A, very good afternoon to all of you, thank you for taking the time out to attend this call. I will give you a brief overview of the quarter and then I will request Sanjeev to give you a detailed read out of the numbers. 1 P age

2 Briefly, I think it has been a fairly good quarter in terms of new business and also in terms of the growth in revenue. We have had significant success in that and I will share with you some of the details and some of the projects that we have signed up and started executing in this quarter. Briefly as you see from our presentation, the revenue in the first quarter grew by 16% in USD terms on Q-on-Q and profit after tax in USD terms grew by 25%, so there has been a significant growth as far as the revenue is concerned, just to give you the detailed numbers in INR terms the revenue is at Rs 720 crores which is up about 11.6% Q-on-Q and 34.8% year-onyear. EBITDA is at Rs crores which is up 4.8% Q-on-Q and down 6.4% year-on-year. PAT in INR terms is Rs crores which is up 20% Q-on-Q and down 10% year-on-year. In terms of USD, we clocked revenues of $ million in the first quarter which is up as I said 16% on Q-on-Q and up about 40% on year-on-year. As far as EBITDA in USD terms is concerned, it is about $ 6.95 million which is up 8.9% quarteron-quarter and down 2.8% year-on-year. PAT in USD is 4.24 million which is up 24.9% Q-on-Q. As you can see there has been a significant growth in revenue, however, at the same time, I would also like to say that the margin growth has not been in proportion to the revenue growth and the reason for that largely has been the very aggressive pricing that we have used in acquiring some of the transition business from two of our major clients in the first quarter. Where in order to acquire the business, we had to be aggressive as far as pricing is concerned. We had to show upfront savings to the customers and also had to absorb the transition cost. These are fairly large programs that are being transitioned from the incumbent vendor which is you know a tier 1 company, so in order to do that, that is what we did in the first quarter, so as a result of that while the revenue grew significantly, the margin did not grow in the same manner though it was much higher than the last quarter but definitely lower than quarter four of last year. However, having said that I think once these projects and the new businesses that were acquired in the first quarter, come into the steady state which could happen towards the end of Q2. We will see both these programs contributing very significantly to our bottom line and that will hopefully enhance the bottom line margins as well. So overall a very good quarter as far as the revenue growth and acquisition of new business is concerned. We will also continue to acquire new clients actually in the healthcare vertical where we had seen good traction, good pipeline is being built both in the healthcare provider space that is the hospitals as well as the insurance companies, which will continue to grow and we will see increased contribution from the healthcare vertical in the quarters to come. From a cash perspective, cash and cash equivalent has gone up to Rs crores, free cash flow of Rs 2.7 crores for the quarter, cash per share is about Rs 93 and EPS in the first quarter is about Rs 8.22 So that is very briefly about the first quarter. 2 P age

3 As far as the outlook is concerned, at the start of the year, we had given a guidance of revenue growth of 10% to 12% and margin growth of 5% to 10%. At this stage based on the outlook and based on what we are seeing, I think our revenue growth will be much stronger than what we had earlier anticipated and we expect the revenue to grow anywhere from 20% to 25% this year so that is a significant increase from what we have guided at the start of the year. As far as the margin guidance is concerned, there are a number of things that are going on right now which can significantly impact the margin. We will perhaps be in a better position to revalidate that guidance at the end of the second quarter, so at this time, I would continue with earlier guidance of what we had given for the margin growth; however, increased revenue guidance from 10 to 12% to 20% to 25%, so with that I will now handover to Sanjeev to give you a detailed read out of rest of the numbers. Over to you Sanjeev. SANJEEV GULATI Thank you everybody for joining this call. Now I will take you through some of the numbers for this quarter and the various revenue analysis matrices. So far as Revenue by Offering is concerned, Technology Solutions contributed about 85.2% compared to 83% in the previous quarter and there was a substantial increase in absolute terms too. Mobility was 7.5% compared to 8.2% in the last quarter, in absolute term it was flat. Product Engineering was 7.3% compared to 8.8%, in absolute terms it was flat. Revenue by Industry, telecom and media contributed about 25.5% compared to 29.4% in the previous quarter, in absolute terms it was again flat, Technology contributed about 49.2% compared to 43.9% in the previous quarter and this was up substantially. Healthcare contributed 22.2% against 23.4% in the previous quarter, in absolute term this was up. BFSI was 0.2% compared to 0.2% in the previous quarter flat, Revenue from others was about 2.9% compared to 3.1% in the previous quarter. Revenue by region, US continue to be a predominant region from where we get business. The US contributed about 90.2% in this quarter compared to 89.1% in the last quarter. Europe contributed 0.5% compared to 0.7% in the previous quarter. India was 5.3% compared to 5.4% in the last quarter. APAC was 4% compared to 4.8% in the previous quarter. Revenue by model - Time and material contributed 74% as against 73% in the last quarter and it was up in real terms. Fixed Bid revenues were about 17.4% compared to 18% in the last quarter again this was up in absolute terms. Revenue share contribution was 8.5% compared to 9% in the previous quarter, in real terms this was flat. The top client contributed 62.6% compared to 60.3% in the last quarter. Top five clients contributed about 81.6% compared to 82.5% in the previous quarter. Top 10 clients contributed about 91% compared to 91.6% in the previous quarter. So far as the client mix is concerned clients giving us revenue of more than $ 1 million increased from 16 to 19 in this quarter. Clients giving us revenue of more than $ 5 million were 8. Clients giving us revenue of more than $ 10 million were 6. Clients giving us revenue of more than $ 20 million 3 P age

4 were 3. Clients which are giving us revenue of more than $ 50 million was 1. Now we look at the revenue mix, the onsite revenue was about 88% compared to 87.2% in the previous quarter. Offshore was about 12% compared to 12.8% in the previous quarter. The billing rates which are only indicative, onsite was about $ 82.4 and offshore were about $ So far as the people matrices are concerned the head count increased to 5236 from 5001 in the previous quarter. Employees in India increased to 2459 compared to 2423 in the previous quarter. Employees outside India was 2777 compared to 2578 the increase was mainly from US. Net additions in head count during the quarter were 235, global attrition was pretty much the same as in the last quarter which is 19.12% and utilization was at 82%. The DSO for the quarter was 109, earnings per share were Rs 8.22 and cash per share was Rs 93 compared to Rs 85 in the previous quarter. Net worth was Rs 895 Crores compared to Rs 868 in the previous quarter. Gross margin to revenue percentage was 23% this quarter. SGA to revenue was 16.9%, EBITDA was 6.2%, PAT of 3.8 % and effective tax rate for the quarter was 27%. So that is all from my end and we will now be very happy to take any questions which you may have. MODERATOR We will take the first question with the line of Rajeev Agarwal from Doordarshi Value Advisors, please go ahead. First question I have is our revenues grew significantly as you mentioned but clearly a lot of that is coming from our top client. You have mentioned I think in the previous call that given we are in the vendor shortlist this should grow and we are seeing that, so the first question is you know where you see this business a few years out, do you feel like this sort of growth can continue, I mean what is your view right now. Rajeev as far as the top client is concerned, we will definitely see growth this year and that is largely because of the vendor consolidation. Beyond this year, you know we may not see the kind of growth that we have seen this year because the overall the pie is not growing, it is just that our share of the pie increases because some of the vendors have moved out. So we will see growth this year quite significant and beyond this year I think it would unless things change which we are not aware of but if it is business as usual then it will come back to normal growth you have seen in the last couple of years. Right and what sort of margins are you getting on this incremental business, I mean is it still the 4% sort of margin that you have talked about in the past. 4 P age

5 It is similar this quarter because of the transition, so we had to take a hit on the margins but that is only for this quarter because there is a transition cost that we had to absorb but otherwise in steady state it would be very similar to the margin that we are seeing for this business in the past. And actually I did up the calculation which is to assumed for a similar margin as what we had in the past with this particular client and what I noticed was that may be the margin in the rest of the business were sort of shrinking a little bit but may be that is because of the transition cost, is that a fair way to assess this. I think on a very rough basis if you split the two businesses, I mean you see Q1 is slightly a outlier because of the transition cost. One is transition cost and the other a client which is in the top 5, we also got a transition deal from an existing tier 1 company. So there we had to give upfront savings to the client so that has resulted in an impact on the margin for the first quarter and to some extent in the Q2 but if you ignore that then you know roughly the non-top client business has an EBITDA margin currently at around 15%, which we will see going up quite significantly in Q3 and Q4. Okay that is pretty impressive, because I was seeing at least a trend where the margins were compressed but may be that is some transition as they are saying so I feel like it is will go up and that is very impressive. Also we had this healthcare client which was our $ 100 million client and the last year we talked about the margins getting optimized, so do we feel like our margins are optimized there, do we continue to be in that state or has it further moved around a little bit. The project that I talked about where we had savings and all that, so that is happening and there have been certain developments with the clients you know they are also doing vendor consolidation in fact there could be a significant amount of transition business that may come across in the next few quarters whether that comes to us or not we have to see. Aggressively going after that and at times at the cost of the margin but because we want to acquire as much we can from this client which is an opportunity to increase our size of the pie. 5 P age

6 Yeah, the other one is the added 9 new clients that is you not see a breakdown of where these client additions came from, could you talk through that. There are two clients if I remember correct, actually there are two clients from the healthcare the two hospitals that we signed and there is two from the healthcare, there is one in the product engineering which is a fairly large client and rest are of Netsfere which is in the mobility space. Right, how is that going next year Netsfere, EMS and Zyter, whatever, any update there. Netsfere and EMS, they are chugging along, I mean we are signing more and more clients but the revenues are not growing as significantly as we had thought. The clients are showing interest and the numbers of clients that are signing up are increasing and number of paying clients is increasing but adoption within those clients is not as widespread as potentially they could be, so we are hoping that, that can start happening soon. As far as Zyter is concerned I think there is a lot of exiting opportunity that we are pursuing and if all goes well then perhaps on the next call we may make a couple of announcements. That seems to be going quite well right now. Thank you. I was just looking at our sales SGA expense which we broke down in the fact sheet, it is up a little bit like between last year same quarter versus this quarter but are we seeing sort of the benefit of that expense in terms of additional revenue from our new client or I mean may be more importantly can you explain to us how your sales team is organized so that how do you look for new revenues and new client, is it by region, is it by product and sort of how are you looking to grow. Okay, so first of all, at the highest level the company is divided into three businesses, mobility, product engineering and technology solutions. Each of these three businesses has their own sales and sales support teams, so these are definitely autonomous units. So the sale strategy for each of those three businesses is slightly different. As far as the technology solutions is concerned, it is largely meeting as many clients, meeting them participating in the conferences, generating leads either cold leads or through somebody that you know through sales people who we hire they know plus traditional sales effort, so that is one part of the sales strategy. The second part of the sales strategy is the mining strategy where we have client partners, who try to increase our size of the business within the existing client because you know for most of the clients that we work with, their spending is huge, so as of today, we have 6 P age

7 in certain cases small share in certain cases reasonable share of their spend. Lot of effort is being put to keep mining those accounts which we have successfully done all these years. There are a lot of opportunities and it is always easier if you have an existing client, it is always easy to mine rather than getting a completely new client and trying to grow that client, so we use both the strategies. In terms of the profile of the people, they are largely hired in the US most of them are US citizens, American, or Green card holders very experienced and senior people who have been in the industry for a long time and who can walk in with some relationships. The strategy with respect of product engineering is also very similar to that of Technology solutions where we have feet on the ground and they keep meeting the clients and try to acquire new clients or increase our share. Mobility is a combination where a lot of it is google marketing, lot of it is sales book marketing or conferences; lot of it is through conferences, because that is more of a psychological play. So there our marketing spend is much higher than the other two businesses, so in terms of sales the number of sales people may not be many. We have couple of them in Europe, couple of them in APAC and the couple of them in the US but lot of spend is done on the marketing of those products because that is a product business. We have a sales team and then it is also supported by the COE or the presales solutions team. Lot of them are in the US and some of them are in India supporting the US team. That it is front loaded and quite heavy. Right and do we expect that similar run rate going forward on the SGA is that right level you see. SG&A as a percentage should come down but we would further invest in that and as an absolute number it would go up in my view but as a percentage our internal target is that it has to come down And one last question and this is a bookkeeping question, sir I see quite a bit of cash on our books and at the same time I see borrowing. I know in the past year we had money in different regions and there we have cash but then I look at the other income I do not see a lot of other income right, I am just curious to see to understand how you know where is the cashflow of a borrowing and what sort of ease are we getting on the what we have as an asset versus the borrowing cost. Okay, first part I will answer and the second part I will request Sanjeev to answer. The first part is in terms of cash I mean, there is a reserve cash which is sitting with us and which is being invested and Sanjeev will tell you how much that is and how it is being invested and there is cash which is in circulation which is with the operative entities in working capital. So the 7 P age

8 money that is in working capital or with the operating entity is not generating any interest because you know that is just in current account. Money that has been reserved that generates an interest income and Sanjeev is going to talk about. Now while we have Rs 300 plus crores cash, we still have a line of credit in the US to support the working capital requirement, so we are sure that most of the cash is sitting in India, so that is why in certain cases the US entities would need working capital support, it is a line it is not a loan, so majority of the Rs 300 crores that cash that we have sits in India, so that is first part. The second-part Sanjeev if you can answer in terms of our investment how much is invested and what return are we getting. SANJEEV GULATI Rajeev at the end of the quarter, we have Rs 307 crores which was there in cash, out of that about Rs 100 crores was invested in FDs in India, so that gave us an yield of about 6.7% in this quarter and amounts invested in the past we were getting a yield of about 6.5% to 7%. The balance of the amount which is about Rs 200 crores is split between India and other overseas entities. Right and so effectively we need like Rs 200 crores as sort of something that we need for our ongoing expenses. I would assume that our line that we have in US is not very expensive right given the interest rate. SANJEEV GULATI No it is not very expensive. One of the reasons why we are taking the line is because of the transfer pricing money is coming to India, the other is just arbitrage I mean the line is at much lower than 6% to 7% that we are getting in India. I mean just curious Rs 200 crores as a floating seems a little bit on the high side or you feel like that is optimized? It is fully-optimized. I mean if we fully optimize then we may be able to shift some more money from the operations in to reserves. 8 P age

9 Great. I appreciate that. MODERATOR The next question is from the line of Prateek Barasia and individual investor, please go ahead. PRATEEK BARASIA I wanted to understand about the employee expenses and how it is affecting the EBITDA margin for instance in 2014, I think the employee cost had drastically increased and become 82% of our revenues and it has remained constant till now so I want to understand is the percent is going to remain constant going forward as well and I think we had spoken a little bit about trying to increase our nonlinear business, so how will this go ahead. Okay, so there are two aspects to it, one is that the employee cost would depend on how much work we are doing in India and how much work we are doing in the US and because you know if you look at the trend over the last 6 to 8 quarters, the number of employees in the US are going up and the number of employees in India are actually coming down or are more or less flat. So as the number of employees go up in the US, obviously the employee cost will go up and that is obvious you are seeing that the employee cost has actually gone up because the large amount of work is being done by the employees in the US and if you look at the people matrix, the number of employees that are outside India is 2777 while at first quarter last year it was 2054, so there has been an addition of almost 723 employees in the US, so that directly reflects in the total employee cost. And the second variable to it is how much is the revenue share business going up as a percentage. As the revenue share business goes up, and then obviously the employee cost will relatively come down. So those are the two variables as far as this matrix is concerned. On a go-forward basis, I would suspect that at least for this year it will be more or less same where it is, next year we will have to see. Essentially there are two drivers to it, one is pulling it up and the other one is pulling it down. What is pulling it up is if we continue to do more and more business in the US that will pull it up, if we do more of revenue share or more of offshore business that will kind of pull it down. So next year one does not have that kind of visibility but as far as this year is concerned, I think it will remain more or less around the same level. PRATEEK BARASIA Okay sir, if we are doing more business in the US, it will remain onsite or we can also do the work offsite as well right because the margins are significantly higher. 9 P age

10 Yes, we are doing, you see we will continue to do work in India wherever, but it is also the nature of the requirement with the client so we are not saying that we will do only work with India so we are very aggressively going for kind of projects that gets executed in the US like most of the work that we do with the top client is entirely in the US or lot of the healthcare work that we do because of the regulatory reason that data cannot move out of the country, so that is what we continue to do in the US, so while this strategy is to increase work for India and increase revenue share but at the same time, also we have to be you know cognizant of what is going on in the market which is demanding that lot of work needs to got done in the US itself. PRATEEK BARASIA Okay, so this guidance of 20% to 25% increase is mostly going to come from the US. Almost 90% of the revenue comes from the US, it is just that some of that revenue gets executed in US and some gets executed in India but the entire revenue is coming from the clients in the US. PRATEEK BARASIA Sir my question was it is going to be onsite that is what I meant actually. It s a combination. I think it is not that the entire growth is onsite; I would say 60% to 70% of that growth will be onsite; the rest will be in India. MODERATOR The next question is from the line of Sarvesh Gupta from Maximal Capital, please go ahead. SARVESH GUPTA Sir if I see your EBITDA trend, it is broadly you know quarter after quarter it is just coming down and actually if somebody does an incremental revenue to incremental EBITDA analysis, it seems that the incremental business is coming at a negative EBITDA and this ties up with the fact that your onsite employees are increasing at a rapid pace, so to me it seems like you are just picking up bad business in the US which is not going to give us any margins, so what is the point of growth when you are picking up business which is not going to provide us any profitability. 10 P age

11 We are not doing any business that is not giving us any profit. I mean if we are picking some business which could be short-term loss but long-term over the period of the projects also possible, so there is no business, there is no project that we pickup which is not generating money. Now the question is how much money, what is the threshold of margin, now that is a debatable question, that is the strategy that one can debate about, you know do we have a threshold of only if the business is below this particular margin level then we will not do that, we will do only the business that is above a particular threshold level. The strategy that we are currently pursuing is on two-fold, one is that we rapidly want to acquire scale, significant scale. If we acquire that scale, our first milestone is obviously half a billion, once we acquire that scale we are in a much better position to be a significant player when it comes to the kind of clients that we are dealing with because there the scale does matter quite a bit, so we do acquire business that may not meet the margin threshold and that impacts the margin as a percentage. Second aspect of our business is that we have two distinct businesses we have a business that we do with the top client that is largely US centric that is largely onsite and at a much lower margin and then there is the rest of the business which is even today when the margins are depressed for various reasons still at a fairly good margin which is about 15%, so that is our two fold strategy while we scale the top clients it still gives us lot of money but it may not give margin as a percentage but it gives us lot of money and which gives us scale which will be used to grow the higher margin businesses that we are currently pursuing so it is a two-fold strategy that we are pursuing, now one can argue with that strategy but just to share, that is what we are doing. SARVESH GUPTA Okay, but do you have any objective number in terms of your return on capital that you want to get from the incremental business that you are seeking. In terms of return of capital, if you look at the return of capital then our business is not bad, it is pretty good, so the numbers that we will more look at is the P&L number. SARVESH GUPTA No I am not talking about the calculated return on capital. I am talking about what is the threshold for the management to bid for a new business what is the threshold ROCE below which you would not bid for that business. 11 P age

12 We have thresholds for every business. We have threshold that this is what we give out targets to our sales team and the delivery team that these are the margins that they have to generate and you know they get tracked on those margin numbers. I mean for different businesses it is different, for example if you do business in India, the GM threshold is 50%, if we do business in the US the GM percent is 20%, so there are certain thresholds for every business but the important thing is that we do not say no to the business that comes below that threshold. We are not walking away from any business that say that comes below the threshold, the attempt is to get business at that threshold or higher than that but if you get business below that threshold we are not walking away from it because I do not think we as a company are in a position to walk away from any business. SARVESH GUPTA Understood and any guidance on the operating and free cashflows going forward? As you see this year also we did a buyback of Rs 150 crores, so most of the PAT that we generate after Capital Expenses gets translated into free cash. I mean that being the trend over the last two years. So the cash that we generate every year is more or less equivalent to PAT that we make. SARVESH GUPTA Understood and sir any plan because you said that these two businesses are very different, one from the top client and one from every other client, so any plan to kind of split the company into some player where we are able to see two different entities taking cognizance of varied business nature. I know no immediate plans but you know we see always there is a product business where we have a mix of business, we have a low margin business, we have a very high value product business, then we have business in between which is technology solutions or product engineering. So at some point in time, we will take some strategic decisions to see how we can enhance the shareholder value but nothing immediate, nothing concrete but we are always looking how to increase shareholder value and what is the best thing to do for the company as well as for the shareholders. MODERATOR The next question is from the line of Sachit Kheda from Smart Equity, please go ahead. 12 P age

13 Sir, is there any movement in the orderbook for new mobility product business, you mentioned last quarter that it was somewhere around $ 5 million so is there any movement on that. There is quite a lot of movement in terms of new client addition. In terms of revenue, this quarter is slightly more than last quarter and we are hoping that it will continue to grow. You see unfortunately in that business, unlike other business, when we sign a client it is not fixed that you know, it is not a million dollar, there is no contract value to it, so that is why it is very difficult to predict. What it is most of the revenue is generated based on the usage and when the product is implemented in their organization. What money we get for that is a very small amount, it is the implementation fee, the major revenue is getting generated for every transaction that they do. So we are trying very hard that adoption and the usage of the product goes up, as it goes up the revenue will go up. As of now the outlook is very similar to what I said at the start of the year that this is what we are going to do. I think may be slightly better than that but as of now that is what I think, it is more or less same as at the start of the quarter. So the order book position that you mentioned last time you can just assume the status quo right. No slightly more than that but yeah not up significantly. And the traditional mobility continues to decline if I assume correct, right. It continues to decline, it is kind of, the decline has been arrested but it will continue to decline year-on-year. Got it. I have started the call a bit late, sir have you already mentioned the reason for you know outflow of our working capital second consecutive quarter, have you already mentioned that. 13 P age

14 No, what is the question. Sir basically, I was looking at the cashflows of in the presentation, so it seems that there has been another Rs 37 crores of outflow in Q1 and there was a Rs 60 crores outflow in Q4 FY17 in working capital, so have you mentioned the reasons for that already or no? Sanjeev can you respond to that please. SANJEEV GULATI Yes, you are referring to the cashflow which is there right. So there has been drop in the cashflow which has been generated in this quarter but if you compare it to the last quarter, there has been an increase. No actually Sanjeev, last quarter there was a Rs 60 crores outflow in working capital and this quarter. Sorry. SANJEEV GULATI This quarter it is Rs 37 crores. Yeah, but I think last quarter you mentioned that you know it would come back in this quarter no. SANJEEV GULATI If you look at the swing on the operating cash flow which was Rs (-34) crores in the last quarter and now it is Rs (+6) crores now, so the swing is almost Rs 40 crores. So it is coming back, definitely it is coming back. I think in Q2 you will see a significant further increase in Q2 and Q3 because some of the AR that should have come in Q1 has come in Q2 so that you will see further improvement in Q2. Okay and will that kind of negative working capital sustain that is my key questions here actually. 14 P age

15 If you look at the overall year, if you forget the quarter and if you look at the year, I mean FY15 was, cash flow was Rs 104 crores, FY16 was Rs 198 crores positive, FY17 was Rs 87 crores, so it is never on a year basis never negative, it is just certain quarters are negative. Sorry I would just consider this quarter-on-quarter as an aberration then. Quarter-on-quarter because you know our invoice values are so large if they slip from you know just one slip by few days taken them to the next quarter then that quarter it takes a hit, so overall if you look at as I mean earlier on also I had mentioned this see most of the client that we generate every year is translated into operating cashflow. Fair enough and sir my last question would be IDM is also doing some really good work on their cloud products, I think they are trying to patch up with the likes of Amazon and Microsoft, are you involved in the cloud products as well as in the cloud projects that they try to implement for the clients. Yes, we are doing some work but that work is mostly time & material we are not really responsible for the project. We are trying very hard to get into that space, so our people are there but that is mostly time & material. Don t you think that there might be a risk on our business model then considering the velocity with which in a traditional IT is moving over to the cloud. It is obviously a risk, all of us are facing and it could impact the growth and that is why while we are doing the traditional business and we are scaling that up as much we can we are also trying to move into the new next generation products and platforms and solutions. As I told you earlier in response to your question on low margins, the margin which we make from our traditional business will give us the freedom to invest in the next generation solution that the customers are now expecting whether it is cloud, mobility or you know higher value than just providing people. We continue to do that, it is a tough market place. 15 P age

16 Got it, you don t see any immediate threats to the business as far as this is concerned. No there is no immediate threat as far as we are concerned there is no immediate threat as far as the revenue or the business is concerned but there is always a constant pressure in terms of the margins and that we are also experiencing and we are also seeing, so you know customers are expecting more for the same amount of money. Fair enough, alright sir. MODERATOR We will move on to the next that is from the line of Ronak Shah from SKC Capital, please go ahead. RONAK SHAH Am I audible. Yeah, I just want to check on what is the capital allocation plan is for FY18, I mean obviously the buyback was done last year, we just wanted to see what management is thinking around the buyback or dividend and how they plan to allocate any CAPEX in FY18. It is too early to comment but from our history if you see you know every year we return money to the shareholder either initially through dividends and then later on we do through buybacks, so whatever given the status of the business, the business does not need money for growth and if there is excess money then we will see what is the most efficient way of returning capital to the shareholder and that strategy will continue in FY18 also. RONAK SHAH Okay and in terms of investing further in the property that you mentioned last year what is kind of the status for that and what is the market value of these properties in your balance sheet right now. First question I will answer then the second part Sanjeev will answer. There is no immediate plans of you know significant acquisition of properties although we are talking to the government in Hyderabad because they are starting a new IT park so we are in conversation with them and seeing if we get allotted we have not got anything allotted till now; other than that we are not looking at acquiring the commercial property as of now, so that is the status as 16 P age

17 of today. As far as the value of these property is concerned I think I will request Sanjeev to respond to that part. SANJEEV GULATI Book value as of now is about Rs 124 crores. RONAK SHAH Rs 124 crores. That is the book value, so market value obviously is much higher which we don t know but the book value is Rs 124 crores RONAK SHAH During what time period were these properties bought. Bought in the last three years. Except for a campus in Bangalore which we bought in 2004, other rest of the properties were bought in the last 3 to 4 years. RONAK SHAH Right. MODERATOR Thank you. Ladies and gentlemen that was the last question. I would now like to hand the conference over to the management for their closing comments. Thank you very much and all of you have a great day. We will see you again next quarter. MODERATOR Ladies and gentlemen with that we conclude today s conference call. Thank you for joining us and you may now disconnect your lines. 17 P age