We let top line fall to grow our bottom line

Written by Rachana Khanzode | Updated: Oct 16 2010, 05:19am hrs
IT solutions provider CMC, a subsidiary of TCS, had recently posted a consolidated operating profit at Rs 53 crore in second quarter, up 35% y-o-y, giving an ebitda margin of 19.5%. The companys CFO JK Gupta tells FEs Rachana Khanzode that the firm had taken a conscious call to let its top line fall with a view to focus on the bottom line.

The ebitda margins fell to 19.5% this quarter from 21.64%.

There was an annual increase in staff cost. We added 620 employees of which 332 are freshers. There was an exchange loss of Rs 1.39 crore that impacted 50 bps while last quarter we had a gain of Rs 91 lakh. We had taken a conscious call to let the top line fall with a view to grow our bottom line. Our shareholders had supported us in this. Now, with operating profits at 20% levels, we would continue focusing on performance. In general, Q2 was under pressure due to wage hikes. We dont see any concern for margins.

What is your hedge position as of now

We have consumed our hedge position. We are going to watch rupee closely before taking any further steps. We expect the dollar to go up because in export driven business that is going to help us. Most of the losses were because of the currency movement.

Are there any specific areas where you would want to add more clients

Client addition has been robust. We added 12 clients in the US and 11 in India. The area which has a big market opportunity is education and which is not fully leveraged. So we would be focusing on this area. Besides, we would be looking at corporate business and job enabling training programmes.

How do volumes and pricing look like

We are not seeing any pricing pressure at the moment. However, we have a different set of services including customer services, IT enabled services and education and training, so volume is not a correct metric.

How is your collaboration with TCS for government contracts working

A lot of our revenues come from our collaboration with TCS. These are largely e-governance projects for infrastructure, data centers, disaster recovery, training, digitisation.