Participants: Mr. R. Ramanan, MD & CEO Mr. J. K. Gupta, CFO
Event Date / Time : 8th July 2015, 11:00 AM IST Event Hosted by : Tata Securities
Event Duration : 30 minutes.
Moderator: Ladies and gentlemen, good day and welcome to the CMC Limited Q1FY2016 results conference call, hosted by Tata Securities Limited. As a reminder, 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 "*" then "0" on your touchtone phone. Please note that this conference call is being recorded. I would now like to hand the conference over to Mr. Subham Sinha from Tata Securities. Thank you and over to you Mr. Sinha!
Subham Sinha: Hello everyone. Subham Sinha here from Tata Securities Limited. I welcome everyone to this Q1 FY2016 conference call of CMC Limited. We have here with us Mr. R. Ramanan, the MD and CEO of the Company and Mr. J. K. Gupta, the CFO of the Company. I now invite Mr. J.K. Gupta to take over. J. K. Gupta: Thank you Subham and good morning to all the participants in this call to discuss Q1 FY2016 results of CMC. The results were announced by the Board of Directors yesterday so you must have got time to go through the results. I will run you through some of the key highlights of financial performance of the Company in this quarter and then hand you
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over to Mr. Ramanan for taking you through some of the business developments.
As you would have seen our Company earned consolidated operating revenue of Rs.672.24 Crores in Q1, which is an increase of 1% QOQ and 13% on YOY basis. Out of this revenue, third party products accounted for Rs.64.49 Crores i.e. 10% of operating revenue and services accounted for Rs.607.75 Crores, which amounts to 90% of operating revenue. 30.3% of revenue in Q1 came from domestic markets while international revenue accounted for 69.7%.
The Company earned consolidated EBITDA of Rs.92.25 Crores in Q1, which is an increase of 1% YOY basis. Company earned consolidated profit after tax of Rs.56.28 Crores in Q1. The total tax provision of Rs.30.45 Crores, which gives an effective tax rate of 35%, includes Rs.16.14 Crores tax on dividend amount of Rs.93.13 Crores that was distributed by CMC America to CMC.
If we exclude this impact of additional tax of 16.14 Crores, profit after tax during this quarter works out to Rs.72.42 Crores, which is up 3% on QOQ basis and 24% on a YOY basis. Total client additions during this quarter have been 12. One client got added in America in Embedded System, two clients were added in Europe in Software Services and Embedded System, one client was added in MEA in insurance space and eight clients were added in India in retail, education, pharma and e- governance space.
Other income during this quarter was Rs.8.90 Crores, which included Rs.8.01 Crores as income from mutual fund investments. The Company had net employee addition of 51 during the quarter taking the total
manpower count to 12716 at the end of Q1.
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The Company had a very good quarter in terms of cash flows. Our cash and cash equivalent at the end of the quarter was Rs.344 Crores which is an increase of 30 Crores after paying dividend amount of Rs.83 Crores and capital expenditure of 13 Crores in Q1. Out of Rs.344 Crores, Rs.264 Crores were invested in debt-based mutual funds at the end of the quarter. Another highlight of cash management is our debtors level during this quarter reduced from 86 days to 78 days.
So this was a summary of financial highlights from my side. I now hand you over to Mr. Ramanan to take you through some of the highlights of
business performance.
As he mentioned, we added 12 new clients in this quarter and all of them are significantly important clients for us. They have the potential for long-term revenues for CMC as well as sizable revenue. They are all leaders in their space. We added a client in Embedded Systems and two in Europe particularly in the ports and cargo and transportation areas and in Embedded Systems. We also were able to add a new client in the Middle East, Africa for insurance. So with this the number of insurance clients that we are servicing in Middle East, Africa has almost grown to about five now.
We have also added eight clients in India. So we have seen a good uptick in the private sector and some of the government projects that we are
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targeting. Overall, the company has continued to perform well in terms of operational efficiencies. Cash flows have improved, operational efficiencies have improved, manpower costs have been retained at its levels and as JK also explained our profit after tax has taken into account an additional tax burden that we had because of dividend distribution from CMC America to CMC India. Otherwise our PAT has also grown quite well during this quarter.
We continue to be very optimistic about the opportunities in this quarter. Also with the amalgamation process in place, synergies with TCS Projects have acquired a new momentum and we are targeting many new customers jointly together and that is a part of our TCS CMC synergy, which has already kicked in. So we are pretty confident that these are going to enable us to penetrate some of the international markets especially in the core competencies and areas that CMC has been traditionally strong in, which is product based solutions or assets based solutions, the embedded and real time systems area, the digitization and workflow management services as well as the opportunities in educational and training in conjunction with large projects in India.
So, this is where we are and if you have any questions, we will be very happy to answer them or provide any clarifications on the numbers.
this quarter of 6%. What is driving this growth?
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we do not find it is good we do not go for it.
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Sharekhan. Please go ahead.
Sanjeev Hota: Sir, could you tell us how this GST rollout, what is the scope for us and the entire IT sector? How this work is going to be there in the coming years? If you could throw some more colour on the GST rollout? J. K. Gupta: Actually we still have to make an assessment of how much business will come out of it, but since both CMC and TCS have been involved in a big way in commercial tax implementation in multiple states, I think CMC and TCS put together we would have implemented it in almost 14 to 15 states. So when GST is rolled out and since we have the legacy system, we believe that both of us are very well placed to make use of those opportunities. But at this point in time, assessing the market potential is not very easy. We have to see in what form it comes. Sanjeev Hota: It is very difficult to get what kind of like spend that is going to come from this GST rollout?
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there that would come?
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cities you can start of with some minimal budget of some minimal requirements in a particular city to define it as a smart city and then you can really go to the other extreme and so one cannot say that there is a particular budget defined, but there would be, I would say almost 80% of any smart city spend would be in hardware automation, networks, and so on and about 20% would be in software related services or development and so on. So that would be the general break-up of the spend and we would be looking more at the software services and the software solutions rather than the hardware provisioning and the third party
product provisioning.
How long it takes?
R. Ramanan: Projects, I would say not three to five years, you could have projects defined 12 to 24 months also and so I would say two years, average two years. Sanjeev Hota: Average two years? R. Ramanan: Yes. Sanjeev Hota: Thanks a lot. Moderator: Thank you. As there are no further questions I would now like to hand over the floor back to Mr. Subham Sinha for his closing comments. Over to you Mr. Subham Sinha! Subham Sinha: Thank you everyone for attending the concall. Have a nice day. J. K. Gupta: Thank you Subham and thanks to all the participant in this call. Have a good day. R. Ramanan: Thank you very much.
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Securities Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.
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