May 11, 2015
Some Transformation Initiatives Yielding Result Nucleus
Source : http://www.moneycontrol.com/news/results-boardroom/some-transformation-initiatives-yielding-result-nucleus_1380663.html
Nucleus Software delivered a good set of earnings in the fourth quarter. Avnish Datt, global head - strategy and corporate development at Nucleus Software says some of the transformation initiatives taken by the company have yielded good result. But it is too early to say if revenue growth is sustainable, he adds.
The company has also invested heavily in building leadership team outside India.
Datt says the company is conservative with respect to inorganic moves. It is also ramping up go-to-market presence in Japan.
Below is the edited transcript of Avnish Datt’s interview with Sumaira Abidi & Reema Tendulkar on CNBC-TV18.
Reema: What explains this 17 percent sequential jump in your revenues because historically, the revenue growth of the company was little more subdued and this quarter it shot up to about 17 percent on quarter-on-quarter (QoQ) basis. What was the reason and is this momentum sustainable?
A: This is encouraging; some of the long-term bets that we started working on around 18-24 months back have probably started coming off. It will be too early to say whether it is sustainable or not. Let us see how it plays out but the transformational initiatives that we started off awhile back on seem to be dripping off some returns now.
Sumaira: Even operationally you all have seen a 60 percent plus jump in your EBITDA margins which have now gone above that 24 percent odd mark. Is this going to be the norm now? What is it that has changed so much operationally?
A: We continue to invest. I would suggest that let us wait for few more quarters for the rhythm to be stabilised. We invested heavily in building-up leadership teams outside of India. We opened up new offices over the last few months. We would continue to build the team and also recruit senior leadership talent outside of India. We are continuing to plough the surplus back into the business. Let us wait for few more quarters to see how the trend stays.
Reema: Despite the company making so many investments, the cash on the books is still to close Rs 350 crore. What is the company’s plan with respect to deploying this?
A: We continue to be conservative when it comes to inorganic growth. However, the cash on the books allows us to make longer term bets to not worry too much about long-term strategic investments. We have started opening up in the US market so we opened up an office and got a very senior person to look after the US market. We continue to plough the cash into developing new markets.
Sumaira: What are the new markets that you could be looking at?
A: Last year we opened up Australia, US and we are also beefing our presence in Europe a little bit. In addition, we are ramping up our go-to market presence in Japan. We have also moved some of our team and are also deploying senior leadership resources in Africa especially the sub-Saharan African market.
Reema: What percentage of your revenues is the sales and marketing expense and how much would you like the sales and marketing expense to go up as a percentage of your revenues considering the kind of investments you want to make?
A: Given the mode we are in right now, we are not minding the limits on sales and marketing expenses as much. So, we don’t have an upper limit. We are looking at what is it that is required for us to grow to our potential and what is it that is required for us to leverage the new product launches, the best in some of the high yield markets.
Directionally, you will see us continuing to invest in sales and marketing. The current spend is 13 percent. So, the sales and marketing expenses were 13 percent.
Reema: You are not considering using the cash to reward your shareholders, perhaps increase the dividend payout or any other metric to reward shareholders?
A: The shareholder rewards would be in the long-term growth of the organisation. We are not making any active plans around using the cash per se but looking at what is it that we can do to maximise our potential. If we need to use any cash for that purpose, why not, but that is not something that we are planning around.