Targeting 18-20% margins in 2-3 years: R Ramanan

Interview with managing director and chief executive of CMC

R Ramanan, managing director and chief executive of CMC, is positive on seeing momentum in demand and hopeful of posting growth higher than the industry average in FY15. In an interview with Sheetal Agarwal and Aditi Divekar, he talks about growth, margins and the road ahead. Edited excerpts:

Your earnings were boosted by a one-off settlement gain from the court case against the Kuwait stock exchange. What is the adjusted profit excluding this one-off gain?

The company's adjusted revenue for the March quarter stood at Rs 604 crore and its earnings before interest, tax, depreciation and amortisation (Ebitda) was Rs 101 crore, up eight per cent and 12 per cent, respectively, compared to the previous quarter. This is the first time we have crossed the Rs 600-crore mark in revenue and Rs 100-crore mark in Ebitda. So, it is a unique milestone. The company's net profit fell to Rs 64 crore due to an additional tax burden of Rs 10.37 crore due to the distribution of dividend from the US subsidiary CMC Americas. Adjusting for these tax one-offs, the net profit stood at Rs 99.81 crore.

What is the demand environment CMC is seeing?

We are focused on different sectors such as transportation, manufacturing, energy resources, utility, hi-tech and government. We see good potential in these segments in the coming quarters. During the year, we have added 65 new clients, which will give us new revenue. On the sales front, we have intensified our efforts in the UK, Europe and West Asia. We are also trying to replicate many of the solutions we have developed in India in other emerging geographies in segments such as e-governance and tourism.

You had planned to increase offshore revenue to boost margins but progress on that front has been slow. Why?

Due to various factors in the US such as regulatory and visa-related issues, our onsite revenue continues to rise; it is increasing disproportionately compared to offshore revenue. But we are happy with that because it means new business for us. However, we expect all of this will result in growth in offshore at some point. So, it will take some time. Acquiring customers is our priority. We expect Ebitda margins to be maintained at 15-17 per cent and hope to scale this up to 18-20 per cent through the next two-three years.

What is the outlook on growth in the domestic market?

We see good potential in India in the long run. I think domestic spending should step up after the elections.

What is your growth outlook for FY15?

In FY15, we will attempt to grow ahead of the industry.