Quest finds value in outsourced engg devt

QuEST, which delivers engineering solutions for advanced technology products in areas like aerospace, automotives, power, and oil and gas plans to go public when Carlyle, which has provided it $6 million of venture capital funding, exits. This is if the current capital market buoyancy continues.

The confidence is based on the current financial run rate of the company. It closed 2004-05 with a turnover of $20 million and a net margin of 15 per cent and expects a momentum of 40 per cent topline growth in the next five years.

Ajit Prabhu, CEO and founder, is also confident that the bottomline will remain positive. The only time it took a beating was in 2002-03, coinciding with the tech downturn. The consequent impact on cash and the simultaneous need to expand facilities and infrastructure when business picked up again led to the venture funding coming in.

The memory of 2002-03 is marked by the collapse of Enron, a major global force till then in the energy business, and its impact to the energy and gas business of GE, which remains the number one customer of Quality Engineering & Software Technologies Pvt Ltd (QuEST).

The company works with a few customers, usually research-driven engineering companies which have a high R&D budget of 5-7 per cent of revenue. Prominent among them, other than GE, are Honda, Kawasaki, Pratt and Whitney, Danhar and Mitsubishi.

"Over time we become partners of our clients and like them to see us as mirror images to whom they can outsource their non-core development work. We take on as many non-core businesses of our customers and become part of their strategic plans. That is how we go up the value chain," says Prabhu.

As an integrated product development solution provider, QuEST typically manages the updating of legacy products, like a facelift for the existing model of a car, so as to bring down the costs for the client.

"Updating old products is the bulk of our business and we also do the non-core concept design for development of new components," he explains. In automotives, the work centres around embedded electronic systems.

QuEST has an office and significant business in China. This accounts for around eight per cent of its revenue.

There it does the soft part of the development work - design and supply chain management. It fact, QuEST does a good bit of support for Japanese customers operating out of India and China.

The company's staff of 800 consists of 100 non-Indians, the latter-based mostly in the US and Italy where the oil and gas business is concentrated.

The onshore presence is important in maintaining customer relationships.