Chairman's Remarks

Dear Analyst,

It is my pleasure to highlight the business performance of the Sasken Group for the second quarter ended 30th September 2015.

We must point out that certain statements made here or those we make subsequently in response to your queries concerning our future growth prospects are forward-looking statements. Please read the Safe Harbor clause in the second slide of our presentation for full details.

Let me begin by presenting our financials for the Second Quarter Fiscal 2016, during which our consolidated revenue for the Sasken Group increased by 17% over the previous quarter to Rs. 127.81 crores. Consolidated Earnings before Interest, Depreciation, Taxes, and Amortization cost (EBITDA) for the second quarter fiscal ‘16 stood at Rs. 12.37 crores, an increase of 20.3 % sequentially. Overall EBITDA in percentage terms for the quarter was 9.7%. Consolidated PAT for Q2 fiscal ‘16 rose to Rs. 10.55 crores, an increase of 7.1% over the last quarter. PAT margins for the quarter registered 8.3%. Consolidated earnings per share for the 2nd quarter are about Rs. 5.20. Cash and cash equivalents, including treasury investments, recorded at almost Rs. 180.00 crores as of September 30, 2015.

Software Services revenue for the quarter stood at Rs. 117.13 crores, an increase of 9.5% over the earlier quarter. Services EBITDA margin for the quarter was at 6.8%.


In terms of decision of the Board of Directors dated April 23, 2015, and in accordance with the provisions of Companies Act, 2013 and the Securities and Exchange Board of India (Buy-back) Regulations, 1988, and with the approval of shareholders by Postal Ballot on June 25, 2015, the Company has offered to buy-back up to 41,57,000 fully paid up equity shares of Rs.10 each, at a price of Rs.260 per share for an aggregate amount of up to Rs.10,808.20 lakhs from the existing shareholders of the Company under Tender Offer mechanism. The offer size represented 19.48% of the aggregate paid up capital and free reserves of the Company as at March 31, 2015. The Offer was effective from August 10, 2015, to August 24, 2015. During this period, the Company purchased 36,56,560 shares and completed the payment and extinguishment of said shares by September 04, 2015.


On the cost side, our annual wage increase and a shift in our on-site – offshore mix contributed to margin pressure. However, going forward, we will focus on using the levers in our control while pursuing rate revision to offset the pressure. As informed earlier, we have an ongoing litigation relating to one of our non-Indian licensees of our IP for breach of contractual obligations. Our litigation expenses have sharply increased, and the matter is expected to conclude within the next four quarters.

On the people front, the headcount for the Sasken Group stood at 1,968 as of September 30, 2015. We continue to attract and retain talent comprising both freshmen and laterals. Attrition, however, remains a concern and for the Sasken group it stood at 24.4% for trailing twelve months. We continue to take concerted action towards lowering attrition and expect to match our peer group statistics. We continue to refine our HR strategies to ensure we can attract, engage and retain that right mix of talent to support our business growth.

Utilization for the quarter averaged 82% and expected to move within a narrow range around the same percentage in the coming quarters.

We have successfully added 15 new customers during the quarter taking the total number of active customers to 125.

We have made a significant investment to avail the services of one of the world’s leading management consultants to help with our business strategy and refocus. With the consulting engagement concluded, we are now embarking on creating a blueprint to translate their learnings and advice into an operating charter beginning with Q4 of the current fiscal year.

I will now provide key highlights related to our services business.

Our strategic focus and commitment remain anchored to our deepening presence in the Embedded Engineering R&D Services space. As a leading provider of a wide spectrum of mobility and wireless technology solutions, making a push into the digital enterprise ecosystem, which is heavily reliant on the associated technology, is but a natural choice.

We have strengthened our position as a key player in the Automotive Infotainment space and have successfully executed projects to build state-of-the-art Infotainment systems and connectivity solutions for both commercial and passenger vehicles.

In the smart devices arena, we provide support to major vendors from around the globe to manage and keep pace with the evolution of the Operating System. Our expertise in this area and our core capability in providing product engineering services assist us in gaining faster traction in the ruggedized device space. We believe our presence in Application Data Services will be a key differentiator as Enterprise Devices is linked to the Enterprise Information Services.

Our partnership with leading Semiconductor vendors continues to flourish. Sasken has evolved to become the strategic ‘go to’ partner for testing services for one of the world’s largest semiconductor vendors. We feel enthused about being entrusted to offer critical design services for a semiconductor platform targeting the Internet of Things (IoT) space.

Our testing practice offerings are mature and among the most comprehensive in the industry. We continue to add new customers as well as provide existing customers a spectrum of testing services across the verticals we serve. We are also using our homegrown Test Automation Framework to automate the testing of devices from the latest generation wireless network. This service is currently being availed by one of the world’s largest wireless broadband deployers.

Sasken is well-placed to become a key partner to enable enterprises to bridge the chasm between physical and digital world. Our predictive analytics-based solution is helping a wireless service providers better manage their data service offering. We have validation that our engineering expertise is considered useful and sought after, to craft solutions for the digital enterprise. We have engaged in providing innovative solutions using short-range wireless technology for one of the world leaders in the sporting goods industry.

My team and I are committed to doing our best for all stakeholders to the best of our ability.

Rajiv C Mody
Chairman, Managing Director and CEO
Sasken Communication Technologies Limited

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