Chairman's Remarks

Dear Analyst,

It is my pleasure to highlight the business performance of the Sasken Group for the first quarter ended 30th June, 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 First Quarter Fiscal 2016. In the First Quarter of Fiscal ‘16 the consolidated revenues for Sasken Group increased by 4.7% over the previous quarter to Rs. 109.28 crores. Consolidated Earnings before Interest, Depreciation, Taxes and Amortization cost for the first quarter fiscal ‘16 were Rs. 10.28 crores, an increase of 137.7% sequentially. Overall EBITDA in percentage for the quarter stood at 9.4% Consolidated PAT for Q1 fiscal ‘16 was at Rs. 9.85 crores, up by 236.7% over the previous quarter. PAT margins for the quarter were 9%. Consolidated earnings per share for the 1st quarter were approximately Rs. 4.62. Cash and cash equivalents including treasury investments were approximately Rs. 289 crores as of June 30, 2015.

I will now provide key highlights related to our services business. Software Services revenue for the quarter were at Rs.106.9 crores, increased by 6.2% over the previous quarter. Services EBITDA margin for the quarter was at 11.2%.

Our C&D business has been in the vortex of relentless change due to the rapid evolution of technologies and changing consumer needs which have resulted in a fundamental change in the competitive landscape across several constituents of this vertical.

We have been able to take advantage of the spurt in the growth of adoption of open standards based In-Vehicle Infotainment (IVI) systems by global Auto OEMs and the increased need for enhancing in-car connectivity. We have a number of significant wins with Tier-1 OEMs who supply both passenger and commercial vehicle manufacturers. We have been entrusted work ranging from enhancing the connectivity of automotive electronic systems and building the next generation Android based IVI systems.

On the consumer electronics side we have broadened our customer base and engaged with a leading OEM to build the next-generation Android Smart TV targeting the European hospitality market. Our smartphone business has been subject to headwinds which have slowed the pace of growth. However, we expect an up-tick in business in this space in the coming quarters as the Android platform continues to evolve and expand across several product categories.

Building on our strengths in the smartphone segment we have established a strong presence in the ruggedized devices space. We are engaged with a leading rugged device OEM to integrate a NFC based contactless technology with enhanced security for wide range of Automatic Identification and Data Capture applications.

Our excellent track record in delivering complex Product Engineering Services has resulted in our winning repeat business from the world leader in providing Global Satellite Phone Service (GSPS). We have been entrusted with the task of providing turnkey ‘full product’ design and engineering services for their next generation Satellite Phone.

In the network equipment manufacturer space, we take pride in our near two decade long association with the leading provider of wireless communication systems based on the GSM-R standard for the European Railway Network. Our team has successfully delivered new versions of software for their latest product family.

On the semiconductor front we are engaged with several of the top 10 vendors providing a range of IC Design and Software services for their flagship products. We are providing RF system integration, debugging, and matching services that will help optimize the performance of the chip sets of one of the largest semiconductor vendors. In another engagement with this customer who counts us amongst a handful of strategic vendors we are providing a comprehensive range of development, integration and testing services in a unique and differentiated outcome based model. We have several other on-going engagements for enhancing connectivity based on standards such as USB, Bluetooth, Wi-Fi and NFC spanning both development and testing across multiple silicon platforms of leading North American and European OEMs.

We are leveraging our deep expertise in product engineering and embedded systems which are becoming increasingly attractive to enterprises that are leading the ‘digital platformization wave’ or under attack from it. We have built expertise in two key areas IT Infrastructure and Application & Data Services which along with the SMAC stack are critical for the digital transformation of the enterprise. We have started making headway in this journey and have successfully engaged both entrenched companies and challengers in diverse areas. Our ability to bring to the table a ‘product engineering mind-set’ and offer comprehensive services from stack2app (stack to application) places us among forerunners who can help businesses profit from this wave of platformization.

We have delivered a predictive analytics-based solution to help mobile virtual network operators (MVNO) understand consumer consumption patterns. This allows the optimal management of bandwidth provisioning and enables them to offer competitive service bundles. Buoyed by the positive reception of this we continue to engage with this new-age MVNO supporting their future road map. We are on the verge of commencing an engagement with the world’s largest manufacturer of IP based network gear who will leverage on our analytics expertise to help enhance the logistics management extended to their field support teams.

In our IT infrastructure practice we are enthused by the growth in business from one of the largest Mobile IP based network service providers. Our engagement entails the provision of a range of services supporting the aggressive roll out of their pan-India network and has good potential to scale further. We continue to work with several other network gear manufactures and service providers offering expertise in managed services, consulting, application management and network analytics.

We are thus making steady progress in the IT Services arena. While scaling the same continues to remain a challenge we are cautiously optimistic of our growth prospects.

On the people front, the headcount for the Sasken Group stood at 1,925 as of June 30, 2015. We have invested in sharpening our ability to attract and indeed retain talent comprising freshers and laterals. Our actions to attract talent have started to yield the expected results resulting in positive net additions. Attrition however remains a concern and for the Sasken group it stood at 23.7% for trailing twelve months. We continue to take concerted actions towards lowering attrition and will endeavor to bring this to be in line with our peer group. We are monitoring the implementation of HR strategies closely and will ensure that we have the right mix of talent to be competitive and grow.

Utilization for the quarter averaged 78% and is expected to move in a narrow range around the same percentage in the coming quarters. We will continue to relentlessly focus on all appropriate cost levers. Owing to our ongoing arbitration, our legal costs will be significant for the next few quarters. In addition, as we are in a salary revision cycle, wage increases will impact our EBITDA margins. We have successfully added 4 new customers during the quarter taking the total number of active customers to 110.

We have embarked upon an exercise to determine strategic imperatives that will identify areas to consolidate, strengthen, and foray into for our future business growth. This exercise is being undertaken with a global leader in business consulting.


Our offer for buy back of shares through the ‘Tender Offer’ route, at a price of Rs.260/- (Rupees Two Hundred Sixty Only) per Equity Share for an aggregate amount of Rs. 10,808.20 lakhs (Rupees Ten Thousand eight hundred eight lakhs and twenty thousand) has been filed with the Securities and Exchange Board of India (SEBI) on July 3, 2015 and is pending approval.

On behalf of my management team, I wish to thank you for your continued interest in Sasken.

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

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