Point Blank - Geometric Software on downward revision of revenue guidance
Manu Parpia, managing director, Geometric Software, spoke about the company's recent performance
The Rs 65 crore Geometric Software is one of the few small-sized domestic infotech companies that have successfully ridden difficult times and reported robust growth in the past few quarters. For the quarter ended December 2002, Geometric's consolidated revenues showed a sequential growth of 7.6 per cent to Rs 21.95 crore, while net profit grew by 3.1 per cent to Rs 4.52 crore. The company, however, disappointed the markets with the downward revision of its topline guidance to Rs 84-87 crore for fiscal 2003 as compared to Rs 87-90 crore stated earlier. Manu Parpia, managing director, Geometric Software, spoke about the company's recent performance.
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What are the reasons for a downward revision in the revenue guidance for this fiscal?
Last quarter, we have not been able to achieve the anticipated growth in revenues largely due to the decline in onsite revenues. Besides, we were expecting some orders to be finalised in the Asia-Pacific region.
But there has been a delay in decision making by the clients. We also lost one large contract to a local vendor due to some political considerations of the customer. We were expecting these contracts to offset the loss of revenues resulting out of the completion of a couple of projects in the US.
Consequently, the share of onsite revenues to total turnover has declined to 8.5 per cent as compared to 14 per cent in the previous quarter. This prompted us to revise our guidance for this fiscal. But we are optimistic about growth in future. Such temporary aberrations do happen at times.
Are you satisfied with the performance of the company's joint ventures and alliances?
We have only one joint venture, 3D PLM, with Dassault Systems. It is showing decent growth and has an employee strength of about 150 professionals now. This is in line with our expectations and is doing exceedingly well.
In alliances, the ramp up of business in some cases has taken more time than anticipated by us. We have been aggressively adding alliance partners as part of our overall growth strategy. Any alliance is done with a view to develop another channel for our services. It enables us to acquire and enter into relationships with new customers. But mind you, it is easy to add an alliance partner per se.
The difficult part is to ramp up the business. However, it is the right way for a company of our size.
What are the reasons for the significant improvement in operating margins in the last few quarters?
The improvement in operating margins has been largely driven by cost savings resulting out of moving business unit heads and some marketing staff back to India. There are other reasons like better utilisation of manpower and higher realisation per employee. Besides, the increase in business from high-margin industrial customers has also added to the expansion of margins as seen in the past few quarters.