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Mastek sees US sales up to 70% in 3 years

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Newswire18 Mumbai
Mastek's business is likely to grow much faster in the US, than its stronghold UK, as the company gears up to cross-sell to customers of recently acquired US technology services provider Vector Insurance Services, Chief Financial Officer R Desikan has said.
 
Annual revenues from the US are seen growing 60-70 per cent over the next three years, as the base is still small, he said. "Thereafter the growth rate should reduce to around 50 per cent."
 
Currently, US business accounts for 30 per cent of Mastek's revenue, while UK accounts for nearly 65 per cent. Growth in UK is likely to be around 20 per cent per year, Desikan said in an interview.
 
Rupee impact
The rupee's appreciation against the British pound is unlikely to hit the company's October-December earnings, because the rise has been steep only in the last month, Desikan said. During this period Mastek is covered by a foreign exchange hedge, he added.
 
Since October the rupee has risen 3.6 per cent against the pound.
 
Over the long haul, the company is ready to bear the impact of this appreciation in the rupee, Desikan said.
 
"We are going to reduce our sales and general administrative cost, utilise efficiency tools so that fewer man hours are spent on work, increase offshoring of work, and bill clients higher by adding value to the services offered."
 
Overall operating margin in 2007-08 is likely to improve 100 basis points, and in 2008-09 it is seen rising 100-150 bps, he said.
 
Buy line
Mastek is now in the process of conducting knowledge transfer to Vector Insurance, Desikan said. This process should take around three months. Thereafter,
 
Mastek will offshore some existing work from Vector, and cross-sell its insurance offerings to Vector's 35 customers, he said.
 
Mastek acquired US-based Vector Insurance Services in July. The company remains steadfast in its plans to acquire more companies in the US and UK that can complement its existing offerings, Desikan said.
 
Mastek is in acquisition talks with two-three players and is eyeing companies in property and casualty insurance segment.
 
"We currently don't have any offering in the P&C (property and casualty)segment," Desikan said. Mastek is also seeking a company with intellectual property rights for a product in the health segment, he said. The budget for each acquisition is $10 million-$25 million, Desikan said.
 
Mastek shares ended at Rs 332.05 on National Stock Exchange on Friday, up 0.7 per cent from the previous close.
 
RAMPING UP
 
  • Currently, US business accounts for 30 per cent of Mastek's revenue, while UK accounts for nearly 65 per cent
  • Growth in UK is likely to be around 20 per cent per year
  • Overall operating margin in 2007-08 is likely to improve 100 basis points, and in 2008-09 it is seen rising 100-150 bps
  • The company acquired US-based Vector Insurance in July
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    First Published: Dec 31 2007 | 12:00 AM IST

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