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Wednesday, June 24, 2009

Omnitech InfoSolutions Ltd:-Management speaks about the future of the company

1)How has the fiscal year 2008-09 been for you?

ans)The fiscal year 2008-09 has been kind of a rollercoaster ride, with lots of uncertainty. The first two quarters were on track, and then we had a sudden power outage like situation. People started thinking there’s got to be some light at the end of the tunnel. But, it was not to be. As far as we are concerned, we looked at an acquisition in the US in September 2008. We almost signed the definitive agreement with the target company. But, the deal was called off due to the collapse of Lehman Brothers and the market meltdown that followed. We waited for a month, but the markets continued to be ugly.As a result, we decided not to pursue the deal, which I think was the right thing to do at that point in time. That helped us harness our focus and energy into our organic business.Also, it became clear that the rules of the game will be different. Before the crisis, everybody had only one agenda – how to reduce costs? Given the context, we said to ourselves ‘what do we have in store to offer to the customers?’ We realised that quite a few of our service offerings were effective in the given scenario. So, people started looking at it, and almost 100% of the clients renewed the accounts with us; not for one year, but now for three years. We also started breaking into the competitors’ accounts.But, not all was hunky dory. For instance, the financial service providers had massive expansion plans, which they had to curtail substantially. That definitely has an impact on our business. Having said that, our solutions helped us mitigate the impact from the fast spreading crisis.

2)How big is the opportunity in Business Availability and Business Continuity?

ans)Business Availability is categorized into three – Infrastructure Management Services, Application Management Services and Performance Management Services. The opportunity in IMS is humungous. The Indian market for IMS itself is around US$80bn. Globally, the market size for IMS is as big as US$150-225bn.The market size for AMS is US$15bn in India while Business Continuity market is around US$12bn worldwide. In India, it is at a nascent stage, but expects it to be approximately US$100mn to start with.

3)What is the break up between domestic sales and exports?

ans)Almost 78% of our revenue comes from the domestic market while the rest comes from exports. We will selectively look at different geographies for expanding our global footprint. By no means are we going to confine ourselves to the Indian market. We will continue to leverage our current locations abroad, be it the US, or Europe or the Middle East. We will try to tap locations where the business opportunity is much larger. However, India itself has a large potential for our business. We will continue to grow outside India, not only organically but also through acquisitions.

4)What is your strategy on inorganic growth?

ans)We have given the mandate to the investment bankers to find suitable targets in managed services, both in India and abroad. Talks are already on with a few companies. We plan to zero down on two companies. One of these companies is in India and the other is in the US. We are also actively talking to a European company and another company in India. Hopefully we will be able to consummate the deals in the next two quarters.

5)What is your USP vis-à-vis the top IT companies?

ans)The Big Five may not have the complete roster of service offerings in the space that we are in. But, they could be having some other options which we may not have. In the Business Continuity (BC) space, we are the clear winner. We are India’s largest managed services provider. We will continue to maintain this advantage.

6)Tell us about your OmniCenter initiative?

ans)OmniCenter at Navi Mumbai was set up in February 2008. We are now in the process of expanding through various geographies. It is one of its kind disaster recovery center, which encompasses all four vertical streams – data, equipment, workplace and people.We intend to set up a second disaster recovery center soon. This should be up and running by the end of June. We will also look at setting up more such centers to tap the potential in the Indian market. We are planning to tap the top seven cities in the country. We are also contemplating to set up disaster recovery centers abroad.

7)What kind of customer profile you have?

ans)Mainly we have mid-sized customers; those with revenue ranging from Rs200 crores to Rs5000 crores. This segment comprises 65% of our total customers. These clients mainly belong to the BFSI, Manufacturing and IT-ITES services.

8)What is your order book position?

ans)Our order book position currently is about Rs110 crores. Mostly these are contracts of 3-5 years. BFSI is the largest vertical. Next big is IT-ITES. BFSI would be around 50%. IT-ITES would be around 20-22% and Manufacturing will around 20%.
9)Tell us about your currency hedging strategy?

ans)We just started hedging. At the bank level as well as the exchange level. Earlier, we were undertaking natural hedging. But matured hedging has only just begun.

10)Will the domestic-overseas break up remain at current levels?

ans)Organically, the break up between domestic sales and exports would remain the same, as both the markets are growing at an equal pace. But, there could be some inorganic growth in the overseas market. That’s where we get large billings and ticket size. Over the next 2-3 years exports will reach 40-45% of our total turnover.

11)What is your reaction to President Obama’s view on IT outsourcing?

ans)The political scenario and the business situation are totally different in the US. The issue is more about talent, skills and technical expertise of the people, which India has in large number. US companies require the services of skilled Indian workforce. Locally, the US doesn’t have that kind of talented people.Once the unemployment level comes down and the US economy stabilizes, the issue may ease off somewhat. This is going to be temporary phenomena. Had it been only about cost perspective it could have had an impact on India but there are multiple factors at play, and therefore we don’t see it having an effect in the longer run.

12)Any guidance for FY10?

ans)We are upbeat. We believe that we will definitely grow. But, in the next two quarters will be sluggish. Things will not start looking up suddenly. It will take time.We are looking at a 15-20% organic growth in topline. Inorganically it could be much higher because we are considering acquisitions.

13)Are you looking at South East Asian market for expansion?

ans)Far East is actively being looked at. For now, we have short-listed India, Europe, UK and the Middle-East. We have started exploring Far East. As of now there is no plan to go to China. We may consolidate in Japan and may go slow there. The Japanese market has been badly hit. We are watching China seriously. But we would like to wait and watch.

14)What is your message to the shareholders?

ans)We are committed. In a time of uncertainty we have been striving for excellence. We have progressed very well. Today, we are able to provide niche services to our customers. We believe in being aggressive by taking calculated risks. We will create wealth for all stakeholders on a long-term sustainable basis.

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