Q3 traditionally weak, maintains guidance of 20-25% EBIDTA growth: RS Software (India)

Riken Mehta Follow me on Twitter @mehtariken

RS Software (India), a leading software solutions provider for electronic payments industry reported its highest-ever consolidated sales of Rs 104 crore in the second quarter of FY14, a growth of 25 percent over the same quarter last year. The company's net profit also jumped by 22 percent to Rs 11.6 crore. However, what needs to be highlighted is the expansion of operating profit margins by 490 basis points to 21.2 percent from 16.3 percent last year.

“The revenue growth was led by healthy expansion in businesses from existing as well as new clients,” Raj Jain, chairman and managing director at RS Software (India) told moneycontrol.com in an exclusive interview.

Quarterly Review

The company crossed a turnover of Rs 100 crore for the first time in a single quarter. The investments made in its prime products like Payment Labs, School of Payments and Knowledge Management System are now beginning to pay off, explains Jain. The revenue growth in constant currency terms was four percent, quarter-on-quarter (QoQ).

Guidance

RS Software's guidance of 20 to 25 percent growth in operating profits in FY14 over previous year remains unchanged despite rupee fall. "The third quarter traditionally remains a weak quarter as two of our key clients have September year ending, so the spending from these two clients will be on the lower side in December quarter,” he added.

Industry Outlook

“The evolution is happening in the electronic payment industry as major central governments across the globe are emphasizing the need of higher security for electronic payments and fraud management. We are seeing the momentum picking up in the first half of FY14," said Jain. "Around 85 percent of the payments in the world are still done via cash and cheques. In US, around 60 to 65 percent of the payments are done via electronic while in India the share is just 7 percent. So there is a huge potential for this industry to grow,” explained Jain.

Operating margins expansion

The fall in rupee coupled with the cost efficiency measures undertaken by the company led to this massive improvement in margins of 490 basis points, year-on-year. "There is still room for improvement as we will install ERP (Enterprise Resource Planning) program by the end of FY14 which will lead to further cost cutting and margins expansion,” said Jain.

Patents

The company has not filed for any new fresh patents after receiving its first patent this year in the Customer Acquisition space, clarified Jain.