A Clear Strategy

Please take us through the journey of your company in last five years?

Cyient is an exporter into engineering services. This company has a track record of 20 years plus in terms of doing the export of engineering services. It’s a global company, twelve thousand and five hundred plus engineers and associates are operating out of which thirty eight global locations. We are already serving about 29 fortune 500 companies. So that’s the background of the company. If you see in terms of the wealth creation for the investors in the last five years, the company has been going well.

The business is growing about 20 per cent in CAGR, the net profit also has been growing around 24 per cent in CAGR for the last five years. So I think the company has a good business model, the company has established set of customers, company has created a global network and company in the last five years has grown at 20 per cent plus for both top-line and bottom-line, that’s one thing which I can say about the last five years. We give lot of emphasis on customers and that’s how we are able to have 99 per cent repeat business from these very nice customers.

But we have also decided that equally important is another stakeholder called investor. So from investor’s perspective, we have been doing lot of things in the recent past. We are trying to make sure that how do we really work on like free cash flow, one of the concerns investor’s has to what EBITDA we generate and how much of get converted in to cash generation. It was very low few years back typically. We would have generated about Rs 50 crore of free cash flow but till today the last year we generated Rs 220 crore of free cash flow. I think the period of 3 years excellence there is a four times growth in free cash. That is to be one of the concern. The company has distributing much higher dividend so the dividend payout also you see few years back it was 10 per cent of net profit currently. We are giving around 25% of net profit. Today we are communicating with investor. The way we are dealing in terms of doing annual investor day, doing some kind of regular road shows & also some kind of services to give what investors expectations are in more importantly working on them. Second thing I would like to say is we are really done lot of work to see that we are working towards to meeting the investors’ expectations.

Over the 5 years we have been growing very well, and we are doing right things to meet investor expectation and investor return. The company’s name has been changed to Cyient from Infotech Enterprises. Krishna Bodanapu has taken over as the CEO of the company from 1st April 2014. We are working on up scaling our system like IHR, P3, SAP to make sure that we have very good systems and process which are available for next level of growth. Lastly, we are working on long term strategy. There is one of largest consulting firm working to come out with long term strategy for company. So I think we have a very clear strategy for next 5 years.

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What is your perspective on value creation for your different stakeholders?

We listen very carefully to the voice of investors and we just try to do exactly what they expect. For example we heard their voice. They said that we need to generate more cash, we need to give higher returns in form of dividend, and some of disclosures and communication have to be increased or enhanced. So we try listening to the investors’ expectations patiently and keep working on that. In last few years the market cap of company has moved up and shareholders returns on market have also moved up.

How the things have changed since the new government has assumed power in the centre?

Government coming in, doesn’t make much impact because it is completely export oriented business and we are already there in established business. There is no change in short term, when you talk of long term, some of the initiative of the government like Make in India campaign and focus on defense, we have lot of potential.

What are the challenges faced and strategies adopted by you for emerging among the top value creating companies today?

Let me first talk about opportunities, the opportunity is that the company has extremely good set of customers. I already explained you about 29 fortune 500 companies who are our customers, these are largest companies in aerospace. So we already have good set of customers who are very satisfied. The challenge is how we do more and more with existing customers, this is where we are making strategies. for example in certain area, we are very strong at doing mechanical kind of work. And now we are saying how do we do more work on electronics for our customers. So the idea is we must get higher share of wallet size from existing customers. So this is one of the strategies. we are acquiring the companies to do so. If you see in the last 1year, we have acquired 3 companies, one is on analytics, one is on communication and third company which we acquired is in sophisticating electronics manufacturing.

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What are the capex plans planned for your company in next couple of years?

See as far as capex is concern our business capex comes from the hardware, software and seat creation that you require for the additional customer business. One thing, as a company we have done is that we are trying to be asset light. So in terms of space for the people, in terms of hardware, we are going more and more for leasing so that we are asset light company. Typically we are spending 3-4 per cent of our revenue as capex for this seat creation, hardware & software, we are spending similar capex for the company. More importantly, we have good amount of cash on the balance sheet. Though we have acquired three companies, still we have Rs 620 crore of cash. We can really leverage the cash and we can acquire businesses using this cash.

Going forward, what do you think are the major growth driving factors for your company are going to be?

One is that we are coming out with the new strategy where we are planning to offer end to end solutions to our customers. So currently we are giving services, we also trying to give solutions and systems. So again it is linked to how to get higher size of wallet of the customer and doing more with the existing customer. For doing that the second important engine is acquisitions. We have strong balance sheet and there is good cash available. there are many existing investors and they are very supportive. Current and future investors want really finance us and help us.

Where do you see your company five years down the line in terms of topline and bottomline?

As we have done strategies for next five year, we clearly know in which industries we have to operate. For example the industries like aerospace, rail transportations, medical devices are the areas which we are bullish on. We want to offer from services to solutions and systems. In terms of numbers, the growth is going to be much higher than the growth in last five years. Last five year we have grown with 20 per cent year on year in topline and bottomline. Our ambition will be to do much more than that, may be 1.5 times, in next five years.