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00:00Hello and welcome, you are tuned in to the small and mid-cap show here on NDTV Profit.
00:14I am Harsh Saita and we will quickly speak with two managements today with regard to
00:21their earnings.
00:22We have PNB Housing Finance first up, we have Mr. Girish Kowski who is the MD CEO at PNB
00:28Housing Finance.
00:30Now firstly, welcome to the show Mr. Kowski, it's a pleasure having you on NDTV Profit.
00:35Good morning.
00:36Good morning, Harsh.
00:37Sir, let me first start off with margins, roughly 3.5% is what you have guided for,
00:443.65% is what you have done for Q4 at least.
00:49Any upside positive possibility on margins given your rating upgrade, that's one.
00:56The second piece is also as capital gets more and more optimised within the organisation,
01:01is there a possibility that you could possibly beat that 3.5% guidance that you have given
01:06for FY25?
01:08I think we should look at 3-4 parameters before talking about NIM.
01:13So if you look at last four quarters, we started affordable housing and now we have built a
01:20book of about 1800 crores, so that will now start getting us better yields.
01:27We got rating upgrade, so that will ensure that going forward in next few quarters, the
01:31cost of borrowings will come down.
01:33We also drew about 3000 crores from NHB, which comes at a lower cost.
01:39So having said all of these things, NIM guidance for FY25 is going to be at 3.5%, there will
01:46be a little upside on the fee.
01:49In terms of credit cost, it will be muted.
01:51For FY24, we had guided 60 bps, we ended FY24 with 25 bps.
01:57So the guidance for FY25 on credit cost is going to be about 30 bps and we have a large
02:02pool of about 2000 crores, which we have written off and there is a recovery possible from
02:08that pool.
02:10So if you consider overall, I think little bit of compression on the NIM would be compensated
02:17by some of these things.
02:19Okay, so sure, point taken and I'll come to each of those, you know, I'll try and break
02:25those up.
02:26First off, with regard to growth itself, could a mid-teens or closer to 20% growth be a possibility
02:34at all for FY25?
02:37So if you look at last year, for the first time, we have grown the retail book at 14%,
02:44which is the highest in last four years.
02:48If you look at overall growth, we have grown at about little over 10%, which is the highest
02:53in last five years.
02:54Why I'm saying this is that we are de-growing a corporate book.
02:59Last March, a corporate book was 4000 crores, this March, it's approximately about 2000
03:04crores.
03:05So as the corporate book is depleting, retail is growing and therefore, you will see that
03:10the overall book growth is at 10% and retail at 14%.
03:14Talking about FY25, on the retail side, we plan to grow at about 17% on book and 25%
03:21on disbursement.
03:22Why 17%?
03:23Because we are moving towards high yield segments.
03:27Our focus now is largely on retail.
03:30If you look at the overall portfolio, 97% is retail and 3% is corporate.
03:36Within retail, we have three verticals, prime, affordable, we started about 15 months back
03:41and this year, we started emerging vertical.
03:44So emerging verticals and affordable constitutes to almost in terms of branches, two third,
03:50which is 210 branches.
03:52These 210 branches would focus on high end business and therefore, we want to grow the
03:57book.
03:58The book has to be profitable and therefore, the growth rate is 17% and disbursement is
04:0325%.
04:04Sometime during the year, we will start corporate in a small way.
04:09Sure.
04:10Okay.
04:11So sometime during the year, you'll go back to corporate as well.
04:14Two risks, possibly or some apprehension possibly in investors' minds, one, as you start to
04:22grow corporate again in FY25, what are the safeguards, what are the guardrails you'll
04:28put in place?
04:29That's one.
04:30And what's the kind of comfort you have on that?
04:32And second is with regard to your emerging businesses as well, what's the kind of comfort
04:38given that there'll be slightly higher yielding?
04:40So my guess is there'll be slightly higher risk or do you feel that risk may be controlled
04:45there?
04:47I think first on corporate, I think we will stick to basics.
04:50And corporate is a business, you know, which this industry has seen over last three to
04:54four decades time.
04:55So we had got certain things wrong in the earlier outburst.
04:58So this time we will take care of all of those things and we will keep it very specific and
05:03stick to basics.
05:05We would focus on slightly lower ticket size, on a very good set of builders, CAT A and
05:11CAT B, project specific.
05:13We would be only into construction finance, not into any other kind of corporate lending.
05:18So I think we will have our framework ready and we are pretty much comfortable.
05:23So we plan to start that this year.
05:26Now, in terms of prime and emerging, I think not much of difference in terms of the risk.
05:32There is slightly incrementally, the risk is higher in the emerging compared to prime,
05:37but not very different.
05:39Even in affordable, I think we have a good experience in last 15 months, but even otherwise
05:44in some form or the other, I think the entire team is from affordable industry.
05:48And even I've been seeing this industry very closely since last 15 years.
05:52So the risk is higher.
05:54So if you talk about great cost for a prime kind of business, the great cost is going
05:58to be for a well-managed company, anywhere between 20 to 24 bps for emerging, it's going
06:05to be about maybe 30 bps and for affordable kind of company, it's going to be about 50
06:11to 60 bps.
06:12So since the yield is high and we will have better margins, I think these risks are very
06:16easily manageable.
06:17Sure.
06:18Got your point.
06:20I want to first off talk about recoveries before we move on.
06:26On the Q4 as well as the FY24 recovery number, could you give us that number?
06:32So in the whole year, we have recovered about 100 crores.
06:36So we have a large pool of 2000 crores.
06:39So we would have good recovery in FY25 as well.
06:43So this entire return of pool would play out in terms of recovery in next four to six quarters
06:48time.
06:49Okay.
06:50So out of the 2200 crore odd pool on the recovery front, on the retail, you have 500, 1700 on
06:58wholesale if I'm not wrong.
07:00What's the kind of recovery visibility FY25 and FY26 if I can just try and pull both those
07:06years together?
07:07Or maybe only FY25 first and then FY26?
07:11I would not be in a position to give you any numbers on that, especially on the corporate
07:15side because if you look at last year, our GNPA was almost about 23% and if you look
07:23at this much, it's about just 3% via one small account.
07:27And we also have resolved a lot of accounts which were written off.
07:32So on the corporate side, we would definitely have some recoveries.
07:36On the retail side, it will be more consistent.
07:38We can see that benefit coming quarter on quarter.
07:42Okay, understood.
07:44And with regard to ROAs, therefore, what's the sense if we leave out recoveries?
07:50Would ROAs be stable between 2.2% odd or what should the ROA band be?
07:58ROA, I think leaving recovery should be about 2 plus and the upside what we get from recovery
08:04will be an addition.
08:06Okay.
08:07And with regard to credit cost guidance, your 30 bps, my guess is that excludes the recovery
08:13possibilities that you've you've kept open for FY25?
08:17Yeah, 30 bps excludes recoveries.
08:21Sure.
08:22Understood.
08:23Understood.
08:24Understood.
08:25Okay.
08:2617% to 19% growth is the guidance number, you know, new businesses, etc. also coming
08:32in 30 bps of credit cost.
08:34Thank you so much, Mr. Kowsky.
08:36It's a pleasure speaking with you and thank you for all of that perspective and guidance.
08:40Well, earnings season for IT is at its peak and Zensar Technologies came out with its
08:45earnings recently with total contract value modest at $181.5 million and EBIT margins
08:53at 14.6.
08:54But to discuss more about how the quarter has gone by and what does the future of the
08:58company look like, we have with us Mr. Manish Tandon, MD and CEO of Zensar Technologies
09:03who joins us now.
09:04Welcome to the show, sir.
09:07Thank you for having me, Mahima.
09:08Right.
09:09So, Mr. Tandon, my first question to you would be, you know, just give us a color on how
09:13the quarter has gone by.
09:14How has FY24 shaped up for you?
09:18Well, I'm really very, very pleased with the performance of the company.
09:23I think we have seen, as you have seen the industry numbers, almost no one has shown
09:33sequential quarterly growth.
09:35We have shown a 2.4% quarter on quarter growth in revenues.
09:43On profits for this entire financial year, we have doubled our profits as compared to
09:48last year.
09:52And even more than that, we conduct employee satisfaction surveys and customer satisfaction
09:59surveys.
10:01And in both of them, we have done exceedingly well, much better than what we had done in
10:07the past.
10:08In fact, on some of those, especially on CSAT, we have been told that we are in the top quartile
10:14of industry performance on customer satisfaction.
10:19And attrition is very low, order booking is strong.
10:26I don't know which temple I should visit.
10:28Absolutely, Mr. Tannan.
10:29Well, I'll tell you, well, we'll shift focus to margins then.
10:37Like you said, you must visit some temples, your margins are now stable down.
10:42So I just want to understand that what are the margins that you're trying to aim at for
10:46FY25?
10:47What will be the levers that will push your margins ahead of that 14%?
10:55So we have given, we have narrowed our guidance on margins.
11:01We are striving for, previously we used to say 14 to 16% and analysts were not very happy
11:06with the broad range.
11:08So now we are saying 15 to 16% as a target margin.
11:13The next question is that today our margins are higher than that.
11:16So why will the margins come down?
11:20Margins are going to come down a little bit because we are investing in business growth.
11:25This growth that you are seeing is because of some of the investments that we have made
11:32and we will continue to make these investments.
11:36These will be ultimately be reflected hopefully in the revenue growth numbers that the company
11:43will be able to show.
11:45I would also say that one of the things that you may be notice is that our order bookings
11:52were at 182 million this quarter, which is a very, very positive sign overall.
12:00This is higher than previous quarter by I think something like 12, 15% and from previous
12:08year by 10%.
12:09Right.
12:10Mr. Narin, so I would also like you to break down for us in terms of your order book of
12:16this 182 million that we are talking about.
12:19How much of it will be executable in the next FY25 in terms of revenue realizations and
12:25how much of this is recurring in terms, I mean is it long term, short term, if you can
12:30break that down for us.
12:33So typically our order bookings are 1.1 to 1.2 times, 1.2 times our quarterly revenues.
12:44And if you can assume a quarterly revenue of 150 million, then we are in that ballpark
12:54that we are talking about.
12:55So most of our contracts are, first of all, our order bookings, booking number is very,
13:04very conservative because unlike others, we just put in order bookings signed SOWs, signed
13:14statements of work, no framework deals, nothing is taken into account.
13:22And we believe that we have to be consistent in doing that.
13:27So as you see the order bookings increase, at least I reflect, I see it as a positive
13:36sign that revenues will be stable or will grow going forward based on this order.
13:44Yeah, okay.
13:45I take your point.
13:46Mr. Dhanan, I also want to understand, your high-tech segment continues to face challenges.
13:53So by when do you expect some kind of revival in the high-tech segment then?
13:57Well, this is the first time that in the last five, six quarters that we have seen secular
14:06growth.
14:07In fact, all the verticals have grown for us, including high-tech as a vertical.
14:16And despite the fact that there were some furloughs in the high-tech, carryover furloughs
14:22from December.
14:24So hopefully the worst is behind us in this vertical and hopefully we will continue the
14:34momentum going forward.
14:35Understood.
14:36And I also want to understand, are your clients looking more for Gen-AI deals, one thing,
14:45and at present, what is the Gen-AI contribution to your total revenue?
14:50And by the end of FY25, how will that fare out to be?
14:55Okay, I would say Gen-AI is still in its early days as a technology, a lot of proof of concepts
15:04are happening, but AI is a technology where a proof of concept may or may not translate
15:14into a scalable overall solution.
15:18And that is what I think the industry is struggling with, that while proof of concepts are there
15:24and they are successful, but they are, the error rate is 2%, 3%.
15:32Now as an industry or for the use case, you have to decide whether a 2%, 3% error rate
15:37is acceptable or not.
15:41So I would say that currently talking about what percentage of our revenues is, or anyone,
15:50any service providers revenue is coming from Gen-AI, I would say is a very premature question.
15:58So unless I'm telling you Nvidia or one of the chip manufacturers or one of the cloud
16:05guys, you won't, a material percentage of your revenue will not come from Gen-AI as
16:16of today.
16:17Understood, understood.
16:18And so, I want to shift focus to attrition rate, you are one of the companies who managed
16:25to have a net addition of headcount, so I'm just trying to understand, how have you managed
16:30to do that?
16:31Are you building a benchmark for the future growth?
16:34What is the plan way forward?
16:35No, no, we are not building any benchmark for future growth, we are, as you know talent
16:44availability is pretty good in today's market.
16:48So we have switched to more of a just-in-time hiring and you know, the interesting thing
16:54is that even while doing net headcount addition, our utilization has actually improved.
17:03And that is a lot of credit to our COO and the operating team and the delivery team that
17:13they are able to execute this so well.
17:16Understood.
17:17And you know, in terms of subcontracting, what is the outlook, you know, how has it
17:23moved for FI24 and what does FI25 look like then going forward?
17:29I personally, I tend to look at overall employee cost rather than trying to break it into subcontracting
17:41versus hiring cost.
17:45In some situations, subcontracting is actually cheaper than hiring and we tend to, I tend
17:53to look at it as a holistic picture rather than trying to fine-tune too much on subcontracting
18:03cost versus employee costs.
18:05Okay, understood.
18:07And you know, you mentioned in one of your transcripts that you know, you're the top
18:11employer when it comes to South Africa, but from what I've understood is that the revenue
18:16has declined from this part of the, you know, business.
18:19So going forward, what does, you know, the future hold when it comes to, you know, South
18:25Africa?
18:26No, actually, actually that's incorrect.
18:28Our South Africa revenue has actually increased year over year by 12% and this is despite
18:36the currency depreciating by close to 10%, all right.
18:42So we are doing extremely, extremely well in South Africa and we hope to continue building
18:52that market significantly as we go forward.
18:55Okay.
18:56I mean, I take your point there.
18:58And you know, when we talk about IT, we have to talk about discretionary spends.
19:04Do you think that, you know, the clients are seeing some kind of uptick when it comes
19:08to discretionary spends now going forward?
19:12I think again, the whole paradigm of, see the discretionary spend, the definition of
19:22discretionary spend 10 years back versus today is very, very different.
19:2910 years back, discretionary spends were, you know, application development kind of
19:35projects or implementation kind of projects.
19:38Now technology is so integrated with business that you are doing development projects just
19:44to sustain your business, right?
19:46So this definition, I think the industry has not evolved as to what it considers discretionary
19:55and what it considers keeping the lights on.
19:59As technology is integrated more with customers and on the front end, a lot of what used to
20:06be called discretionary is not really discretionary.
20:10Understood.
20:11Point taken, Mr. Tandon there.
20:13You know, my last question to you would be, you know, a lot of macro uncertainties are
20:18still there, you know.
20:19So are you seeing some kind of cancellations or, you know, pauses in your at present deal
20:25wins?
20:26How is the scenario like?
20:27No, I don't think that I'm seeing any pauses or cancellations at all, actually.
20:36I think, A, it is not that we have a lot of long-term contracts that we are sitting on
20:42which can be cancelled.
20:44We are building that pipeline of large deals and trying to get into more longer-term contracts.
20:50So obviously that is one factor, but I have not seen too many cancellations or shifting
21:02of programs or anything of that kind, at least in the last couple of quarters.
21:08Okay, Mr. Tandon, well point taken.
21:11With that, we're completely out of time, but it was a pleasure speaking with you at NDTV Profit.
21:18Thank you, Mahima.
21:19Thank you for having me.
21:20Thank you so much.