Higher taxes, forex losses lead to lower profit in Q2: Nucleus Software

In an interview with ET Now, Vishnu R Dusad, CEO and MD, Nucleus Software, talks about the order pipeline and future prospect. Excerpts:

ET Now: Give us the quarterly performance for us? Have you actually done in 11.5 crores versus 5 crores on a quarter on quarter basis and all of this, is this purely operational or is there a forex element to this as well?

Vishnu R Dusad: There is a sizable forex element to this, which is nearly 4 crores. The rest of it is operational. For example our EBITDA last quarter was 5.48 crores, which has moved from 5.48 to 10.75 crores, so we have doubled the EBITDA.

ET NOW: If I just take purely the EBITDA performance, which has doubled, why has not the PAT gone up in the same quantum if you remove the forex gains that you have got this quarter around? Is there higher interest costs or higher depreciation or something that we are missing out here?

Vishnu R Dusad: There is a higher taxation, which is in the vicinity of 3.31 crores higher taxation this quarter. As against 1.37 crores, we have a taxation of 4.68 crores.

ET Now: How much of the EBITDA has been hit by salary hikes? Do you think that has been factored in the performances despite that?

Vishnu R Dusad: Absolutely. Our license revenue has gone up this time by 3 crores, so that is one clear factor, which has helped improve the EBITDA and our expenses we have been able to contain almost at the same level.

ET NOW: What has happened in Q2? Is the strong performance a result of better pricing or is it more volumes that have come into play? How have you grown the EBITDA almost 100% wherein the top line has not grown in the same quantum?

Vishnu R Dusad: No. The improvement is essentially because of both better pricing as well as far stronger controls on the delivery mechanism.

ET Now: How much better pricing because I was speaking to a lot of your peers, all of them are saying that pricing has not really gone up and in fact the lower pricing would be the new norm? You are saying that pricing has indeed gone up. Is there a difference out here? Do you believe that pricing could actually stay at the stable levels or go higher in the next two quarters?

Vishnu R Dusad: I would like to say that it will stay at the same high levels essentially because of the robustness of our platform, our new marquee customers, they are far more willing to look at higher pricing for our IP than they were in the past.

ET NOW: Give us a sense then of the deal pipeline, how that is looking right now given that there is a lot of turmoil in the developed countries as far as deal allocation is concerned?

Vishnu R Dusad: Our order sizes are far smaller as compared to the industry’s order sizes and given that we feel okay in terms of the pipeline. I would not say that it is weakening but at the same time I would not say that it is strengthening very highly, I would say it is okay at this moment.

ET Now: The gains that you have got in this quarter around, how much of a forex cover do you have going ahead as well or will we see substantial forex gains if the rupee stays at the current levels in the October-December quarter as well?

Vishnu R Dusad: We have a forex cover of around $13 million, so I do not see similar gains coming in this quarter because whatever gains were to come, they have already been accounted for, so I do not visualise too high...

ET NOW: The better part of your results that is the strong EBITDA performance, do you think that in the next two quarters, you would be able to shape up in the same fashion as far as your EBITDA goes?

Vishnu R Dusad: We do hope so.