Zensar Tech

IT services company, Zensar Tech posted a decent set of numbers for Q2FY16. Consolidated net profit for the quarter showed a 20% (QoQ) rise at Rs.91 crore and this was mainly on account of the 7% jump in total income at Rs.759 crore. Dollar revenue showed a 6% sequential growth. The main contributor to the revenue was Application Management Services (AMS) which showed a smart 6% rise in revenue  while Infrastructure Management Services was a drag with its EBIT declining 22%.

Operating profit for the quarter came in at Rs.108 crore, up 10% while margins expanded to 14.2%, up 30 bps. An almost debt free company, its cash and bank balance at end of Q2 stood at Rs.287 crore. The company currently has a pipeline of around US$390 million of which US$140 is from IM segment , with almost all deals coming from USA. Digital revenue, like all the others is expected to become its major driver in next couple of years. This quarter itself it has shown a growth of 15% , up from 2% growth in 2013. It hopes to take it to 50% in the next few years. Q3 is seasonally weak for IT companies so Q4 could see the next big jump.

In October, Marina Holdco, a company backed by Apax Partners, announced that it had bought 23.2% stake in Zensar Technologies. This stake was acquired from Electra Partners Mauritius, an existing minority shareholder. This stake was purchased for Rs.833 crore. Electra Partners said inclusive of dividends and proceeds from the share sale, the deal will generate a return of 19 times on original cost over the 18 years of the investment; an internal rate of return of 18%. The RPG group will continue to remain majority stake holder at 48%.