Thinksoft Global: Will the growth resume?

MUMBAI: The stock of Thinksoft Global Services has not been able to break the range bound trading over the last three months following the company’s fluctuating quarterly performance over the past two years. The company’s management believes that the growth would be more consistent in the coming quarters as its Asian operations generate traction and the proportion of the offshoring revenue improves.

The small cap IT player reported a sharp sequential drop in revenue and profit for the March 2013 quarter due to change in the revenue mix tilting towards the offshore thereby reducing the topline. Revenue fell by 15% to Rs 37.7 crore for the quarter, while net profit skidded by 63% to Rs 2.2 crore.

Since offshore billing rates are lower than rates for the onsite operations, revenue takes a hit when offshoring improves. The positive side is the improvement in operating margin in the long term.

The company reported traction in Asian operations in countries including Singapore, Malaysia, Hong Kong, and Australia. The share of revenue from this region improved to 38% in FY13 from 34% a year ago. In comparison, business in the European region was weak with its share falling to 35% from 43% a year ago. According to the management, the European region is likely to show weakness as decision making is delayed due to economic concerns.

The company’s current employee utilisation is around 68%. According to the CEO Asvini Kumar, the company is geared to increase utilisation by 10% without additional human resources. This will make it easy to absorb new order flows in the coming quarters without having to increase workforce.