Interview with Hiranya Ashar, Director - Finance & Chief Financial Officer, Rolta India Limited

Rolta India Limited provides software/information technology based engineering and geospatial solutions and services to customers across the world and has executed projects in more than 35 countries. Rolta is headquartered in Mumbai and operates through a network of twelve regional/branch offices in India and seven subsidiaries located in USA, Canada, UK, The Netherlands, Germany, Saudi Arabia and UAE.

Hiranya Ashar, Director - Finance & Chief Financial Officer, has over 10 years? experience in finance, accounts, taxation and audit. He is a commerce graduate and an Associate member of The Institute of Chartered Accountants of India. He has extensive experience of managing corporate finance, project management, financial planning & analysis, budgetary control, fund management, taxation, audit, mergers & acquisitions and investor relations. He possesses strong analytical and management skills and is an effective leader in rapid growth situations.

He has an extensive experience in boardroom, executive management, financial, operations, and business strategy. He possesses strong information systems skills, including experience using systems to facilitate productivity and improve financial analyses.

Speaking with Anil Mascarenhas of India Infoline, Hiranya Ashar says the accuracy of our design is such that any clash detection can be checked at design stage itself.

Mapping applications are being done by many firms. Integrating available data into an useful solution has been an issue. To what extent is Rolta able to achieve the same?

Though mapping is done by many firms in India, it is done in a scattered manner. The map is used more as a base for GIS applications and needs to be integrated with the geographic database in order to make it intelligent to support queries and analysis of the information. Further one needs to develop MIS and customize the GIS application in accordance with the customer requirements.

Today, decision makers need information that is actionable, timely and readily available to make effective decisions for quick action. Digital maps provide a wealth of resources for immediate access, analysis and management of spatially referenced information. Therefore, GIS is no longer a tool for the specialist, but is a decision making tool for management.

Over the past few years, we have moved up the value chain by executing turn-key projects to provide end-to-end solutions in all our business areas. In GIS, we mapped the entire Dubai Emirate, created 3-D digital model with spatially referenced information of entire resources of Dubai municipality enabling the authorities to access, analyse, plan and manage their resources effectively. In India we executed a turnkey project "Dial 100" for Mumbai Police on similar lines of 911 in US, which effectively reduced their response time to reach the trouble spot. We are also exploring with other states in India for implementing similar GIS solutions. In the Middle East too we are executing few similar projects.

In Utility space, we provide comprehensive solutions to manage and maintain supply networks over large geographical areas. We executed several turnkey projects worldwide like British Telecom, Saudi Telecom, Montana Dakota etc., thereby enabling them to effectively manage and upgrade their nationwide networks. We provide end-to-end solutions in the areas of mapping, cartography, imaging, photogrammetry and utility/resource management. We are also focusing on electricity distribution companies with solutions for enhancing productivity and facilitating reduction of Transmission & Distribution losses and energy audit.

In our joint venture with Thales, we will leverage our Geo-spatial expertise and the ability to integrate the geo-spatial database with all the command, control or data fusion technologies and products that come from Thales. The JV will provide comprehensive solutions with sophisticated systems to the defence and homeland security for managing the entire intelligence chain from data acquisition and processing to transmission of data to command centers, operational decision support, command communications and operational control.

Could you cite some benefits of your City mapping tool?

Geographic Information Systems (GIS) is a user-friendly tool. In Dubai, we have developed a 3-D model of the entire Dubai city where you can virtually walk through the streets of Dubai. The ground data and all other data are all integrated, which will give the name of the building and all other relevant details including how the building looks. Our basic customers for such applications would be town planning authorities and municipalities. This can be effectively used for town planning, disaster management and any planned evacuation in emergencies.

What kind of accuracy do you have in your Engineering Design Automation (EDA) business?

Our EDA business is quite different as we focus on plant and process engineering unlike many others, who do product engineering. We provide state-of-the-art plant design & specialized services worldwide for Detail Engineering, both in Plant & Mechanical Engineering. In Engineering Design Automation, we provide services like creating intelligent databases for piping & instrumentation drawings, product modeling, 3D Plant modeling for complete plant visualization and detail engineering services.

What differentiates us from the rest is, we do the detail engineering, which is creating a virtual prototype of plant. The accuracy of our design is such that any clash detection can be checked at design stage. In contrast, if you have a drawing, the clashes may come up sometimes while the plant is being constructed. In our case, such situations are taken care of at the design stage itself and there are no last minute surprises.

We have undertaken many Greenfield and brownfield projects. The major advantage of converting old drawings of the plants is substantial reduction in its maintenance and insurance costs.

You may remember one of the worst accidents in ONGC?s history, the Bombay High North platform in the offshore Mumbai High field was gutted in a devastating fire in July ?05. Had they used digital model, it would have saved considerable time and costs in rebuilding the same.

Rolta now offers Laser and Photogrammetry services in the field of As-built Plant Data capture and modeling by leveraging its in-house skills in Photogrammetry and domain expertise.

Tell us about your joint venture with Stone and Webster.

In September 2004, we got into 50:50 JV with Stone & Webster Inc and set up a Joint Venture Company in India ? Stone & Webster Rolta Limited. Stone & Webster-USA, founded in 1889, is one of the world?s foremost engineering, procurement and construction companies and has a portfolio of power projects spanning over 50 countries, six continents and experience of 115 years. It has exclusive proprietary technology for the development, consulting, engineering and construction of nuclear, fossil fueled, geothermal and hydroelectric power generation projects in addition to being a recognized leader in refining, petrochemical and polymer fields. Drawing upon Rolta?s rich expertise as an Engineering powerhouse, the JV Company ? Stone & Webster Rolta provides high quality Engineering Services worldwide and undertakes turnkey refinery, petrochemicals and power projects in India.

The JV has been formed with a two-fold charter, as Stone and Webster does the basic design, while SWRL undertakes the detail design for its global projects thereby Rolta acting as an offshoring design center for Stone & Webster. While in India, SWRL will undertake the execution of EPC projects and basic designs from Stone & Webster, US. In short, we leverage Rolta?s infrastructure, facilities, and capabilities and Stone & Webster?s extensive experience and expertise for executing complex global EPC projects.

So the nuclear deal between India and US will throw open a lot of opportunities?

Yes, the nuclear deal will open huge opportunities for the JV in the power sector.

Stone & Webster owns proprietary technology in nuclear energy, and is a leading player in nuclear market. They maintain 80 % of US nuclear plants. They also have 20 % stake in Westinghouse, a leading supplier of nuclear reactors. Rolta is uniquely placed to capitalize the emerging opportunities for setting up nuclear power plants in India.

What about e-solutions?

eSolutions is a niche area where we implement e-security and the entire lifecycle of services for Network and Security Management, Storage Management and Service Management.

Rolta also provides RFID solutions and include applications for Asset Management, Vehicle tracking and IT Access Control, Document / Library Management, Inventory Control & RFID / Smart Card Integration with Network Management Systems.

You have a major partnership with CA for e-solutions. Give us more details.

Yes. We have grown in the eSolutions space with our partnership with CA, for implemention, customiation and integration of CA suite of products in eSecurity and network management domains for their customers globally. Rolta is a "Premier Global Services Partner" of Computer Associates and provides end-to-end services such as Solution Architecture, Customization, Implementation, Migration, Software Life Cycle Development and Testing.

Rolta entered a three-year definitive agreement with CA in October ?05 for North America and has provided significant services to CA customers' worldwide using eTrust, Unicenter, BrightStor and custom integration solutions.

On the similar lines, in October ?06, Rolta and CA entered in to another three-year definitive agreement for United Kingdom, Europe, Middle East and Africa to provide product implementation, migration, upgrade, customization and integration services to CA customers.

What is the outlook for your various segments?

During the quarter, we continued to move up the value chain by providing high-end consulting, web enabling of GIS data and system integration. Rolta has been appointed a principal member of the OGC?, The Open Geospatial Consortium, US. This will enable the company in taking a leadership role in promoting the benefits of interoperable geoprocessing in the Indian and international market. GIS has grown at 18-20% bringing in 60% of our revenues and we expect to grow at 20-22% for next 2 years. Catalysts to drive the same for the next 2-4 years would be the JV with Thales, France and opening up of GIS market in India. This JV will leverage the broad spectrum of cutting-edge technologies, systems and solutions from Thales, and Rolta's leadership position in the Indian market. The JV will take advantage of technology transfer from Thales for developing state-of-the-art Command, Control, Communications, Computers, Intelligence, Surveillance, Target Acquisition and Reconnaissance (C4ISTAR) information systems, for domestic and international markets.

The company has won several large projects from both owner-operators and EPC companies in India and overseas including a large order from an Indian owner-operator. With multi disciplinary project experience and domain expertise in the refinery, petrochemical and power sectors, the company is uniquely positioned to address the emerging huge demand in India and overseas. In the Ship Design Services, the company has expanded from domestic projects and has achieved significant progress in international markets. The company has won orders from two renowned international shipyards in Europe and is uniquely positioned to address the huge potential for offshoring ship design services in coming years. The joint venture company Stone & Webster Rolta Limited (SWRL) is executing several large projects from petrochemical companies and large refineries apart from providing engineering design services for global projects of Stone & Webster.

EDA has been growing between 28-30% and contributes to around 30% of our business. We see huge opportunities emerging on account of leading Indian petrochemical companies and refineries doubling up the capacities and global outsourcing demand for engineering design services. Going forward we expect EDA business to grow at 30-35 %.

As mentioned earlier, we have strong relations with CA. Similar ventures with other companies like IBM, Oracle etc. cannot be ruled out. In the coming two to three years we see a growth of 40-50%.

Another area we are keen on is gaming & character animation. He we are talking more about the animation and design stuff, not applications development.

Tell us about your order book and by when would it be executed?

The current order book size (backlog) is Rs. 7.5 billion as follows :

We also have a healthy near-term pipeline of more than Rs. 13 billion representing orders that we are pursuing in the near term and expect these orders in the next 2 to 3 quarters.

Brief us on your path from Design and engineering to project driven growth.

We pioneered CAD/CAM and GIS in India identifying relatively untapped GIS as a growth area and tied up with Intergraph Corporation, USA for exclusive partnership in India for its entire range of products and solutions. We won major contracts for digital mapping system from nodal agencies in India and achieved the leadership position in the Indian GIS market. To address the global business demand, we set up development and delivery center in Mumbai, one of the largest commercial photogrammetry and GIS facilities. We set up a subsidiary in US to focus on services business and started with GIS services like data conversion. We successfully executed a significant contract from one of the major Telecommunications network in Saudi Arabia for GIS data conversion of outside plant network models and building plans to the Intergraph environment. Over the last decade, we built our capabilities, alliances and established a successful track record. We won and executed large projects providing end-to-end solutions in both domestic as well as global market.

In GIS, data conversion is a low-end job and forms a part of the turnkey projects, we execute. Currently we sub-contract around 20-30% of the job to other agencies and we are looking at sub-contracting more low-end jobs to outside agencies.

In plant design we have graduated from providing digital plant designs and data migration services to providing tun-key ?As-built? plant designs. In mechanical engineering we now provide higher proportion of PLM services than delivering ?part of the value chain? projects.

What are your billing rates?

Our average GIS billing rates are around $18 - $19 an hour. Blended billing in EDA are between $22-$25 an hour. For e-Business, average billing rate for onsite is between $110 to $140 an hour and for offshore between $25 to $30 an hour.

What about margins?

Our overall EBIDTA margins are in the range of 40-42% of and Net profit around 24-25 %. EBIDTA and net margins are 42 % and 25% respectively in GIS, 40 % and 23 % in EDA and 32 % and 20 % respectively in eSolutions.

Overall EBIT margins are in the range of 26-28 %. 

Your current headcount. What kind of ramp up are you planning?

We have a head count of over 3600 in Rolta India and SWRL JV, which we plan to increase to 4,000 by end of June 07 and 5,000 by end of June 08.

Your capex plans?

The capex for the current year would be around 160 crores and for the next year capex of Rs. 160-180 crores is planned. Considering our offshore-onsite employee mix of 90:10, our total seat cost would be in the range of Rs. 1.20 to Rs. 1.50 bn for 800 ? 1000 people. We are currently using applications, which cost between $15,000 to $30,000 and a good ship designing software costs $50,000. The cost per seat works out to Rs. 12 -15 lacs without infrastructure cost. We amortize that in four years.

Your receivables have been on the higher side?

Yes, we hope to bring it down from 7 months to 6 months. By end of June 07 it should be in the range of 180-190 days. Our project nature is such that we bill on milestones. Some amount is retained by client as retention money, which accumulates to around 15-20% and is received after completion of the project. Another reason for the longer duration is that for government business, it takes 6-8 months because of a long chain of approval cycle. At the same time, the government is most creditworthy. Money may come in late but will definitely come in.

With increase in business from international & private sector and focused efforts towards strong receivables management, we hope to bring down the receivables to 5 months (150 days) in the next 18-24 months.

What about billing rates. Are you able to increase the same?

Billing rates have not increased in proportion to increase in salary costs. We have seen a 3.5% increase in billing rates, for existing clients the rise is 3-4% and for new clients increase is around 5-7%. The blended increase works out between 3-5%. We may not be able to sustain margins as sales are growing by 15-20%.

To increase margins, we are moving up the value chain. From our current average realisation/billing rate of $16 to $20 $, we hope to increase it to $20 to $25 an hour by providing innovative services and solutions and also by using our IPRs thereby effectively reducing the time to complete the projects.

What is the level of attrition? What is being done about the same?

Attrition is around 9-10%. It?s a challenge to have low attrition and we have innovative HR policies to help retention. The good news is that Top and middle management are stable. The top management has been with the company for 10 years while middle management is there for 7-8 years.

Transparency and corporate governance have been an issue?

We have adopted and implemented International Financial Reporting Standards (IFRS) and EU Norms conforming to the best international regulatory procedures and high standards of transparency and corporate governance. Our IFRS accounts are audited by a leading accounting firm Grant Thorton. We have established Investor Relations division providing all our stakeholders the relevant and timely information about the company thereby increasing transparency. We are listed on the London Stock Exchange and are complying with LSE listing guidelines.

Your message to shareholders?

Rolta has geared up to capture huge growth opportunities by putting in place a stronger leadership team and adding top-class talent across the organization with increased focus on delivery, production and support to its customers worldwide. During the quarter more than 200 technical professionals have been inducted in various disciplines raising the total employee strength of the company and its JVs to over 3800. Rolta has benchmarked its quality processes against the world?s best quality standards. We have completed our first phase of corporate journey. We now possess a solid foundation to accelerate growth of our business in terms of an established track record, empowered people, domain knowledge, world class infrastructure and enduring partnerships. We are now well positioned to capitalize on unprecedented opportunities in each of our core markets leading to impressive growth and a quantum jump in the value we bring to all stakeholders and concurrently providing meaningful service to our nation.