Signs of stability in retail and strong deal pipeline marked Q1: Zensar CEO

Reported revenue was ₹991.2 crore down 2.6% q-o-q and down 7% y-o-y. The numbers were ahead of estimates by Bloomberg which expected Zensar to report revenue of ₹976 crore for the quarter. In dollar terms, revenue dipped 7% q-o-q and 14.7% y-o-y.

The retail business has shown signs of stability, which was impacted the worst during the quarter, deals pipeline increased and overall signs of stability were seen, said Sandeep Kishore, chief executive officer and managing director, Zensar Technologies during an interaction with Mint.

Sectors worst hit during the quarter were consumer services (20.8% decline), banking (12.8% decline) and emerging businesses (7.5% decline). The verticals were impacted because some projects were not renewed post completion, however the management expects the renewals to happen once the market recovers.

“In Q1, we have continued our focus to ensure wellness and safety of all our people and to support all our global clients in their Digital, Cloud and IT systems as the world deals with the pandemic. We have invested into launching several new propositions tailored to help our customers remain relevant during and post the pandemic period," said Kishore.

Digital Foundation Services (new technology) has performed well, posting a q-o-q growth of 7.6% and hi-tech business grew by 2.9% q-o-q. Kishore added that supply side issues were not faced during the quarter but demand was impacted by retail although demand was balanced by hi-tech services which improved significantly during the quarter. Largely retail and few aviation-related clients have asked for discounts following their distressed situation due to the pandemic.

“In Q1 we reported $150 million total contract value (TCV) deals compared to $110 million last quarter, demonstrating the robustness of our new propositions aligned to Digital Foundation and Digital Applications. Our current pipeline is at $1.5 billion. Our global talent has been very productive, in the new 100% remote model working closely with our customers as they embark on transformation path to recovery and resilience," he further added.

Deals came from cloud business with three new logos added to the cloud portfolio in Q1.

Navneet Khandelwal, chief financial officer, Zensar Technologies said, “In Q1FY21, we continued our cash management initiatives and our rigour on collections. Our focus on operational efficiencies has resulted in an increase in EBITDA despite decline in revenues to 14.4%. Our PAT (profit after tax) is at 7.4% of revenue which is an increase from 6.8% in Q4FY20."

This has resulted in an improvement on cash conversion or DSO by 12 days sequentially, (and almost 29 days y-o-y) resulting in an increase in net cash position by $41.3 million sequentially.

Zensar has launched its virtual employee onboarding program over the past few quarters remotely from tier 2-3 cities which they said will help the company bring in more talent diversity.