INTERVIEW OF THE WEEK : ASHANK DESAI
January 22, 2006

Mastek Ltd is concentrating on the banking financial services and insurance (BFSI) segment and has done a lot of work for insurance companies in the US and UK. Pravin Palande of the Financial Express spoke to Ashank Desai, Chairman, Mastek Ltd on the strategies and growth plans of the company. Excerpts:

For the second quarter ended December 31, 2005, Mastek had a total income of Rs 175 crore, a growth of 25% over the corresponding period, last year. How was it different from other quarters?

It has been a good quarter. But we have been showing good growth year on year or quarter on quarter for a long time. We have been increasing our order backlog. The delivery efficiency and effectiveness and some of the revenue for the next quarter getting reflected this quarter is the reason why our December quarter figures look good.

Mastek being a major player in the BFSI segment, how much does insurance account in your business?

We are basically into BFSI and government related projects. Insurance in particular accounts for 25% of the total BFSI segment.

Mastek is basically a service company and does not have any products. Don't you think that products play an important role for any software company that wants it’s presence felt?

What you call products, in our industry, it is also known as solutions. You have to understand that for an independent software vendor, a product is really not equivalent to something like what a Microsoft or Google creates. We end up building frameworks with lot of components and then we offer these solutions to our customers. So if you are to call it a product or a reusable component, we are basically talking about the same thing. In the same range we have complete solutions for insurance called Elixir, which was launched in India a few weeks ago. This can be offered as a total solution for a small and mid-sized insurance company. The companies that we target in UK and US are very large companies. These companies do not take your complete solutions. This is true for all product companies in India. Most of the product implementation for Indian companies happens with small banks abroad.

This is because big banks have complex legacy systems. In a similar manner Elixir is not being heavily marketed in developed markets as the market is limited. However, there are customers in Asia-Pacific who use our business solutions.

What do you plan to do with the liquid cash of Rs 123 crore with your company?

It is always good to have a strong balance sheet as it helps customers to have confidence in us. So our cash does not hurt us. We are looking at different avenues for investing the cash and we are looking for companies to acquire if they build us synergies. Last year we acquired a company called Entegram LLC which specialises into customs application development, application support and maintenance for a consideration of $2 million. This year we have not done any acquisition. The kind of companies that we are looking at should have domain expertise and should be related in some way to what we are doing at Mastek. They need to bring in customer relationships that they cannot handle but they trust us to handle the same. These companies should bring in specific skills that we do not have.

Your concentration on the European markets has moved up over a period of time. Why is this market so attractive?

Over the last five years the European market has become very important to us. We were successful in building relationships with large customers and partners in Europe, especially with Capita and Entegram. We were executing large projects in Europe. Actually in 2001, we decided to change the customer base in US. At that time we had small customers and we did not have many offshore projects and were dependent on onsite business. We decided to focus only on strategic customers and concentrate on core business. Business in the US did not grow in terms of revenue but there was good volumes growth. Because of the fall in the growth rate in the US market, the revenues from European markets started to look larger.

In terms of addition of clients every quarter, we do not see much growth in Mastek on this front. Why is it that your rate of adding clients every quarter is slow?

As I said earlier, in 2001 we decided to concentrate on strategic customers. We will not expand our revenues from those lients who do not fit in our domain expertise and we will slowly try to get out of such businesses. We concentrate only on our core clients. I agree that we need to add more customers every quarter but we also need to look for synergy in our customers.