zensar: Zensar trims retail portfolio, to focus better on core

Pune: Zensar has reduced the size of its retail portfolio to cut volatility and focus on fewer core areas, the IT services provider said.

In the past two years, the share of retail in the RPG Group company’s total revenue dropped to just under 14% from 28.5%, even as revenue increased by about 16% in the same period.

The company has decided to focus on three core areas — hightech manufacturing, infrastructure and financial services, CEO Sandeep Kishore told ET.

Zensar reported a 32.6% drop in net profit for the December quarter, citing softness in the retail segment — with a revenue impact of about $5 million — as a key reason for the profit decline.

Revenue was flat at Rs 1,020.60 crore but inched up 1.1% to $143 million in dollar terms.

Shares closed 12% lower on the National Stock Exchange on Friday, following the results announcement after market hours on Thursday.

“In the previous quarter, we also let go of eight tail-end clients, which has also resulted in headcount coming down by 300,” said Kishore. The industry definition of the retail segment is broader, but at Zensar it is restricted to specialty apparel retail, which is going through a difficult period.

The company, however, has a robust deal pipeline and expects things to normalise by the end of the ongoing fiscal year, Kishore said.

At Zensar, digital growth was impacted by weak BFSI (Insurance) and one-time volume discount given to top-client and a steep decline in legacy business (-13.5% quarter-on-quarter) due to retail pressure (client pruning), Amit Chandra and Apoorva Prasad of HDFC Securities said in a note. The retail vertical was down 21.5% quarter-on-quarter, they wrote.

However, deal wins improved with total contract value (TCV) of $170 million (vs $120 million in Q2), of which 45% were net new wins. Pipeline was healthy at $1 billion, and 52% of the deals fought were large deals (TCV greater than $5 million), they said.