Faster Growth, Steady Margins: LatentView Analytics CFO Reveals Strategy Post-Q4 EBITDA Surge

LatentView Analytics reported its financial results for the fourth quarter ending March 2024, with an increase in consolidated net profit, up by 32.2% to ₹45.2 crore compared to ₹34.2 crore in the same period last year. Consolidated revenue also showed growth, rising by 21.7% to ₹171.6 crore from ₹141 crore in the corresponding quarter of the previous year.

We sat down with the company’s  CFO Rajan Venkatesan to know more about the company's performance in the quarter and plans for the year ahead.

Q4 Overview

Talking about the results, Venkatesan said that for the full year, the company posted 19% growth which was not what they anticipated at the start of the year but considering all the macroeconomic factors and the demand environment, it was pretty good. He also highlighted how the company’s margin improved this quarter.

Talking about the reasons behind that, he said, ” One of the things that we’ve managed to do is improve our overall, I would say operating efficiencies. What we’ve also done is there were, I would say substantial investments that we had done in Europe last year, where our presence was close to about 10 odd people.

So we did a sort of rationalisation wherein some of these roles were moved to India, some of those people were converted into billed roles and some people, we took a call that, you know, they were not working out so, we had to let them go. Basically, I would say those would be the two predominant reasons, so better operating efficiency and some level of rationalisation in the core market spending.”

See Also: Ending FY24 On A High, Chola Finance CFO Expects 20-25% Growth In FY25

The Outlook For FY25

FY24 has been a bit challenging for the IT sector in general, so we asked the CFO what were the company’s expectations from the coming year.

“I mean, you’re starting the year be fairly optimistic, right? When I say optimistic, obviously, it is all on the back of the pipeline and order book that we see today. So the plan for the next year is to definitely grow at a faster rate than what we did this year while overall for the full year, maintaining an EBITDA margin between 21.5% to 23%. We would want to be in that range but grow faster, so that’s the goal for next year,” Venkatesan said.

However, Venkatesan did acknowledge that the demand environment still remains challenging. “We’re still living in an environment where clients are hesitant to sign off on big projects. There are several rounds of negotiations that happen, so deals are taking a fair amount of time to sort of close out. But what gives us a lot of, I would say optimism is the strength of our existing relationship. So the new client wins is where we have been struggling even in the last year and we’re hoping to correct it in the following year but the strength of our existing relationship with the existing customers continues to get stronger and stronger.”

The Macro Scenario

One of the major hindrances faced by the sector last year was the hawkish macro environment. So we asked Venkatesan whether he sees things changing this year.

“As we talk, you know, the earlier hope was that the Fed would cut rates three times? But I don’t know if that will play out this year, right? At the same time, you know, for instance, some of our clients are doing well, quite well themselves, the market cap of say Microsoft and Google, all of them have grown. So definitely for the tech vertical, we’ve seen strong resilience, also consumer goods as a vertical has been fairly resilient, which is where I think the acquisition we’re doing will also help us,” said Venkatesan.

The Acquisition

In March, the company announced its Board’s approval for the acquisition of a 70% stake in Decision Point, an AI-based analytics think tank, for a total consideration of $39.1 million (approximately ₹326 crore). Talking about the acquisition Venkatensan told Benzinga India that the companies are still working on some closing conditions which should be completed in the coming weeks. “Hopefully, we should be able to consolidate their numbers with our numbers starting in June,” he added.

Talking about its plans for the acquisition, the CFO said, ” One of the big exciting things from this acquisition is Latin America as a market, which will open up. Secondly, our dependence on technology as a vertical, which is today 75% to 70% of our revenue, will also come down.”

He added that the company sees a lot of cross-selling and upselling opportunities between the two companies’ clients.

The AI Impact

The emergence of artificial intelligence has been one of the most talked about developments of the past year. Several companies, especially tech companies have been working towards incorporating AI in their offerings in one way or another. So we asked the CFO about his thoughts on the subject.

Venkatesan said that the company has been working on AI projects with some companies. In the March quarter, the company worked with a global tech giant and a large automotive company. “Not big projects, but these are projects that we are very excited about because we believe that we can take some of these options and take them to other clients as well,” he added.

“From a revenue standpoint, we are not entirely sure because a lot of these projects will still continue to be pilot projects, small value projects, right? Because I think even enterprise clients are, are still figuring out what to do with AI. But definitely, for us, the other big sort of lever that can happen through AI is how can we drive efficiency in how we deliver work, right? how can we improve our efficiency and profitability as well? I think that is a big area of focus for us in the coming year where we will try to leverage more and more to ensure that we are not always adding people, to drive extra revenue growth,” said Venkatesan.

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