Take Solutions is a Chennai-headquartered listed IT vendor promoted by the Shriram Group . Over the last few quarters, the company has started shifting its focus from its core supply chain management solutions business to expand its life sciences offerings. The market seems to have appreciated this move and, in the past one year, the company's shares have risen fourfold on the bourses. During the period under consideration, the BSE Sensex has gained less than 50 per cent. In 2013/14, the company reported revenue of Rs 821.7 crore and net profit of Rs 61.76 crore. Vice-Chairman and Managing Director of Take Solutions, Srinivasan H.R., spoke to Venkatesha Babu on the changing business mix of the company and the road ahead. Excerpts:
Q. Why the shift in focus and how do you intend to differentiate your life sciences offerings?
A. Some parts of the SCM business we were operating in, had become commoditised and was impacting margins. While we will continue to be in parts of the SCM business which are lucrative, we have exited some other segments. In our life sciences offering we want to be a highly-focused and specialised player. Let me give you an analogy.
In a general hospital you can be cured for cold. If somebody has a particular problem, a cardiovascular or ophthalmology issue, we go to a specialised hospital. We are like that actually. Our thinking is of a specialised hospital and we never want to be a general hospital. What we do in life sciences is quite different from what many of our peer vendors are doing. For example, let's say a large pharma company is doing a clinical trial. We want to know what the trial data says from phase 1 to phase 2 or phase 2 to phase 3? How do you draw inferences about whether this trial is proceeding as per plan, or there is a need to go on with the trial, or drop it and move on to something else? We provide that kind of specialised analytics. This is why we employ medical doctors, chemical engineers, biostatisticians and other such people, who have been very intimately involved with the process of clinical trials.
Q. So, the typical comparison with an IT vendor is not a good one?
A. Unfortunately some analysts have the need to benchmark us to a group. They can't think of a different animal, and analyse or access a different animal. We are a different kind of player. We are not a full-service CRO (contract research organisation), which normally recruits patients and then monitors. We work on only the data portion. In a sense, what we do is a data CRO. The data part of that sits on the crux of technology and pure life sciences. We are sitting on that crux.
Our peers are sitting only on technologies. They are not sitting on the domain. What we do is analyse and interpret, which is a different end of the value chain. So, we do get compared to IT services companies. Are IT companies trying to come into this space? The answer is yes. Do CRO's want to come into that space? The answer to that also is yes. For example, Accenture acquired one of our competitors, Octagon Research, in the US. But I believe our focused play in this segment gives us an edge.
Q. The life science business is not new for Take. But, why this emphasis to rebrand this business as a separate subsidiary, with Navitas, in January? Are you looking at inorganic opportunities?
A. Yes, we started our life sciences business somewhere in 2005. In 2010, we had an excellent overall EBITDA (earnings before interest, taxes, depreciation, and amortization) of 23-24 per cent. However, as parts of our SCM business started getting commoditised our margins suddenly started tapering off. In 2012/13, our EBITDA reduced to 15 per cent. That is when we decided to do a drastic overhaul. During the end of last financial year and during a large part of the current financial year, we walked away from Rs 220 crore worth of business. It was not easy. It upsets shareholders, it upsets the board, it upsets your employees. You keep touching a lot of volume, but if you are basically going off, it's not a profitable growth.
So, we said, let's go back to profitable growth. We set ourselves a goal, saying that by 2016/17, we will be back at 24 per cent EBITDA. We will be able to do that with the help of the life sciences business, where we have a competitive advantage and an edge in the marketplace. A large part of our investment is going into life sciences and we think it's a growth opportunity. It's an industry where outsourcing is just taking off. What most players do today is still largely in-house.
We are basically competing with in-house people, not so much with our competitors. Much of this SCM business that we talked about was in Southeast Asia and the rest of Asia. It is not necessarily in India. We did lose some headcount there. Currently, we have about Rs 127 crore of cash. But in terms of our networth, our debt-to-equity, we are only at 0.2. So, there is plenty of room to leverage if inorganic opportunities rose. We have been a very conservative company.
Now on acquisitions. Do we want to bulk up? Yes. But for that, it will not be that easy. These are very specialised areas. We won't buy a company for revenues. Sometimes, when we examine a company, we may like the company, but we don't like the (asking) price. If we like the price, there is something in the company that you don't like at all. If both are okay, then you still have to look at the cultural aspect of whether it's going to be a fit or not. So, as a small company, we have our own challenges of making acquisitions work. We've done a few in the past. The last one we did was in January 2011, more than four years ago. While we are keen on inorganic opportunities, everything has to be right. Organically itself we will grow easily by 18-20 per cent every year. The focus, however, is on profitable growth.
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