Latent View Analytics is targeting $200 million in revenue as it looks to accelerate growth under new leadership, with artificial intelligence, strategic partnerships and acquisitions forming key parts of its expansion strategy, Chief Financial Officer Rajan Venkatesan told CNBC-TV18. The analytics and data engineering company expects to balance investments in growth with profitability and aims to maintain its EBITDA margin in the 20-21% range for the full financial year. “The focus this year will be to continue to make investments on both these fronts,” Venkatesan said, referring to AI and partnerships. “The focus will be to deliver the $200 million revenue goal that we have.”
Latent View expects financial services and retail to be among the key drivers of growth as it works to offset an $8 million revenue shortfall caused by insourcing at a large technology account. The company expects full-year revenue growth of around 12%, below its historical growth rates.
Margins to recover towards 21%
The company expects its profitability to improve after margins came under pressure in the June quarter due to wage hikes and weakness in its consumer business. Latent View reported a 21.6% year-on-year increase in revenue to ₹286.9 crore in the June quarter. Adjusted EBITDA rose 12% to ₹58.6 crore, while the adjusted EBITDA margin narrowed to 19.7% from 21.4% a year ago and 23% in the March quarter. Net profit declined 6.9% year-on-year to ₹47.1 crore. Venkatesan said wage hikes for around 70% of the workforce, with average increases of about 8%, had a one-time impact of around 2.7 percentage points on EBITDA margins.
Weakness in the consumer packaged goods (CPG) business had a further impact of about 1.5 percentage points. “We expect that will get reversed in the following quarter,” he said, adding that EBITDA margins could gradually move towards 21% as growth momentum improves.
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New leadership to drive next phase of growth
Latent View recently appointed Sonal Ramrakhiani as its new CEO, replacing Rajan Sitaraman, who had led the company since 2019. Venkatesan said the leadership transition was aimed at helping Latent View move into its next phase of growth. The company’s revenue has nearly tripled since the year before its public listing, rising from about $44 million to nearly $120 million last year. He said Sonal’s experience across Tata Consultancy Services, Tata Technologies and Wipro would help the company pursue its $200 million revenue target. Financial services remains key growth engine
Financial services is expected to remain a major growth driver for Latent View.
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The segment generated about $17.7 million in revenue last year, and the company expects this to rise to $25-26 million this year. Four of the six new client wins secured during the June quarter came from financial services, Venkatesan said. Latent View expects to offset the revenue gap from the technology account through growth in financial services and retail.
The weakness in the consumer business was largely concentrated in CPG rather than retail. Venkatesan said the CPG decline was partly due to the absence of follow-on revenue from one-time projects executed in the March quarter, along with the transition following the acquisition of DecisionPoint.
The company’s immediate priorities are to build organic growth while pursuing acquisitions, investing in AI capabilities and expanding strategic partnerships. This is the slightly edited transcript of the interview. Q: Since you’ve had the CEO change come in in the month of July, what does that mean in terms of a strategic direction for the company? And secondly, a quick word on your margins. Was the slip that we saw a one-off on account of the wage hikes, etc., that you undertook, and how quickly do you see it getting back to the 22% kind of levels? Rajan Venkatesan: To respond to your first question on the leadership change, our current CEO, who was in charge before Sonal Ramrakhiani joined us, Mr. Rajan Sitaraman, took over as the CEO in 2019.
Of course, he’s had a fantastic run in taking the company public, and from the year in which we took the company public, the company has roughly grown about threefold, right? We were close to about $44 million in revenue the year before we went public. Last year, we ended the year with close to about $120 million in revenue.
So, of course, Rajan’s had a fantastic run, but we also felt that this was the right time for us to bring in fresh leadership to take the company forward into the next goal that we have, to get to about $200 million of revenue, right, which is an immediate goal. So we felt Sonal, given her leadership position in the Tata organisation—she’s worked in TCS and Tata Technologies in the past, and more recently she was heading the engineering practice for Wipro in North America—given her background, we felt she’d be the right person to help the company move forward and hit that revenue mark of $200 million. Your second question was specifically on the slippages that we saw on the margin front. So you will note that Q1 typically is impacted. I mean, even if you go back historically, it is always impacted by wage hikes that we generally do. So, in this particular quarter, for close to about 70% of our entire workforce, we did wage hikes averaging close to about 8%.
So you did have that one-time impact of close to about 2.7% on the overall EBITDA margins. Of course, the revenue also had some bit of softness, specifically in the CPG vertical, which also had an impact of another 1.5% on the overall margins, which we expect, by the way, will get reversed in the following quarter. But as we continue to build the growth momentum for the rest of the year, you will see the EBITDA maybe slowly inching closer to the 21% mark, as opposed to the 20.4% that we reported in the current quarter. Q: Is bringing margins back to normal levels also an agenda for the new leadership because the margins took a big hit this time around? What led to that?
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And, of course, what are the steps that you would be taking to bring them back to the levels where they were? Do you see that happening this year itself? Rajan Venkatesan: So this year, our focus, by the way, like I said, right, I think the focus will be to make investments both on the AI side as well as on the partnership side. So those are fairly large strategic initiatives that we’ve outlined as part of our leadership strategy as well. So the focus this year will be to continue to make investments on both these fronts, plus the fact that we’ve also had a leadership change, right? So the guidance that we have for this year is that we will maintain the EBITDA in the range of 20 to 21% on a full-year basis. But the focus will be to deliver the $200 million revenue goal that we have, right?
So you will see that through a combination of organic as well as inorganic, those will be the immediate priorities. Q: $200 million revenue growth is something that the Street would like, Rajan. You know, because my question was pertaining to that itself. I look at some of your segments.
There was quarter-on-quarter growth in financial services. I reckon this was more seasonal in nature. Retail and CPG, however, fell about 32%, and then you had this 18 to 20% growth guidance for the consumer sector as well. So, given all of this and the pace at which you’ve been growing, the growth has been declining year-on-year. At the same time last quarter, you grew at 32% year-on-year. That came down to 23%, 24% in the next subsequent quarters, and now you’re at 21%. So what’s the year-on-year growth run rate that is likely to play out over the next few quarters with this 19 to 20% margin growth that you’re giving?
And if you could break that up into sectors as well. Rajan Venkatesan: Yeah.
So specifically, I think financial services will continue to maintain this strong growth momentum. I think last year we closed the financial services practice; we delivered a total revenue of about $17.7 million. The expectation for this year is that financial services should be anywhere between $25 to $26 million of revenue, right? So you will see that that’s almost like a 70 to 80% jump in relation to what we delivered last year.
So, financial services, the momentum will continue. In fact, you know, four out of the six new client wins that we had in this particular quarter were all driven by financial services.
We do see very, very strong growth momentum over there, specifically on the softness that we witnessed in the CPG and retail practice. So maybe if I were to just bifurcate the CPGR, right, between CPG and retail, retail, by the way, is very, very strong. In fact, there also we see fairly strong momentum. What we’ve been particularly impacted by is actually the CPG sector, right? There are two reasons for it. One, of course, there was an acquisition that we did, the DecisionPoint acquisition, and we just closed the entire sort of leadership transition, where the erstwhile founders of DecisionPoint moved out and we’ve actually been running that company now. But more importantly, there were a few one-time projects, we’ve outlined that in our press release as well, there were a few one-time projects that we had executed in the CPG segment specifically in Q4, where we didn’t have the follow-on revenues to show for in the current quarter.
That is what has led to the decline in the CPGR practice. But on a year-on-year basis, right now, the visibility that we have on a full-year basis is to deliver close to about 12% of revenue growth over the previous year. This is lower than our historical growth rates. That is primarily because of one large technology account. In fact, you know, our CEO would have probably spoken about this in the last quarter earnings call, where there was insourcing that happened in one large technology account of ours, where, you know, beginning of the year, we were almost like $8 million behind the run rate that we were tracking for in the previous year. That has impacted the overall growth rate.
But our focus is to balance that shortfall through growth in financial services as well as our retail practice.
