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00:00Hello and welcome. You are watching SMID show on NDTV Profit. I am Harsh Saita. With me
00:13is my Mawar Shahjani and over the next half an hour we'll speak to two very interesting
00:17managements. But first off, I want to try and break down the first one, Nucleus Software.
00:24They've announced a buyback of 72 crore which is roughly 1.7 percent of paid up equity.
00:29Also, you have a very soft Q1 FY25 that has come through. One on the top line front, also
00:37slightly softish. Costs were higher and therefore margins have contracted sharply from mid-twenties
00:43to mid-teens. Just to try and get perspective on both of these aspects, we bring on board
00:49Vishnu Dusad, who is the co-founder and managing director at Nucleus Software. Welcome Mr.
00:54Dusad. It's good having you.
00:57So sir, 72 crore, a decently large-sized buyback coming from you. Give us what the
01:03objective of this is. Are you currently in surplus cash? Is that why you're returning
01:11it back? Of course, also taking or leaning on the tax benefit clause which is available
01:18till 1st October. Is that the objective?
01:21I would say both. The board always keeps balancing between the shareholder as a stakeholder and
01:31the company's needs as well as our customers' needs. Certainly, the tax benefit that was
01:41available before 1st October was one of the factors behind this buyback.
01:48And where does this leave you in terms of cash balances? Are you investing in something
01:53new, something different going forward? Is there no need for cash deployment within the
01:59business? No, there is certainly a requirement within the business. We continue to invest
02:08in the latest technologies that would help keep improving the quality of our solutions
02:17for our customers. So, on an ongoing basis, we keep looking at what are the latest tools
02:24and technologies and appropriately we keep acquiring those tools and technologies. And
02:33beyond that, we keep certain reserves and that's how we look at our cash.
02:40Mr. Dusad, Mahima also joining in. I want to understand that how much of an investment
02:45would you be making, firstly, and in what time period will you be making those investments?
02:54Okay, I think we are looking at at least making 50 to 100 crores investment in that range
03:05over the next year to two years. It will directly depend on our ability to acquire
03:15the capability to leverage the new technologies. The more is our ability to acquire the new
03:21technologies, the more we would be investing. We would be investing in both hardware as
03:26well as software. We are making good headway in our AI investments. We are acquiring reasonable
03:39amount of hardware. We are acquiring some tools that would improve the quality of our
03:47solutions on an ongoing basis. And those are the directions in which our investments would be
03:53happening. Okay, Mr. Dusad, let me come to the business itself. Because over the last six-odd
04:00quarters, revenue has been largely flattish, anything between 190 to 220, maybe 220-odd
04:08crore, 210-odd crore. So, largely flattish. When do we start to see a bump up in revenue? When
04:16do you start to see those new clients start to add to your top line?
04:22Yeah, I think we have been having good conversations with our customers for now
04:30last three to four quarters at least. And the best part is that none of them have said that,
04:38no, we don't like your solution and we are going to be your competitors and so on. So,
04:47they are taking time. These are some of the, I would say, major decisions. So, they are taking
04:54time and we would not be able to comment when does the info of order starts coming in. Appropriately
05:04the top line will start going up. Okay, and so when do you start to see,
05:12so you are seeing good traction, okay, but do you expect a turnaround maybe
05:18second half this year? Is that a reasonable timeline to expect?
05:23In terms of expectations, certainly. That is what is the expectation, but as you know,
05:29we do not give any guidance, so we would not be able to commit anything.
05:32Sure, and on the cost side, talk to us about what is happening because your margins have contracted.
05:38Yeah, I would certainly like to talk about it because for us, our teams are the most important
05:46asset that we have and it is their decades of rich domain expertise and experience which
05:57gives comfort to our customers and that is what we continue to invest in. We are ensuring that
06:05they are acquiring the latest technologies, knowledge about latest technologies, knowledge
06:12about latest processes and that is where our investment is happening apart from the hardware
06:18and software and tools that I talked about and that is where the margins are under pressure.
06:26They may remain under pressure for a few more quarters, but that is how we are looking under
06:32business. Okay, and what about, so you are saying that they will remain under pressure for a few
06:37quarters. You are also saying you are investing. Is this capex which you are expensing out? Is
06:43that why margins are under pressure? Just trying to understand. You are building on your current
06:48stack. You got it precisely right. We have been expensing out all the capex, all these decades
06:57that has been the conservative policy of the company. We have been on an ongoing basis
07:06expensing out all our capex expenses, certainly the ones that go in the direction of
07:13development of the software and so that there is no overhang on the balance sheet.
07:20Mr. Desai, one last question before we let you go. What is happening in terms of pricing because
07:26there is some kind of contraction there? Sorry, I did not get your last word. There
07:31is some kind of contraction there. No, there is no contraction whatsoever that
07:39we are aware of because for decades we have been making our solutions available at
07:50what we call at ultra deep discounted prices. So, it is just the ultra part that we have
08:00as of now reduced. We are in the process of communicating to all our customers the value
08:07that we deliver and they are able to appreciate that value and that is how they have been
08:16agreeing to the increase of prices and we are confident that we will continue to deliver value
08:24even at the increased prices. Mr. Desai, thank you so much for giving us those insights on
08:30Nucleus software and thank you so much for taking our time and speaking with us at NDTV Profit.