Has Ramco Stalled Image credit (Image Credit: Pixabay/EtienneL)

Ramco has published its 4th quarter and full year 2017 results. Revenues (in Indian Rs) are up are marginally to Rs 4,593.21 million (2016: Rs434.02 million). In US dollar terms revenues are down from $68.76 million to $68.28 million (0.7%). This article will only give US dollars from here on. While the exchange rate has worked against Ramco this year it provides a better comparison with competitors. Ramco is still expanding internationally and has a growing exposure to foreign currency risk.

In 2017, total expenses were up 16% at $73.34 million (2016: $ 63.25 million). This was possibly due to increased marketing expenses as Ramco management looks to expand its market penetration. However, with no breakdown given in the reports, it is impossible to say. In practical terms, Ramco only made an after-tax profit because of a $7.2 million deferred tax credit. This left the company nominal profit after-tax at $ 1.63 million.

This is not the revenue growth expected from an enterprise resource planning  (ERP) company operating in a booming global market. That market is predicted to be worth more than $49.50 billion by 2020 according to a report by Market Research Engine. With competitors looking for, and often achieving, double-digit growth why are Ramco’s results so poor?

P.R. Venketrama Raja, Vice Chairman and Managing Director, Ramco Systems, commented: Over the last few years, we have taken a conscious decision to focus on fewer things but do them better. The testimony to this is number of fortune companies we have signed and the inroads we have made with our Aviation offering into markets like China. The sharper focus has given us better results with both quality and scope of business engagements getting better. The thrust on Innovation and simplification has resulted in building an agile organization that is ready to adapt and change based on market needs.”

Will greater focus lead to better profits?

Ramco has had some interesting wins over the last year. A few of those wins have been in the US including the US logistics market with G&D Integrated in January this year. The key for Ramco is whether it can convert the isolated wins into a significant market share across US companies. It is an important market with many companies looking to cloud-based ERP solutions. It is also a market that is getting more competitive especially in their target areas such as aviation.

The press release highlights key growth markets as Philippines, Indonesia and China. It is the last of these that, if Ramco can break open, will be important for its success into 2018. In China it added Belinco, an aircraft maintenance company as a customer and SRN Info as a channel partner.

The last year has also seen some solid wins for HCM across the Middle East. Yet this is not mentioned in the results. Those companies included Western International Group and Horizon Hospitality.

The focus that Venketrama Raja claims, seems to start with the Aviation and Logistics industries and is also aligned with HCM and payroll for multinational corporation. It is odd though that the press release calls out mid-market HCM in the US as being a key target market. While it highlighted this in November, no customers were actually named in that announcement.

International growth important

With 73% of its revenues coming from markets outside of India Ramco is in danger of losing market share. With the investment that Oracle is making in NetSuite, the company needs to keep accelerating its growth in target markets. One reason for the slower growth this year is the move to a larger number of multimillion dollar, multi-national deals. The lead times for these are sometimes considerably longer than mid-market deals. Ramco will need to start evidencing deal wins with more customer announcements.

International growth is coming at a cost. While it is winning in some regions it is also going to find that competition increases over the next year. Several ERP companies have also had recent investments such as Epicor and IFS and are likely to fuel marketing initiatives in their chosen territories.


Virender Aggarwal, CEO, Ramco Systems (Source LinkedIn)
Virender Aggarwal, CEO, Ramco Systems

These are not great results from Ramco despite Virender Aggarwal, CEO, Ramco Systems calling out that it has a larger order book. Aggarwal commented: “We have seen significant growth in recurring bookings resulting in unexecuted order book growing by USD 33m. However, the recurring nature of business has impacted the revenues in the short term; and the profitability was impacted by currency fluctuations and the change in Indian accounting standards. While this hurts our quarterly revenues in the immediate timeframe, we are happy to see the strong recurring revenue being built for the future.”

It is significant that a year after the company boasted a 16% growth in US$ it seems to have stagnated. Growth at Ramco has stalled and the leadership will need to figure out why and how to fix it quickly. The exchange rate fluctuations hide a serious drop in revenue. So what will the leadership need to do?

They may need to identify cost savings for the year ahead or take further risks and increase marketing spend. First, they will need to identify where the sales revenue growth is likely to come from. Perhaps Venketrama Raja gives a significant clue when he talks about Aviation and China.

Ramco also needs to consider whether their scattergun approach is working. The reason for the stall in growth might be because it is spread too thinly. That is not to say it should drop out of all markets but perhaps focus on fewer verticals and geographies. However, without more figures available it is difficult to say which markets should Ramco focus on. Despite new business wins in several regions only it can really determine where it faces weaker competition and has a lower cost of sale. It will be interesting to see how Ramco hones its focus in the coming months.




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