Tata Elxsi hosted a conference call on April 21, 2022. In the conference call, the company was represented by Mr Manoj Raghavan-CEO & MD, Mr Nitin Pai – Chief Marketing and Chief Strategy Officer, Mr Gaurav Bajaj – Chief Financial Officer.

Key takeaways of the call

FY2022: Revenues from operations stood at Rs 2470.8 cr a growth of 35.3% YoY, PBT stood at Rs 745 cr, a growth of 45.6% YoY and Net profit stood at Rs 550 cr a growth of 49.3% YoY. Operating margin stood at 31% for FY2022.

The company's largest division Embedded Product design grew by 35.7% YoY and Industrial design and visualization division grew by 36.0% YoY.

Q4FY2022: Revenues from operation in the quarter stood at Rs 681.7 cr a growth of 7.3% QoQ and 31.5% YoY. Net profit stood at Rs 160.0 cr a growth of 38.9% YoY. Operating margin stood at 32.5% for Q4FY2022.

Embedded Product design grew by 7.5% sequentially and Industrial design and visualization division grew by 8.0% sequentially.

Vertical wise: Transportation continued to grow strongly, registering a revenue growth of 7.7% QoQ, and 37.9% YoY, aided by large deal wins across EV, autonomous and digital. The company has been selected by a German Tier 1 supplier for establishing an offshore development center for Autonomous driving and ADAS technologies.

Media and Communications delivered consistent and sustained growth of 7.3% QoQ and 33% YoY, powered by Design Digital and platform-led deals.

Healthcare continued to grow strongly powered by digital and connected health, reporting 7.3% QoQ and 66.6% YoY growth in revenues. A north American healthcare platform provider has selected the company for providing cloud engineering services.

The company continues to win multi year multi million US$ deals to support digital transformation for a unified cloud platform, along with migration of its legacy products.

Embedded Product design life cycle depends on each customer situation. There is huge potential available and it is not in the saturation phase.

The company wants to be carbon neutral by 2030 and 50% less carbon footprint by 2025.

The company has launched ' Tengage' which is a digital heath platform designed for omni-channel care. It is been around 3 weeks since the launch of the product. The company is seeing good response for the product in US however digital platform deals will take some time.

Human Resource: Currently the supply challenges continue to exist. The company has hired 2014 net additions during FY2022.

In FY2022 the company hired 1000-1100 freshers and plans to hire freshers in the range of 2500-3000 in FY2023. Net addition including laterals will be in the range of 3000-3500 people.

Attrition was better for the company when compared to the overall industry but still remains elevated.

For freshers it will take 6-9 months to make them billable. For ERD division the company undertakes both classroom and on the job training for freshers.

Onsite off shore mix: Onsite off shore mix is in the range of 10:90 in the quarter. This has remained normal for the last couple of quarters. Pre covid onsite: offshore mix was around 30:70 however, the company does not expect the mix to touch those levels and expect it to be somewhere in-between.

Wage hike: The company has given age hike for around 65-70 % f the people from Jan-2022. And the balance 30% who are mostly middle and senior staff will receive the same from April22.

Impact of wage hike on margins was around 150 bps points in the quarter and the same is expected to be offset by better utilization and fixed cost projects and rate hike undertaken which will neutralize in next 1 or 2 quarters.

Fixed cost contracts: In last couple of years the fixed cost projects was in the ratio of 50% and it is expected to remain in the same levels for next 1 or 2 years+ 1 or 2%.

OTT platforms: There is no slowdown in OTT platforms, however the competitive intensity has increased which is actually favorable for the company as it provides more opportunity in the form of more deals.

Merger and acquisition: If there is a good company available at reasonable valuation that company will look forward for acquisition. The reason for acquisition will be either new capabilities or to acquire new marque clients.

Outlook:

Transporting vertical is accelerating and the company has signed multiyear and large deals in electric vehicles, ADAS and connectivity and the company expects to grow at a accelerated pace.

The company is signing a lot of multiyear and large deals and the order pipe line is strong. The company is entering FY2023 with larger orders than previous year. The Company is engaged in lot of client mining. The company is also gaining market share also the market itself is expanding.

The company has entered into new geographies including Middle East and Latin America.

Pricing: The company has benefited from rate hikes for whom the company is delivering value. The demand environment is so strong that the company is focusing on right talent.

Dividend: The board of directors have recommended final dividend of Rs 42.5 per equity share.

Management Commentary:

Commenting on the performance, Mr. Manoj Raghavan, CEO and Managing Director, Tata Elxsi said: “This has been the strongest year of growth in the company's history and an all-round performance across business units, industries and geographies. We continue to execute strongly on our growth aspirations with a CC revenue growth of 7.4% and 10% QoQ PBT growth in Q4 FY22.

Our Transportation business is now on a path of accelerated growth, with our differentiated EV, Autonomous, Connected and Digital capabilities powering large deal wins.

Our Media and Communications business is continuing to grow strongly, supported by award-winning platforms and products that are powering digital transformation for some of the best global brands in the industry.

Our Healthcare business has grown 72.4% YoY over FY21, powered by digital and connected health, regulatory services and innovation for next-generation medical devices and services.

We have executed strongly on our key strategies of leadership in our chosen verticals, deeper customer mining, large sustainable deals, and re-balancing of our vertical and geographic mix.

Our Design Digital proposition – of bringing together Domain, Design, and Digital, and differentiated delivery capability and ownership, positions us uniquely with customers for their strategic transformation and customer experience priorities.

We continue to win market share and strengthen our position in the market, supported by the passion and commitment to delivery excellence and customer delight from the entire Tata Elxsi team. On the whole, it has been a great performance amidst a year of pandemic-led disruptions and supply related challenges across the industry. We continue to invest in building our talent pipeline to fuel continued growth.

I am delighted to exit FY22 with all-round growth in revenues, margins and customer additions. We are entering a new financial year with a strong deal pipeline and the continued confidence of our customers in the value of our integrated design and product engineering, and the impact on their offerings and customer experience”