Tata Elxsi
hosted a conference call on May 18, 2023. 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
and Ms Cauvery Sriram-Company Secretary.
Key
Takeaways of the call
For the full
year FY2023, the company has delivered strong performance with revenue growing
27.3% YoY and PAT growing 37.4%. During the financial year the company crossed
the Rs 3000 cr revenue mile stone. Q4FY2024:
For Q4FY2023,
the revenues of the company stood at Rs 837.9 cr a 2.5% QoQ growth and 22.9%
YoY growth. In US $ terms QoQ growth was 2.9%.
EBITDA for the
quarter stood at Rs 249.5 cr which translates to a EBITDA margin of 29.8%. PAT
for the quarter was 201.5 cr.
In a scenario of
macroeconomic uncertainties and challenges the company was able to grow its
revenues and protect its margins.
The company’s
Embedded Product Design (EPD) division grew 1.6% and 13% YoY. The IDV and SIS
had a remarkable growth during the financial year. Industrial Design & Visualization
grew 52.8% YoY and System Integration &Support delivered 77.6% growth YoY.
With respect to
verticals, the company had a steady quarter for all the verticals and more
importantly, healthcare and media communication have returned to growth from
last quarter despite moderately.
Across the 3
verticals, the growth has been primarily volume led and witnessed strong growth
across large accounts. Across the key accounts, the company has increased
wallet share against competition underscoring differentiated value proposition
and offshore delivery capabilities.
Margin:
On a QoQ basis
EBIT margins were impacted to the extent
of 30 bps due to campus on-boarding, investments in people, subject matter
experts and sales and marketing people.
However, PBT
increased from 28.7% in Q3 to 29% in Q4 due to increase in other income.
Increase in other income was on account of higher interst, Research and
development gains and exchange gains.
Margin levers of
the company include higher utilization.
The company
expects the margins to sustainable in FY2024 and targets PBT margin of 28-29%
to operating revenue in FY2024.
Human
Resource:
Attrition-The annualized attrition of the
company has declined to 17.3% which is one of the lowest among the peers.
Supply side
constrains have eased. The company has built up bench strength and will use
bench strength to grow revenues.
Hiring- The
company plans to hire around 2200 people during FY2024 of which 1800 are
fresher’s and the balance 450-500 are lateral hiring.
ESOP- the
company has introduced ESOP and expects around Rs 4.5 cr expense per quarter towards ESOP.
Wage hike will be
according to regular wage cycle.
Operating cash flow:
Operating cash flow was impacted due to some receivables due to some system
transformation. Cash flow will be back and normalised in next 1 quarter.
Other Expenses: Other
expenses have been volatile for the last 3 quarters. Most of the expenses which
were not there during covid, have returned.
Tata Tech: Tata Elxsi and
Tata Technology offer different services to customers which are complementary
to each other and Tata Tech will not impact the business of the company.
Deal
Wins:
Tata Elxsi has
been chosen by Alps Alpine to establish a Global Engineering Centre (GEC) in
Thiruvananthapuram. The GEC will focus on software-led innovation and
engineering to support Alps Alpine’s vision for future mobility.
The company has
also won a multi-year deal from European OEM.
Outlook: The company is
building a strong deal pipeline and expect to see large dela pipeline picking
up over the current quarter and beyond.
The management
is excited about the opportunity ahead in automotive and transportation
business, the scale and rate of transformation needs to undertake changes
driven by regulatory, sustainability and evolving customer consumer
preferences. This will provide healthy opportunities and this transformation
demands deep domain knowledge, scale in software development and application
development in digital technologies like artificial intelligence, Internet of
Things and more importantly design will take centre stage in creating consumer
delight. The company is in the right place and bring the right capabilities and
are engaged in the right conversation with the global automotive leaders in
their transformation journey.
The company has
signed some deals in the quarter. The company has witnessed some deferrals in
some clients however the company expects growth to come back in Q1. The company
is witnessing strong deal pipeline and expects the growth to replicate in
FY2024 as seen in Fy2023.
The company also
witnesses emerging opportunities in application around 5G that allow
enterprises to garner the speed and reliability of the technology. The company
is witnessing deals with operators and enterprises to make this a reality.
The company’s
health care and life-sciences vertical was impacted due to extension of
regulatory deadlines which cut companies existing revenues and work. However,
the vertical has recovered within a quarter and is building a strong pipeline
of deals and penetrating into new marquee customers.
In Media and
telecommunication the company is witnessing some green shoots with no
challenges in medium to long term.
The company
expects to grow in the Top 10 and top 20 accounts.
Despite macro
-economic challenges some customers are continuing to make investments. However
some customers are deferring their discretionary spends due to pause in their
R&D spends.
Dividend:
The Board of Directors at their meeting
held on 18th May 2023, has recommended a final dividend of 606% at Rs. 60.60
per share for the financial year 2022-23.
Management Commentary:
Commenting on
the performance, Mr Manoj Raghavan said “Financial year 2023 has been another
year of strong operational performance, driving healthy revenue growth and
strong margins despite the macroeconomic uncertainties and challenges that the
industry has been facing since last few quarters. In a matter of just two
financial years, our top line has grown by 72% to Rs. 3144.7 Cr and our PAT has
almost doubled to Rs. 755.2 Cr.
During the
financial year, our transportation business, which accounts for more than 43%
of our Embedded Product Design (EPD) division, grew strongly by 32.8% in
constant currency terms. The Healthcare & Medical Devices business too
registered a robust growth of 28.4% in constant currency terms. Our Media &
Communications business witnessed a stable and sustained growth of 14.6% in
constant currency terms during the financial year.
The key
strategies deployed over the last two years have played out well with strong
synergies between the design, product engineering and deployment support
services of Tata Elxsi. This is enhancing deal sizes, durations and value
delivered to customers. This is reflected in the strong Q4’23 growth from IDV
(52.8% YoY in constant currency terms) and SIS (77.6% YoY in constant currency
terms).
We are entering the new financial year with
a strong commitment to keep our growth momentum going, and the continued
confidence of our customers in our differentiated design-led engineering
capabilities.”
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