Tata Elxsi hosted a conference call on Oct 25, 2021. In the conference call the company was represented by Manoj Raghavan, MD & CEO.

Key takeaways of the call

Another quarter of steady growth across industry verticals with strong execution.  Constant currency revenue up 7.4 % QoQ , 37.2% YOY and the growth was entirely volume led.   Embedded Product Design (EPD), the company's largest division grew by 35.4% YoY.  Within EPD transportation gew 14.1%QoQ & 28.4%YoY; Media & Communications grew 8.6%QoQ & 31.2%YoY; Healthcare up 6.9%QoQ and 72.7%YoY.  Industrial Design & Visualization (IDV) grew by 64.5% YoY. SIS up 23.1%QoQ and 46.1%YoY.

Entering the third quarter of FY22 with a strong order book and a healthy deal pipeline across key markets and industries. Order book visibility is 6-9 months and that continues going into Q3FY22 as well.

Seeing significant growth in the automotive market, with large and strategic deals with both OEMs and suppliers in EV and autonomous technologies, underscoring technology and engineering leadership of the company.  Won a multi-million-dollar software development deal from an OEM in the APAC region and also won a software platform development for level 3 autonomy from a North American supplier.

Decent growth in automotive after subdued quarter in H1FY22.  The automotive biz is still well below the last peak of 2071-18.  Hope to surpass the peak gradually.

The overall growth was fuelled by digital and platform-led deals and underlines the differentiation and relevance of its design-led approach and technology capabilities to the product and technology transformation agendas of customers in   key verticals of the company.

The superior top-line and bottom-line performance was supported by industry-leading operational excellence and talent retention.

Rest of World market is muted for some quarter hit by travel restriction dampening start of new projects. But see revival in RoW market especially Japan, Korea and China with the company winning one order from Japan. 

Transportation vertical - 20% or so is contribution from japan with china and Korea built up during the peak of 2017-18. These countries are coming back

Had a full salary hike starting July 2021 and the effect of that in employee cost is an increase of about Rs 14-15 crore a quarter.  No wage hike scheduled in Q3FY22.

Overall managed the employee cost pretty well.  Accelerate hiring in last few quarters and that will continue going forward as well. Added 700 new Elxsians this quarter, representing almost 9% of its headcount from the previous quarter. Will continue to add and plan new employees to drive future growth.

Seeing good organic growth in the Media & Communications space. The ITS platform in the Media and Communications space is enabling strong deal wins and expect good traction going ahead.

Contribution of top 5 customers to topline is about 37% in Q2FY22. JLR is not the largest client for the company in Q2FY22. Focus is to mine top 10 and top 20 customers for more business.

ER&D – Entire digital space including AI, big data, digital, manufacturing all are definitely mean growth for the company. Automotive industry is going digital that is good for the company.  Opportunity infront of the company is very big. Not expect any downturn in auto, healthcare, M&C in next 2-3 years.

The growth is pushed through offshore engagements. Some markets are opening it onshore improve that will be known only to be watched in Q4 & Q1FY23.

Hiring momentum will continue for next 2 quarters as company needs more resources due to the rate at which company is growing. There is huge demand in the marketplace and need to hire more to match the demand. Will cross the 10K headcount mark over the next 2 quarters, will add 1500 to 2500 employees per quarter for next 2 quarters. 6-7% of employees are working from office. Over the next few months, will start bringing in employees – at least senior staff .

 H1FY22 margins are sustainable in the long term.

Platforms have helped Tata Elxsi win customers, especially in the Media & Comm space. Will continue to invest into Platforms as they help in cross-selling Services also.

Utilization stood at 80% in Q2FY22.

Onsite: offshore mix: 75:25 right now. In the short term, offshore mix will remain in 75-77 range. As economies open, might tilt marginally towards online.

Rail segment continues to growth the company got one order in Q2FY22 as well. Rail & off way to account about 20% of transportation vertical revenue in next few years.

 JLR account: Good growth in the last 2 quarters but nowhere close to the peak so long way to go. Believe that as JLR pivots into EV portfolio – portfolio contribution to Tata Elxsi will be able to cross previous peaks.

 Don't see shortage of semiconductors impact Tata Elxsi business.