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Tata Elxsi hosted a conference call on April
23, 2024. In the conference call, the company was represented by Mr Manoj
Raghavan-CEO & MD, Mr NitinPai – Chief Marketing and Chief Strategy Officer
and Mr Gaurav Bajaj – Chief Financial Officer.
Key
Takeaways of the call
FY2024
FY2024 was a consistent year of operations
with a revenue growth of 13% (Rs 3552 crores)despite global macro- economic
uncertainties and volatility in the media and communications vertical in the
last few quarters.
Margins:The company has done well to maintain industry leading margins at
29.5% for the full year despite the company continued to invest in talent base
through all the 4 quarters.
PBT grew 11.9% YoY to Rs 1048.7 crore in
FY2024. PBT margin stood at 28.5%. (This was the first year with PBT in excess
of Rs 1000 crore.)
Q4FY2024:
Revenue for the quarter stood at 905.9
crore down 0.9% QoQ and up 8.1% YoY. In constant currency terms revenue
declined 0.6% QoQ and up 7.2% YoY.
EBITDA margin stood at 28.8% down 100 bps
QoQ.
Margin walk is as follows: The company had
an impact of 30 bps due cross currency headwinds and 80 bps on account of
continues addition of head count their training and talent built up this was
offset marginally by 10 bps due to decline in cost of sales.
Vertical wise during
the financial year, the company’s transportation business grew strongly at 20.4%
YoY in cc terms, and now accounts for 49.9% of its overall SDS revenues. OEMs
now constitute over 56% of the transportation business, and the company is now
embedded into the SDV programs of 5 global OEMs. In Q4FY2024 transportation
grew 1.2% QoQ in CC terms and 7.2% YoY in cc terms.
The Healthcare & Lifesciences business
registered a growth of 7.6% YoY cc terms. The company has established a strong
foundation for continued growth, with the addition of 5 marquee customer logos
in the year and expanded capabilities and platforms in new growth areas such as
digital therapeutics and connected health. In Q4FY2024, Health care vertical
grew by 0.2% QoQ in cc terms and 7.2% YoY in cc terms.
Media & Communications business declined
2.6% in cc terms in FY2024.It declined by 4% QoQ in Q4FY2024 in cc terms and declined by4.6% yoy in cc terms. While this quarter saw a one-off impact of a
deal ramp-down with a customer due to a merger. The impact was around 3% out of
4% by this one customer and there is no further ramp down. This customer is
outside top 10 customers.
However the company has done well through the
year to protect business, add marquee customers and increase wallet share with
key customers.
The company’s system integration and
support services segment Q4 revenues were impacted due to delays in hardware
shipment due to Red sea crisis. It grew by 18.7% in FY2024 in cc terms getting
revenues close to Rs 100 crore in FY2024.
The company is transforming its customers
across industries with shift to OEM’s across automotive industry, and operators
in Media and Telecom industry.
The company has witnessed strong growth in
Top 10 and Top 25 customers.
Human
Resource:
Net additions were 178 employees in Q4FY2024taking the total head count
addition of 1535 for FY2024.
Attrition declined to 12.4% in Q4FY2024.
The company plans to hire 1500-2000
freshers in Fy2025. Lateral hire will be based on the talent requirement and
industry demand.
The company plans to train and make sure that the 25% of the employees
are are trained in AI and Gen AI by Q3FY2025.
IT services: The company is vigilant of the
IT services companies entering ER&D business through acquisitions and expects
competition from them. However, the company is confident about the offerings
which it has built organically over the last 30 years and the relationships
with its clients which are 10, 15 and 20 years old.
Trade of between growth and Margin: The
company will not chase growth at the cost of margin. The company has to
maintain margins and grow at a better rate. The company has enough levers to
grow without sacrificing margins. Dividend:
The Board of Directors has recommended a dividend of 700% at Rs. 70/-,
per equity share of Rs. 10 each, for the financial year 2023-24, subject to the
approval of the shareholders of the Company.
Outlook:
The company is entering the new financial
year with the commitment for growth, with continued confidence in and the
continued confidence in its differentiated design-led engineering capabilities.
Automotive: 56% of the company’s automotive revenue now comes from OEM and there
is significant reduction in Tier 1 revenue. In FY2024 OEM revenue grew by 40%
when compared to previous year.
The company has a large portfolio of Tier 1
clients will focus on key toer one customers
There was some delays in one deal which the
company signed in Q2FY2024 and the company expects it to improve in later half
of the 1st quarter of FY2025.
Media
and communication:Decline in Media and
communication revenue was on account of ramp down in one of the large accounts
and there will be no further ramp down in that account.
The company expects that the vertical has bottomed
out and expects growth to come back in Q1 and Q2.
The company expects better performance in
media and communication vertical in FY2025 when compared to FY2024.
All in all the company expects healthy
revenue growth in FY2025 on back of strong deal momentum and healthy deal
pipeline.
Margins: The company has enough levers to
expand margins and targets to get back to FY2024 EBITDA margins of around 29.5%
in FY2025.
Management
Commentary:
Mr. Manoj Raghavan, CEO and Managing
Director, Tata Elxsi, commenting on the company’s performance in the financial
year 2023-24, said: “Financial year 2024 has been a year of consistent
operational performance with a revenue growth of 13% despite global
macroeconomic uncertainties, and volatility in the media and communications
industry over the last few quarters. We have done well to maintain industry
leading EBITDA margin at 29.5% for the year, even while we continued to invest
in expanding our talent base through all four quarters, with a net addition of
1535 Elxsians through the year.
We had laid down a strategy of integrating
our design business deeply with our key industry verticals, complementing our
software and digital business with a design-led proposition. This is now
complete, with a seamless end-to-end proposition from ideation to market
introduction. This is enhancing our competitive differentiation, providing
early visibility into customer product roadmaps, and creating larger downstream
development deals. Starting with this quarter, we are reporting this integrated
view of design-digital in all three verticals, under the Software and Design
Services segment (SDS).
During the financial year, our
transportation business grew strongly at 24.6% YoY, and now accounts for 49.9%
of our overall SDS revenues. OEMs now constitute over 56% of the transportation
business, and we are now embedded into the SDV programs of 5 global OEMs. I am
especially delighted with the SDV program with a global OEM we won this
quarter, and the German Design Award 2024 for our work on automotive HMI, which
demonstrates the world-class design-led proposition we offer to customers.
The Healthcare & Lifesciences business
registered a growth of 10.8% YoY. We have established a strong foundation for
continued growth, with the addition of 5 marquee customer logos in the year and
expanded capabilities and platforms in new growth areas such as digital
therapeutics and connected health. The Offshore Development Centre for
innovation and R&D we announced in March 2024 for Dräger Medical, the German
headquartered leader in critical care and safety equipment, demonstrates the
relevance of our technology and design expertise and deep domain capabilities
for next-generation healthcare.
Our Media & Communications business
grew 0.2% during the financial year. While this quarter saw a one-off impact of
a deal ramp-down with a customer due to a merger, we have done well through the
year to protect business, add marquee customers and increase wallet share with
key customers. Even while the industry continues to experience significant
reductions in discretionary spend and R&D budgets, we are placed well with
our integrated design-digital offerings and investments in platforms for the
future.
Our Systems Integration and Support (SIS)
Business is pivoting to value-added services, innovation-led projects such as
experience centres, and supporting downstream deployment and run management for
our products and platforms. While Q4 revenues and growth was impacted by
hardware shipment delays due to the Red Sea shipping crisis, it grew creditably
by 19.0% in FY24, getting to a near 100 Crores business in this financial year.
We are transforming our customer base
across industries, with a significant shift towards OEMs in the automotive
industry, and operators in the media and telecom industry, while we continue to
invest in deepening our key customer relationships. This is reflected in the
strong growth in our Top 10 and Top 25 customers across the company.
We are continuing to invest ahead in
building our talent pipeline, and are expanding our presence across locations
in India and overseas. Our employee retention continues to be the best amongst
our peers and industry at large.
Even as we step into the new financial
year, we are pleased to announce two new members to the board. Mr. Soumitra
Bhattacharya has had an illustrious corporate career especially in the
automotive industry with over 28 years with the Bosch group. He serves as
Chairman of Bosch Limited, and is the Director for IFQM - an industry-led
initiative focused on Quality, Excellence, and Innovation. Ms. Ashu Suyash is a
highly respected leader and served as MD and CEO of CRISIL, among leadership
roles across many leading institutions. She has recently set up Colossa
Ventures, an investment ecosystem for women entrepreneurs, and is an
Independent Director on a few Boards including Hindustan Unilever. We look
forward to leveraging the rich experience and network, industry knowledge and
strategic inputs from our new directors.
I am pleased with our overall performance
and resilience in revenues, margins, and customer additions through the year,
in a volatile macroeconomic environment.
We are entering the new financial year with
a commitment for growth, and the continued confidence in our differentiated
design-led engineering capabilities. This is backed by strategic relationships
we have built over years with key customers, the qualitative change in revenues
towards OEMs and SDV programs, entries into new operators and marquee
healthcare logos, investments in strategic technology areas and AI, and the
strong deal pipeline we carry into the new financial year.”
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