Release Date: July 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Elxsi Ltd (BOM:500408, Financial) reported a steady quarter of growth with revenues from operations at INR926.5 crore, growing 2.4% quarter on quarter and 8.4% year on year in constant currency terms.
- The transportation business unit showed strong growth, reporting a 5.3% quarter-on-quarter and 20.3% year-on-year increase in constant currency terms.
- The company has successfully acquired a strategic network transformation project from a top telecom operator in North America, facilitated by their Neuron platform.
- Attrition rates have declined further during the quarter, indicating improved employee retention.
- Tata Elxsi Ltd (BOM:500408) continues to invest in digital AI engineering technologies across verticals, aiming to have 25% of their talent pool ready by December this year.
Negative Points
- EBITDA for the quarter was INR252.3 crore, showing only a 0.3% growth year on year, indicating stagnation in operational profitability.
- The Healthcare and Life Sciences business reported a decline in top line by 4.3% quarter on quarter in constant currency terms due to delays in project renewals.
- The company made a one-time contribution to the progressive electoral trust of INR19.78 crore, impacting the EBITDA and PBT margins.
- The media and communication industry remains challenging, with only a 0.5% quarter-on-quarter revenue growth in constant currency terms.
- The tax rate has increased due to the expiration of tax holidays in some SEZ units, which will likely continue to impact financial performance.
Q & A Highlights
Q: Just wanted to understand on the healthcare customer, the moderation that we've seen in this particular quarter, is this something which is over in 1Q and or 2Q should normalize going forward? Or this will see some effects in the coming quarter as well?
A: This will have an effect in H1, and we hope to normalize that in H2. (Manoj Raghavan, CEO)
Q: Given the performance in 1Q as well as the healthcare customer moderation continuing in 2Q as well, does that outlook change or that sustains from here on as well?
A: We continue to stick to the guidelines that we've talked about in the last quarters. We definitely want to exit the financial year with a better growth rate than as compared to last year. (Manoj Raghavan, CEO)
Q: The strong growth in the transportation vertical this quarter, is it broad-based or driven by the top client?
A: It's a broad-based growth across multiple customers. Some of the deals that we had closed, ramp-ups have actually started happening and all of those contributed to this performance. (Manoj Raghavan, CEO)
Q: Just wanted to understand your thoughts on wage hike cycles for FY25, and also the hiring class because last quarter, when you spoke, you said we'll probably go -- we'll have much more major hiring in FY25.
A: The wage hikes for junior staff would be effective Q2 from July and for senior staff from Q3 that is October. The average wage hikes would be in the range of 5% to 6%. (Manoj Raghavan, CEO)
Q: How is the center in Michigan playing out in terms of improving our positioning with global auto OEMs?
A: Proximity centers are important for being closer to the customer and showing our intent and commitment to those markets. These investments are helping us in large engagements. (Manoj Raghavan, CEO)
Q: How should we be thinking about the growth mix across verticals from an FY25 standpoint?
A: Growth will be led by transportation. Our industrial design business is also showing accelerated growth. We are seeing green shoots in the media and communication space and are hopeful for a turnaround. (Manoj Raghavan, CEO)
Q: What is the strategy behind aiming for 20% of overall revenue from the healthcare vertical?
A: The 40, 40, 20 mix is a strategic contract for de-risking industry cycles and managing the portfolio well. Automotive and transportation are the largest growth opportunities at this time. (Nitin Pai, Chief Marketing and Chief Strategy Officer)
Q: How should we think about the trajectory from a sequential growth momentum perspective in the transportation vertical going ahead?
A: We see a good deal pipeline and momentum. We hope to continue this growth, converting visibility into revenues and delivering growth. (Manoj Raghavan, CEO)
Q: Any reason for pushing out the wage hikes and how should we think about margins from a full-year perspective?
A: We will continue to be within the stated margin range of 20% to 29%. We hope to maintain last year's performance, maybe beat it a little bit, depending on revenue growth. (Manoj Raghavan, CEO)
Q: Are we seeing any green shoots in media and telecom, and do we expect this to be a turnaround?
A: There are some good opportunities and larger consolidation opportunities that we are bidding for. The industry is still under stress, but we feel a little bit more confident now. (Manoj Raghavan, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
