Release Date: October 26, 2023
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aurionpro Solutions Ltd (BOM:532668, Financial) reported a 37% year-on-year revenue growth for Q2, reaching INR 211 crores.
- EBITDA for Q2 grew by 32% year-on-year to INR 46 crores, maintaining an industry-leading EBITDA margin of 22%.
- PAT for Q2 increased by 36% year-on-year to INR 34 crores, with a PAT margin of 16.1%.
- The Banking and FinTech segment saw nearly 30% growth, driven by new wins and expanded sales channels.
- The Technology Innovation Group (TIG) experienced a 45% year-on-year growth, with significant success in transit and hybrid cloud services.
Negative Points
- Employee costs increased from INR 69 crores to INR 80 crores, partly due to new R&D investments and ESOP costs.
- The Smart Cities business within TIG is not experiencing significant growth at the moment.
- The company faces long sales cycles, especially in the enterprise software market, which can delay revenue realization.
- Despite strong growth, the company remains heavily reliant on the Asia-Pacific market, with 60% of revenue coming from India.
- There is uncertainty around the exact financial impact of recent acquisitions, as contributions from these will only start reflecting in future quarters.
Q & A Highlights
Q: Congratulations for a great set of numbers and also congratulations to Ashish sir for becoming the CEO of the company. Your base business, sir, I think, should grow by 30%, 35% every year. And we have also done a couple of acquisitions which together probably might have closer to INR 20 crores to INR 25 crores of profits. So with some synergies, could we expect closer to INR 220 crores, INR 230 crore of profit next year, profit after tax?
A: Sorry Sahil, can you repeat the last part. Next -- you're talking about next year? Sahil, are you asking about next year or this year?
Q: Yes, sir. I was saying that -- yes, sir, FY '25.
A: FY '24 is this year.
Unidentified Company Representative: FY '25.
A: FY '25. Okay. Yes. So look, Sahil, first of all, thanks for the congratulations and all. I think the team did pretty well in the quarter. We feel -- so the guidance that we give out for the full year, as I said, we have multiple users of capital, most of which we built into our strategic plans, right? So acquisitions being one of those. So to some extent, we were expecting to do some M&A. Now M&A -- the philosophy that we have at Aurionpro in terms of doing M&A is, we will do a deal only when we see, one, it fits an identified gap; second, it adds immediate value to the shareholders. I mean we are not in the business of doing M&A. We will do it only when it makes a huge sense from a value standpoint. In that sense, both these acquisitions are, one, immediately accretive to the EBITDA; second, they make a huge amount of sense from a future value standpoint in terms of how much can we expand both of these businesses, sell to the same client base that we have globally, load the products from the same channels that we have as well as be able to expand on these in India as well, right, where both of these products, which are the core markets for both of these products. I will not really get into the business of giving future guidance at the moment. So we typically give a guidance for the current financial year. And when we walk into the end of the year, we will try and position for the next year. But by and large, I would say, incrementally, these will be -- I am very positive these will be extremely value adding to the Aurionpro shareholder, right, both in terms of growth as well as in terms of profitability that we do. And culturally, both the businesses are a great match for us, right? So overall, very bright future. We'll not give numbers.
Q: I have a couple of questions, and I just want to know regarding your recent order wins because in the presentation, I can see the order book you have around INR 810 crores. I just want to know any order wins in last 2 quarters. And I can see the increase in the goodwill. Is this because of the recent acquisitions you have made?
A: Yes. Okay. So thanks for the question. Look, coming to the goodwill, goodwill is entirely due to the Interact DX acquisition, right? So that you would see in terms of the entries that we published on the balance sheet. On the order wins, we do publish where there are material order wins from time to time. We've had a fair amount of success on both sides of the business. So one is on the lending side of the business, we've had multiple wins that we've talked about, which allows us to really expand the business as well as a fair amount of momentum on the existing client base in terms of upgrades, et cetera. On the transaction banking side, again, we had a number of significant upgrades with the existing clients as well as we're getting into some -- a very strong pipeline, where we will announce, I suppose, some wins as we get into the second half of the year. Transit again had a phenomenal outing. So transit, since we built the sales channel out in Americas, we have gone significantly outside of the initial win in the U.S. We've expanded to Mexico, the win that we announced. It's a multiphase project, and we just announced the first phase, but we will build on it. We've announced Costa Rica. We have announced Australia. We've also expanded into many other geographies, which, again, as and when we fructify those partnerships, we'll talk about it. And we announced the expansion with WebWorks as well on the data center side, right?. So I think there is -- in general, the demand environment seems to be very benign for the offerings that we have. We seem to see a fairly large number of deals in the market. I keep emphasizing the point that we need to be highly selective in terms of taking on new business and not get very excited in terms of driving growth rates beyond what the enterprise can deliver. So we will try and be selective. We will try and take on projects in a way that we can keep the delivery reputation of the enterprise. This is a long, long journey. We don't want to get short-term greedy when we try to accelerate growth rates. So we will sort of acquire just enough business to keep hitting the guidance numbers that we have and maybe go a little bit over, but not significantly. Hope that helps.
Q: I just want to know the bifurcation of order book between the 2 business segments, banking finance and the tech innovation group. And I just want to know one more thing like where do we -- and yes, please.
A: No, no, sorry, sorry, go on.
Q: Yes. I just want to know regarding the business of data centers right now, where we do stand in the data center business and what kind of investments you are looking into data center business?
A: Okay. So the first question is straightforward. It's about 40% on banking and 60% on TIG, the order book. The second one, sort of data centers, we, first of all, don't intend to put too much capital to use in the business, right? So we are not in the business of building data centers of our own. We are in the business of, one, we have an extremely high-quality design team. So designing the data centers as well as program managing the builds for our partners. And that is what we will focus on, right? We, like Aurionpro, always does when it gets into a business, we are building our own IP. We are building -- we are productizing a key part of data center delivery that we will -- I suppose, once the R&D is finished, we will announce in the next few months. So we will continue to look at the business in terms of what can we
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
