Release Date: May 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Allied Digital Services Ltd (BOM:532875, Financial) announced a 30% dividend for the year, reflecting strong financial performance.
- The company has completed 40 years in business, showcasing its long-term stability and growth.
- The Indian business segment reported a 33% year-over-year growth in Q4 FY24, indicating robust domestic performance.
- The rebranding of their SaaS platform from Adidas to Digital Days, with added AI and automation features, aims to enhance market recognition and adoption.
- Significant order wins in the US and India, including contracts with major banks, oil and gas companies, and smart city projects, highlight the company's expanding client base and service offerings.
Negative Points
- Global market conditions, particularly in the US, are causing delays in deal closures due to inflation and economic uncertainty.
- Customers are exhibiting aggressive pricing expectations, leading to elongated decision-making cycles and potential margin pressures.
- The company faces challenges in maintaining and improving margins amidst competitive pressures and economic uncertainties.
- Debt levels have increased due to project-based funding requirements, although the company remains net debt-free.
- The upcoming election season in India has caused a temporary slowdown in decision-making for government projects, potentially impacting short-term revenue growth.
Q & A Highlights
Q: Is the current margin sustainable, and how much more improvement is possible in the next couple of years?
A: Nitin Shah, CMD: We are quite satisfied with the current margin of 15%. Our aspiration is to improve it further through strategic hiring and operational efficiencies.
Q: What is the status of the revenue target of INR1,000 crores by FY25 or '26, and when do we expect that run rate to come in?
A: Nehal Shah, Whole Time Director: We are still on track to achieve the INR1,000 crore target in the next two years. While some deals are taking longer to close due to global market uncertainties, we are confident about reaching our goal.
Q: What is the current order book at the end of FY24?
A: Nehal Shah, Whole Time Director: We currently have about INR1,400 crore of order books in hand. However, this number may not fully reflect the ongoing renewals and new orders that come in during the year.
Q: How are you planning to utilize the INR130 odd crores of cash in hand?
A: Nehal Shah, Whole Time Director: The cash is reserved for large contracts and potential inorganic growth opportunities, such as acquisitions in the cybersecurity and cloud sectors.
Q: What factors are leading to increased margins on government contracts, and are there any payment issues with the government?
A: Nitin Shah, CMD: We have stringent prequalification requirements for government tenders, which limits competition. We focus on operational maintenance to improve margins. Payment issues have significantly reduced due to improved government processes.
Q: What is the opportunity size in the smart city project space over the next two to three years?
A: Nehal Shah, Whole Time Director: We see a market size of about INR50,000 crores over the next five years, with each city project ranging from INR30 to 50 crores. We expect significant traction in the coming quarters.
Q: What is the current status of the Taloja and Ayodhya Smart City orders?
A: Nehal Shah, Whole Time Director: We have completed about 18% of the billing for these projects in the last quarter. More updates will be available in the next quarter.
Q: Why was the SaaS platform Adidas rebranded to Digital Desk, and what is the customer traction like?
A: Paresh Shah, Global CEO: The rebranding was to focus more on our brand and enhance product offerings with AI capabilities. We have over 100 customers globally and see significant traction.
Q: What are the future projects on the data center side?
A: Nitin Shah, CMD: We are active in building and operating data centers for clients but do not intend to own and operate data centers ourselves due to the high capital and skill requirements.
Q: What is the reason behind the increase in debt despite a higher cash balance?
A: Nehal Shah, Whole Time Director: The increase in debt is due to project loans for executing Smart City projects. These are short-term debts that will reduce as we receive payments for the projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
