Release Date: August 01, 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) reported a 17% year-on-year growth in the India market for Q1 FY25, despite the general elections.
- The solutions business grew by 52% year-on-year in Q1, driven by smart city projects, now representing 23% of revenues.
- The company secured orders totaling over INR150 crore, including new wins and multiyear contract renewals.
- Allied Digital Services Ltd (BOM:532875) has established a sales office in Dubai, indicating expansion into the Middle East market.
- The company is well-positioned in the smart city sector, having completed 12 cities and with two more under implementation.
Negative Points
- The US market showed sluggishness due to the upcoming presidential election, affecting decision-making and slowing down growth.
- EBITDA margin remained steady at 11%, which is lower compared to the previous quarter's 14% due to one-off reversals.
- The deferment of decision-making due to the General Election in India led to a temporary slowdown in revenue growth.
- There was a slight sluggishness in overall consolidated revenue growth due to macroeconomic conditions in the US.
- The company anticipates the need for project funding loans for large projects, indicating potential short-term financial strain.
Q & A Highlights
Q: What are the future projections for margins and smart city projects?
A: Nehal Shah, Executive Director, stated that the current base margin is 11% and they expect improvements in future quarters. They have completed 12 smart cities and are working on two more. They are confident about acquiring new projects and see opportunities in smaller towns and renewals of existing projects.
Q: When will the revenue from recent deal wins be realized?
A: Nehal Shah explained that the billing cycle for new deals typically starts 90-120 days after the deal is won. Therefore, deals won in the last quarter will start billing in the second quarter, and those from the first quarter will begin in the second or third quarter.
Q: What is the company's strategy for smart city projects and the total addressable market?
A: Nehal Shah mentioned that the Government of India might announce 1,000 smaller towns for smart city projects, creating a market of about INR50,000 crore. Allied Digital is one of the few key players in this space and is well-positioned to capture a significant share.
Q: How does Allied Digital plan to fund its growth initiatives?
A: Nehal Shah stated that they plan to use internal accruals and may take short-term project funding loans if necessary. Gopal Tiwari, CFO, added that the company is net debt-free and has sufficient cash flow to support large projects.
Q: How is Allied Digital positioned in the cyber security space?
A: Nitin Shah, Chairman and Managing Director, emphasized that cyber security is a major focus area for the company. They have a specialized team and use proven platforms like Microsoft and Fortinet to provide comprehensive solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
