Release Date: April 17, 2025
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 healthy quarter-on-quarter growth of 3.5% in constant currency terms in the Healthcare & Life Sciences segment.
- The company secured a strategic EUR50 million multiyear SDV and software engineering deal with a Europe headquartered global car OEM.
- A strategic multiyear product engineering consolidation deal of over USD100 million was won in the media and communications vertical, marking the largest single deal in the company's history.
- Design-led revenues have grown over 25% in the year, highlighting the strength of Tata Elxsi Ltd (BOM:500408)'s design digital proposition.
- The company is expanding its vertical presence with the addition of Aerospace and Defense, addressing emerging opportunities in the sector.
Negative Points
- The automotive business faced challenges as some OEMs and suppliers paused new program starts due to geopolitical and market uncertainties.
- There were delays in ramp-ups planned for ongoing deals in the automotive sector, expected to resume in Q1 FY26.
- The Media and Communication business experienced customer-specific issues due to M&As and business restructuring, with the industry exercising caution in R&D spend.
- The company has been cautious with discretionary spending and non-people costs due to the uncertain economic environment.
- Revenue degrowth has been a key reason for the margin decline, with a focus on bringing back revenue growth to improve margins.
Q & A Highlights
Q: What is the net new component in the large consolidation deals in the media vertical?
A: The net new component in the media vertical consolidation deals is approximately 25% to 30%. - Manoj Raghavan, CEO
Q: How are the recent geopolitical and tariff changes affecting the automotive vertical?
A: The geopolitical and tariff issues have led to project pauses with OEM customers, including our top client. We expect clarity in the next few quarters and are hopeful that new large deal wins will help cover these weaknesses. - Manoj Raghavan, CEO
Q: What is the visibility for growth in the current quarter, given the pauses and new deal ramp-ups?
A: We have decent visibility and encouraging discussions with key customers. We believe we will be able to grow from Q4 levels. - Manoj Raghavan, CEO
Q: What led to the sharp decline in other expenses, and what is the sustainable number going forward?
A: The decline is due to disciplined management of discretionary spending and non-people costs, such as third-party contractors and office consolidation. We will continue to measure these expenses as we move forward. - Gaurav Bajaj, CFO
Q: With the recent large deal wins, can we expect a reversal of declines in the automotive and media verticals?
A: Yes, the large deal wins provide stability and a foundation for growth. We aim to mine these accounts and grow faster, focusing on scaling and mining key deal wins. - Manoj Raghavan, CEO
Q: How does the management view the potential for growth in FY26 compared to FY25?
A: The management is focused on delivering better performance in FY26, leveraging large deal wins and scaling them over the four quarters. - Manoj Raghavan, CEO
Q: What is the impact of the large deals on margins, and is there any rebadging involved?
A: The large deals come at competitive rates but provide stability. There is no rebadging involved, and we aim to leverage opportunities like AI to improve margins. - Manoj Raghavan, CEO
Q: How is Tata Elxsi positioned in the semiconductor space with the ongoing CapEx in India?
A: We are in discussions with companies setting up fabs, focusing on design and manufacturing offerings. It's early to quantify the opportunity size, but we are engaging with potential customers. - Manoj Raghavan, CEO
Q: What is the strategy for risk mitigation in terms of revenue mix and geographic exposure?
A: We are expanding beyond traditional markets to emerging ones like India, Japan, and Southeast Asia. This strategy has helped us mitigate risks from geopolitical issues. - Manoj Raghavan, CEO
Q: How has the annuity mix changed over the past years, and what is being done to increase it?
A: The annuity profile has increased to around 45%-50%, with a focus on moving from project-based to annuity-based engagements, especially with top customers. - Manoj Raghavan, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
