Tata Elxsi Q3FY17 Concall Summary

Performance Highlights 

Tata Elxsi Perfromance Highlights Q3FY17
  • Growth of 13% which would have otherwise been 18% had it not been for exchange rates
  • Entire hiring of fresh graduates that was started during previous quarter got completed in the present quarter
  • Segment Split
Tata Elxsi Segment Revenue Q3FY17
  • Auto contributes 45% of revenue,  broadcast 24-25%. Share of JLR contribution to revenues is 21%-22% in Q3Fy17
  • Revenues Split
Tata Elxsi Fixed vs Time & Material Revenue Q3FY7
Tata Elxsi Onshore vs Offshore Revenues Q3FY17
  • Offshore is 40% on onshore. Onshore is 40% so offshore by employees is 16% and rest is onshore»

 Key Challenges

  •  Exchange rate
    • Euro had a negative impact of 2-3% on an average between the last 2 quarters
    • Yen had had a negative impact of 8%
    • GBP also have a negative impact. It moved from 100 to 83. The company has a natural hedge in GBP to some extent . 40-45%of expense is in GBP. The company has sought price hike with some of the key cust omers. Company has 40% of revenues in GBP and so net exposure to GBP is 24
  • Reduced number of days and the leaves during the year end

Automotive Segment

  • The segment continues to grow
  • The company partnered with a company called lrdeto on the car security  space
  • First licensing for the V2X Emulator Solution in China along with the partner Spirent . It is a license to a government agency in China so no IPR related issues expected
  • Company showcased its capabilities in Automotive space in CES event that included activities on autonomous car, ADAS as well as e-cockpit and connected infotainment space
  • Main competitors are KPIT, Capgemini and Wipro
  • Segment mix between power train, safety, infotainment keeps changing in Automotive segment . ADAS is the flavour of the season
  • Driverless cars
    • Tata Elxsi has its own R&D program where they are bringing autonomous driving capability on existing cars. Testing of vehicles in controlled environment is going on. They started with a pre-programmed trajectory and now the vehic les will be tested in real environment on Indian roads
    • The company is using Al based approach that includes learning and mapping obstacles and road signs using multiple sensor technologies
    • Company is using Nvidia also in this R&D effort

  Panasonic Collaboration

  • Opened a dedicated offshore centre for Panasonic in the home appliances space
  • It is a joint development centre with employees from both companies
  • The division of Panasonic has revenues> $ 20 Bn. So opportunity size is huge
  • Work involves lot of Al based activities for the home appliances  division
  • The company plans to launch a number of new devices which use artificial intelligence like dish washers, microwave ovens, air coolers etc
  • The company will work with Panasonic to launch prototypes, do trials and then help them launch the products globally

 Projects Update

  • Metro Projects
    • Two metro projects -Kochi and Nagpur
    • Kochi metro will generate revenues of Rs 3.5-4 Cr and Nagpur project a little more than that
  • Space Projects
    • Sales team continuously looking for opportunities from VSSC and ISRO
    • Most opportunities are based on tenders. Company is being choosy about which opportunities to pursue

 Impact of H1B Visa and Slowdown in IT

  • No impact of H1B Visa issue. Company gets 60% of its revenue from offshore but has 60-65% of employees hired locally in US
  • No fundamental structural shortcomings  seen
  • No pricing pressure seen
  • The company provides highly specialised skill and customers are more interested in making sure that it is done right, done well and on time. So no pressure on margins as· of now

Medical Equipment Business

  •  Company has opened two new logos in US and hopes to get a larger share of business from next financial year

 Headcount

  • Total 5,600 employees and utilisation is 74-75%
  • Around 300 new employees added in Q3 FY17
  • No more significant hires planned. New hires will be only for specific engagements

 Update on Clients

  • Company is following a strategy of deeper mining of existing clients for the next couple of quarters
  • New orders from clients are small
  • Top 5 customers contribute 48% to revenues
  • One Tier-1 customer added in Japan, nothing in US during the quarter
  • Top 10 clients contribute 75% of revenues. Out of top 10, 6 are in transport and 4 in broadcast segment

 Future growth strategy

  • Expand portfolio of offerings
  • Bundling of skills to create a combined service offering which can be of higher impact than standalone offering  were
  • Concentrate on existing customers