Tata Elxsi Q4Y17 Concall Summary

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Financial Highlights

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  • Fairly good quarter; 5% increase in the revenue when compared to the previous quarter
  • Revenue depleted by close to 4% due to the erosion of the currency
  • Unfavorable changes in the exchange rates resulted in reduced profits and revenues

Major Projects

  • Worked for Tata Motors for the Geneva Motor show in setting up virtual reality bar which was ideated, designed, equipped and operated by Tata Elxsi.
  • One of the main VFX studios which was commissioned for the movie Baahubali 2.
  • Converted couple of customers who were interested in the e-cockpit solution that was demoed in the CES presentation (presented in the previous quarter)
  • Steady ramp up in the ODC project for Panasonic in India
  • Completed a project for HAL for the design of interiors of Indian Multi-Role Helicopter (IMRH) in a record 60 days, utilizing variety of processes
  • Awarded contract from AAI to help them develop the way finding and signage design for 10 airports across the country

Major Achievements

  • Achieved a major win with an European operator for one of the automation tools and license the complete automation suite to this operator
  • Good roadshow observed in Japan and expecting to convert some into business in the automotive side
  • Japanese OEMs companies looking for OEM deals with Europe and US companies; However, large Tier 1s do not have any experience working overseas
  • Won the prestigious iF Design Award for works on Kochi Metro

 Business Strategies and Growth

  • Broadcast business has almost doubled in business due to one of the major customers
  • Supported Indian brand Blue Star to launch their new range of water purifiers
  • The top 10 customers contribute to 60% of the revenue on an average
  • Hedging – Apart from the natural hedge, the company also takes options at a premium; the company does not do any derivatives nor esoteric deals

Revenue Breakup

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  • Embedded Product Design (EPD) contributes 75-80% of revenue
  • Auto constitutes 60% of EPD
  • Growth rate of Transportation was close to 35% and that for broadcast was below 20% for FY17
  • Industrial Design (ID) constitutes 14% of revenue
  • 40% from the Old VCL revenue
  • Less than 50% from the entertainment market
  • 62% of the revenue are from offshore work and close to 38% is realized from onsite deployment
  • 44% revenues from Europe, 40% from US and the rest from India and Rest of Asia
  • Volume growth of 8% realized in this quarter when compared to Q3
  • Increasing significance of OTT and related applications
  • The company has its own IP and frameworks which help in testing and validation of some of the OTT frameworks
  • Gain in customers in the last quarter for licensing the framework which help launching these OTT services faster

No. of employees and hiring

  • The year ended with total of 5500 employees
  • Hiring against specific requirements; mostly fresh graduates

 Merger of VFX and industrial design team

  • Synergies have been extracted
  • Several projects, like the Tata Motors at Geneva, realized only through the combination of content

Other Updates

  • The Utilization Rate for the FY is around the mid-70s
  • CFO resigned owing to personal reasons; company in process of identifying the new CFO

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PI Industries Q4FY17 Concall Summary

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Financial Highlights

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  • Revenue stood at Rs. 627 Crores, higher by 4% over the last quarter figures with EBITDA at Rs. 154 Crores, up by 42% having EBITDA margins at 24.5%
  • PAT has also increased by 41% to Rs. 135 Crores due to better tax figures for the company for the 4th quarter.
  • Overall on the FY basis, Revenues increased by healthy 8.4% to Rs. 2383 Crores with EBITDA at Rs. 551 Crores (up by 28% on a Y-o-Y basis)
  • Tax rate has also been reduced due to investment tax rebates and other factors offering a PAT of Rs. 457 Crores, up by 48% Y-o-Y basis
  • Based on a sound financial performance, the company has announced a quarterly dividend of Rs 2.50 making dividend of Rs 4.00 per share for the whole year
  • Debt to Equity position stood at 0.50x
  • Better utilization of credit line and cash has kept the trade payables for FY17 down to Rs. 288 Crores from Rs. 366 Crores.
  • Other Expenses has been down by 12% compared to Q4FY16 figures.
  • Tax rate can be expected to be in the range of 20% in the future years as currently there is a lot of saving in the company due to existing benefits on SEZ’s and on R&D spending and Investment allowances for PPE
  • In the other income section new gains has been transferred due to Ind-As standards of financial reporting
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Global Industry Outlook

  • Global industry is perceived to have a turnaround in the upcoming financial year due to increased inventory for major global players
  • These are few triggers, the inventory in the channel, inventory with the companies and also commodity prices
  • The commodity prices for the last three-four years have been declining, but there is wellhope for revival trend in terms of commodity prices also
  • Exports are currently growing at a rate of 11% for the company which is expected to keep at 10% level in spite of an expected slump in the following 2 Quarters.

Strategic Partnership With BASF

  • Under a new agreement with BASF, PI industries is going to co-market latest innovative fungicides and herbicides with 4 new molecules
  • Two out of these 4 molecules are going to be newly launched in crop segments in India – one is in the rice category and other one in maize category
  • Multi-Pronged approaches have been taken by the company to increase distribution network for better market penetration for these products.

CAPEX Plan 

  • Company has expected for a cap ex of Rs. 200 Crores for the FY18 and is going to setup new investment opportunities
  • 50% of this capex will be targeted towards revenue generation and 25-30% towards technological upgradation
  • The plant in Jumbasar is also expected to run on a higher capacity than currently (60%) and new capex can be scheduled in this arrangement
  • This financial year has marked full operations of 2 plants in Jumbasar for four molecules where there is enough land to set up 6 more plants
  • There is going to be some investment in one of the MPPs that is currently in progress.
  • The company is also looking at some refurbishing of the earlier assets, some expenditure is also going to happen towards ETP & Utilities
  • Plan for the Pharmacy business in final stage and will be communicated by the next financial year

Oreder Book

  • The order book of the company  is in the range of 1 Billion dollars which is up by 25% from the last year
  • Contribution of existing product line coming from Jambusar plant and future product line is present in the new order book

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Arvind Q4Y17 Concall Summary

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 Financial and Business Highlights

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  • The value of company increased from Rs.2200 crores to Rs.3000 crores company this year.
  • Cotton prices have been prevailing at 25-30% higher levels than theprevious year.
  • Brands and Retail business showed 22% revenue growth
  • The margins almost doubled to 7.1% from last year
  • Power brands show powerful performance with revenue growth of around 21% and margin of around 13% which is up from around 10% in the same period last year
  • Q4 revenue for FY 17 was 10% higher than the previous year
  • EBITDA margins were down 2% on account of reduced margin in Textiles and lower earnings in a few smaller business
  • E-Commerce is the fastest growing but on a smaller base.
  • There was 5% are the growth of Branded business and 5.4% on Power brands.
  • 9.4% LTL sales growth across all the businesses
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Brands and Retail Business

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  • Brand and Retail business delivered market leading thegrowth of 26% with slight improvement in margins. Also, likely to grow at around 22-25%
  • Margins for Brand and Retail business will continue to grow - 150 basis points margin improvement
  • Brand and Retail portfolio had a strong LTL growth of 9.5% for the quarter
  • Brands are divided into three categories namely “Power Brands,” “Emerging Brands” and “Specialty Retail.”
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  • Power Brands grew 5.4% on LTL level
  • Power Brands delivered very good profitability, but it used to be taken away by some of these Emerging Brands.
  • The negative impact of the Emerging Brands is now coming down. Last quarter they reached to breakeven improves the overall margin.
  • Emerging Brands and Specialty Retail is improving to help margin.
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Textiles Business

  • The revenue growth of Textile was over 8%, primarily driven by the 25%-odd growth in Garment revenue.
  • EBITDA was lower by around 10%.
  • Margin for Textiles business is likely to remain under pressure primarily due to higher Cotton prices as well as the currency impact
  • Textiles EBITDA is around Rs.900 crore.
  • PBIT has gone up from Rs.57 crores to Rs.77
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Technical Textile Business

  • Technical Textiles has seen a sharp decline from Rs.31 crores EBIT profit to Rs.7 crores EBIT loss
  • AMD, a part of Technical Textiles Business, is currently scattered among textiles as well as another segment.
  • AMD business is growing at a pace of about 25%; it will be a closer to Textiles margins over a period of one year.
  • Technical Textile has grown by over 25%; it is going to be close to Rs.700 crores business this year
  • In the next 1, 1.5-years, Technical Textile is planned to make Rs. 1,000 crores with adecent margin

Unlimited Brand

  • “Unlimited” brand which is now reinvented and relaunched version of earlier Mega Mart
  • Unlimited had an impressive rate of 29%.
  • Unlimited had LTL growth of 30.2%
  • SSG number of Unlimited brand is around 27-28%

Specialty Retail

  • Specialty Retail which is GAP, TCP and Sephora was launched last year
  • Sephora contributing much more than planned
  • GAP and TCP had been expanded quite well in one year.
  • There was some challenge regarding the cost model because of the CVD introduction in the last budget which is now getting corrected through domestic production

Ethiopia

  • The company is investing in Ethiopia and will be setting up around 12 million garments unit.
  • Overall investment would be close to Rs.100 crores in Ethiopia to set up garment manufacturing plants,
  • phase-1 is getting over this financial year
  • The first plant that had been bought and invested in has gone into commercial production in Q4 and is  expectee to make larger shipments starting July 1
  • Almost by October 2017, it will be functional at full levels of production; it is about 6 million garments annual capacity.

Internet

• Expense on the internet was over ten million plus last year;it should be down at least 20-25% this year.r

Inventory

  •  The inventory level is maintained around two months’ level, that is the standard have been maintained.

Debt

  • Net debt at the year-end was Rs.2950 crores which arearound 2.9x EBITDA for the year.
  • On overall basis, debt would not change for more than Rs.100 crores
  • The debt-equity ratio is at 0.8; however, the earning-to-debt ratio has come below 3, and the company's stated objective is to take it to 2.5.

CAPEX

  • CAPEX target of almost Rs.500 crores and with working capital increasing because of cotton price increase
  • There a possibility that there will be Plus/minus Rs.100 crores neutral cash flow

Hedge

  • Around 40% of Textiles revenue comes from exports approximately and about 30% and 50% of this amount hedge every year
  • The contracts remain for two months or the commodity hedges.
  • Hedging mostly on international exchanges as liquidity is not very high in the domestic market

Cotton price

  •  Cotton prices have increased by 15% in Q4
  • The raw materials cost to sales have changed by 4% hence margins are under pressure in Q4.

Joint Venture businesses

  •  Two out of five joint ventures are in the field of Technical Textiles
  • One business is in the Garment manufacturing.
  • Company suffered a bit because most of its sales were directed to the UK which because of the pound there was a challenge there on margin
  • Garment, Tommy & Hilfiger and Calvin Klein have done extremely well this financial year.

GST implication

  • In GST, there is one immediate transition-related rate, and there is one which is a medium-term raes
  •  On the opening inventory, they would give a set off against the GST in future of VAT as well as excise duty. However, they will not give you set off of service tax or CST.ra
  • Overall GST would be about 7% or thereabout as the taxes which are available in transition
  • For Textile, Tax after GST would be around 2% and 3%. 90% of sales are B2B sales, and hence tax would be saved because of Input tax credit

Engineering business and water treatment plant

  • Engineering business and Water Treatment business are operated under the brand Arvind Envisol which is 100% subsidiary of Arvind
  • Engineering business is growing at 25% revenue
  • Engineering business was close to Rs.160 crores and anEBIT margin of over 25%.
  • Zero discharge patented technology in Water Treatment projects.
  • Water Treatment plant’s revenue is expected to touch turnover about a couple of hundred crores over a period

Donwloads

Apcotex Q4FY17 Concall Summary

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Financial Highlights

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  • Turnover of about Rs. 87 crores against Rs. 58 crores in Q4 FY16, a growth of about 28%
  • EBITDA stood at Rs. 8 crores as compared to Rs. 9 crores in Q4 FY16
  • PAT margin of 4.13% for Q4 FY17
  • EBITDA for the period stood at Rs. 29 crores as compared to Rs. 38 crores with an EBITDA margin of 7.43% for FY17

Current Business Scenario

  • Business Mix is approximately as of now 50% is synthetic rubber, 50% is synthetic latex. and out of this 50% synthetic rubber and about close to 35% to 40% would be NBR and related products
  • NBR is currently produced in Valia Plant and Styrene is produced in Taloja Plant
  • They are the only manufacturer of NBR in India and the applications are majorly in automotive, varied rubber kind of industries
  • Business from one of the largest customers may remain uncertain as there is a temporary shutdown of orders which mayextendfor a longer period
  • Company has been able to secure some raw materials at lower prices and that is one of the reasons for a good margin improvement
  • Consolidation of Omnova Acquisition is completed in FY17
  • Construction latex that company supply to the construction industry has been the largest growth contributor in terms of percentage
  • 18%-19% growth rate in the latex industry for last 5 years.
  • Capacity Utilization of around 70%-75% across latex, synthetic rubber and NBR

Key Developments

  • Company incurred a gross sale loss of about Rs. 26 crores to Rs. 30 crores in Q4 FY17 for a period of 51 days due to unrest in Taloja Plant
  • The company restarted the HSR production at Taloja plant from April 2017 after almost after almost a year which will lead to margin improvement
  • Company has been able to reduced debtors for Omnova business from almost 85-90 days to approximately 65 days

Future Outlook

  • A crash in the new raw material prices in Q1 FY18 could lead to some pressure on the margins in the short term
  • Company plans to incur a CAPEX of about Rs. 25 crores to Rs. 30 crores in FY18, payback of 3 years
  • This Rs. 25 crores to Rs. 30 crores are mostly for reduction of cost and improving margins
  • Being the only manufacturer of NBR in India, the company expects to potentially grow in this segment as it has low market share now.
  • Company expects it should be able to achieve 50%, 60% market share in NBR business
  • For the next year or two,Companyexpects latex to drive the export growth
  • Volatility in oil prices will drive the RM prices
  • Company expects margins to reach 13%-15%, same level that it was 2 years ago
  • Company expects no net effect due to currency fluctuations especially fluctuations to INR

Downloads

Cupid Q4FY17 Concall Summary

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Financial Highlights

  • FY 2017 has been the best year for the company with a net profit of Rs. 20.5 crores during the year
  • Total Revenue of Rs. 85 crores from female condoms
  • The third quarter sales were about Rs. 28 crores and fourth quarter is about Rs. 18 crores
  • EBIDTA Margin: Female condom- 50-55%, Male condoms- 15% and lubricants- 40%
  • Revenues: 5% from lubricants, 52% female condoms and 43% male condoms
  • Ad Spend of around Rs. 70 Lakhs including events to sponsor and popularize Cupid products especially female condoms
  • Expected Ad spend of Rs. 7 crores this financial year and target projected sale of Rs. 97 crores next year
  • Expected 15% to 20% increase in revenue year-over-year
  • Rs. 19 crores in cash for promotion, development of new products and other activities
  • No debt due to possible plans of acquisition ranging from Rs. 20-40 crores
  • No impact of GST as condoms are completely exempt
  • Expected Rs. 10 crores sales via retail channel in 2018 with 40% working capita
  • Revenues of second and third quarter are always better than that of first and fourth quarter
  • Promoters holding has fallen from 48% to 44% due to selling of some shares
  • 33% increase in dividend as dividend moved up from Rs. 3 to Rs. 4
  • Capacity for male condom is about 325 million pieces and we are planning to add about 80 million more which is 20% of our overall capacity of 400 million total male and female
  • CAPEX plan of Rs. 7 crores: Rs. 4 crores for the imported machinery and another Rs. 3 crores to build up the infrastructure facilities
  • Other expenses increased from Rs. 9 crores to Rs. 16 crores due to increase in advertising, salary and power cost
  • Assured orders of almost Rs. 89 crores to be spread over a period of 15 months
  • Using hedging techniques to protect from Dollar fluctuations
  • Volume: about 17.5 million for female condoms and 202 million male condoms for FY17
  • Expected volume: Around 20 million for female condoms and about 250 for male condoms for FY18
  • Major raw material Latex prices vary within a band of (+/-10%)
  • Inventory of Rs. 45 lakhs to Rs. 50 lakhs, which is about four-week supply
  • Receivables vary between Rs. 8 crores and Rs. 14 crores
  • Rs. 1 crore allocated spend for R&D

New products

  • Launched water based lubricant product which is the third product in the basket beside male condoms and female condoms
  • Developed an unique male condom which is patented all over the world which would be launched this year
  • Developing a second-generation high-tech female condom
  • Already manufactured and marketed hand sanitizer with unique features
  1. For hand sanitizer, retail marketing in India and export especially in the Sub-Saharan African countries
  2. Margin for hand sanitizers is 35-40%
  3. Points of Differentiation: competitive price, added feature of moisture retention and various colors and flavours
  • Developing a vaginal cream to enhance pleasure with no adverse side-effects
  • Working on a product to resolve the problem of premature ejaculation
  1. Kind of a wet wipe or tissue wipe
  2. $400 million dollar market in US and a US company with patent approached to distribute it in India
  3. Option to manufacture in India and even export to other counties
  4. Manufacturing facilities in India would be set-up in next financial year 

Future prospects and plans

  • Initiated a brand promotion for retail business
  • Already sold products in 220 cities all over India and plans to extend it to about 1,000 towns and cities in next three years via online channel
  • Rs. 58 crores worth of confirmed orders and additional Rs. 31 crores worth of repeat orders expected from our customers
  • Plan to raise about Rs. 25 crores out of which about Rs. 11 crores to be used for brand promotion program throughout India
  • Working on the appointment of CEO for the company
  • Plans to expand the facilities and production capacity by about 20% in this coming year
  • South African existing contract of Rs. 104 crores for three-year will come to an end in June, 2018 so new tender will be floated in December, 2017
  • There is no price increase clause in existing contract however it might be added in next one
  • Sales and Distribution network currently in Bombay, Thane, Pune, Bihar, U. P., and Haryana which will be extended to Rajasthan, Gujarat and Kolkata
  • Business plan is to extend a credit for maximum 30 days with PDC and increase working capital by Rs. 3 crores
  • Growth prospects as 65% of the population in India is below the age of 35 years and the company has competitive products
  • Expecting orders in June with tender from Ministry of Health
  • Additional capacity will be operation from second half and revenue would start from fourth quarter
  • Due to price limitation in India for condoms, the margin is less so focussing sales and marketing outside India
  • Advertisement through Newspaper Ads, digital marketing and sponsorship of events

Female condoms

  • The company has a design patent on female condom and is user-friendly
  • Plans to get female condoms registered with USFDA to get a revenue of $2 per piece against current revenue of $0.40
  • The main competitor is Female Health Company which is the only manufacturer approved by USFDA
  • Registration would cost $2 million and will take 2 years approximately
  • Clinical study to be undertaken to prove the safety of product
  • To be sold as B2C brand and supplying to other brands as well
  • Will require another three months before selling on retail outlets as distribution network needs to be set up
  • Rs. 52 crores of sales to top three customers: Rs 40 crores to Government of South Africa and the rest Rs. 12 crores to WHO, UNFPA and an International NGO Population Services Inc.
  • 80% of our Rs. 85 crores sales last year was from export and balance 20% from domestic
  • Rs. 15 crores worth of FC is to be delivered between April and June 2018
  • The Company’s female condoms are graded superior than the Female Health Company condoms.
  • Will get help from Mr. Colin Pollard who was the Director of FDA for Reproductive for clinical trials

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Prabhat Dairy Q4FY17 Concall Summary

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Financial Highlights

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  • FY17 Revenues grew by 20.7% YoY to Rs 14,111.3 Mn
  • FY17 Gross Profit increased by 14.3% YoY to Rs. 2,753.0 mn. Gross margin decreased by 109 bps YoY from 20.6% to 19.5%.
  • FY17 EBITDA grew by 9.7% YoY to Rs 1,280.5 Mn, EBITDA margin of 9.1%
  • FY17 PAT grew by 102.8% YoY to Rs 469.4 Mn
  • Q4FY17 Revenues grew by 23.0% YoY to Rs 3,776.8 Mn
  • Q4FY17 Gross Profit increased by 19.9% YoY to Rs 712.2 mn. Gross margin decreased by 49 bps YoY from 19.3% to 18.9%.
  • Q4FY17 EBITDA grew by 17.9% YoY to Rs 303.4 Mn, EBITDA margin of 8.0%
  • Q417 PBT grew by 25.3% YoY to Rs 118.7 Mn
  • Q4 FY17 PAT decreased by 130.5% YoY from Rs. 58.4 mn. to Rs -17.8 mn.
  • Higher deferred tax expense resulted in company reporting loss in the quarter

 Business Updates

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  • The share of value added products increased to 88% of total revenue in the quarter driven by specialty ingredients and cheese.
  • Co-gen Plant at Shrirampur commenced operations during the quarter.
  • Launched Ice Creams under ‘Volup’ brand in key towns of Maharashtra like Nasik, Ahmednagar, Aurangabad, Jalgaon and Dhule.
  • Entered into an MOU with Nutridor Ltd. Thailand for being it’s co-manufacturer for Cow Ghee, Mozzarella Cheese and Sweetened Condensed Milk.
  • B2C share increased to 30% of total revenue during FY 17
  • Net debt stand at Rs 194 cr, lesser than last year
  • Working capital increase by Rs 85 cr mainly due to higher inventory levels of cheese and butter
  •  Capex for FY 2017 was RS 50 cr and around Rs 40 Cr is expected for 2018.
  • Finance cost is down 27% for the year and is expected to remain around the same levels.
  • Capacity Utilization for Ghee is 70% to 75%, for pouch milk is around 30%
  • Gross margin in the customer business is  in the range of 28% to 30% while gross margins in the B2B business is in the range of 18% to 20%
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Milk Procurement

  • For Q417, Milk procurement prices increased by 5% QoQ from Rs. 27.21 to Rs. 28.57 per litre as the raw milk availability continued to remain impacted.
  • For FY17, Milk procurement prices increased by 32% YoY from Rs. 19.50 to Rs. 28.57 per litre.
  • Buffalo milk is in the range of Rs.40, Rs.45 a litre in the North India.
  • For Q417, milk procurement is 9 lakh litre. For FY 17 the average milk procurement is 8 lakh litre
  • Milk procurement did not meet the previous expectation of 10 lakhs lite for Q4 because of lower production.
  • Milk prices expected to around the same levels in FY 18, Might ease a little given good monsoon is expected. 

Capacity Utilization

  • Capacity Utilization for Ghee is 70% to 75%, 
  • Capacity Utilization for pouch milk is around 30%
  • Overall capacity utilization is currently at a range of 60%
  • They intend to take the Overall capacity utilization to around 85% to 90% in the next two to three years,

Pricing Power

  • In B2B the prices are passed on with a lag of 1-3 months
  • In some cases, it is passed on immediately in the month. In sometimes, it takes at least three months to pass on the prices.
  • In the branded business however there are certain products wherein they need to absorb the prices and when the market moves up, the prices also move up.
  • They have taken multiple price rises in the year. One in November, One in March and multiple times in the last 3-4 months for various products.
  • In the last quarter around 80-90% of the price rise was passed on to the market 

Distribution Channels

  • Currently they have around one-lakh retail touch points.
  • 60,000 to 65,000 retail touch points are direct by the company.
  • Around 30,000 to 35,000 retail touch points are indirect because we also have a very strong wholesale network.
  • This is mainly serviced by 1200 distributors in Maharashtra as and 25 other states.
  • For fresh dairy products (milk, dahi, paneer, shrikhand) there are 25000 stores (all of them in Maharashtra). Other products with longer shelf lif are sold in all 1 lakh stores.
  • Distributors get a margin of 7% to 8% and retailers around 15% to 20%.
  • All the states are serviced through 2 factories. One in shirdi and one in Navi Mumbai.
  • No plans to increase the presence of fresh milk products on states other than Maharashtra in the next 2-3 years
     

On GST

  • Expected to be neutral to positive.
  • There could be some higher blockage of working capital requirement.
  • Will have a mega project benefit as whatever tax they pay, we will be getting it refund on taxable product

Volup Ice-cream brand 

  • According to them, Ice cream market is growing at 25% to 30% plus CAGR.
  • There are limited players in Maharashtra.
  • There is a lot of space available not only in tier 1 towns, but in tier 2 and tier 3 towns as well.
  • There are two brands; Sinsane is a premium category, which has SKUs ranging from Rs.40 to Rs.75 and Volup is a popular category which has SKUs ranging from Rs.5 to Rs.40.
  • Present in 1200 outlets right now within in 45 days of their launch.
  • The product response have been extremely good because of the quality while the USP is mainly only fresh milk and cream

Future Plans

  • Increase the share of B2C segment to 50% by 2020 as compared to 30% currently
  • Gain higher proliferation in the new states in which they have launched their products.
  • Increase modern trade presence to 1000 by the end of FY18, compared to 140 this year.
  • Increase overall capacity utilization to 85-90% in next 2-3 years, compared to 60% currently
  • Gain Higher traction in the new Ice cream brand launched called Volup
  • Scaling up their cheese business for which they had commissioned new cheese manufacturing facility with a capacity of 30 MT/day in 2015.
     

Downloads

Persistent Systems Q4FY17 Concall Summary

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Overall Revenue Numbers

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  • Dollar revenue for Q4 FY17 stood at $109.03mn showing a 0.9% q-o-q dip and 8.6% y-o-y growth
  • Dollar revenue for FY17 stood at $429.01mn showing a 22 % y-o-y growth
  • INR revenue for FY17 stood at INR 28,784.39mn showing a 24.5% y-o-y growth
  • Linear revenue grew by 0.3% q-o-q, driven by 1.1% growthin average blended billing rate, however volumes declined by 0.8%
  • Offshore linear revenue dipped by 1.6% q-o-q, due to 1.3% volume decline and a dip of 0.3% in the billing rate
  • Onsite linear revenue grew by 3.5% q-o-q, driven by 2.1% volume growth and a 1.4% increase in billing rate 
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Margins:

  • EBITDA margin for Q4 FY17 was 16.3% compared to 15.9% in Q3 FY17 and 15.8% for FY17
  • Two major factors that have impacted the EBITDA margin are:
  • Appreciation in Rupee by 1.6% impacting EBITDA by 50bps
  • One-time expense in the form of an out-of-court settlement which impacted margin by 160bps. This is related to rCloud product of Accelerite business and is shown as an exceptional item in the financials(INR 114mn). As rCloud contributes marginally to revenue, the company has decided to move out of this product
  • G&A and S&M expenses were lower in Q4and good recovery of receivables from customers also helped the margins
  • D&A in Q4 was at 5.4% of revenue in Q4 compared to Q3, which was5.2% of revenue
  • EBIT margin for Q4was 10.9% as against 10.7% in Q3
  • Treasury income was INR 171mn in Q4 vs INR 143mn in Q3. The exchange loss in Q4 was at INR 28mn due to rupee appreciation, against a gain of INR 174mn in Q3
  • PBT margin was 12.9% (INR 937mn) in Q4compared to 15% (INR 1,118mn) in Q3
  • ETR for Q4 was lower at 22.3% due to lower tax in overseas subsidiary while for entire FY17, the ETR was 24.8% which was same as FY16
  • PAT margin was 10% (INR 728mn) in Q4, compared to 11% in Q3 and for entire FY17, it was 10.5%(INR 3,015mn) at 1.4% y-o-y growth
  • In FY18, margins are expected to improve with higher revenue growth in high margin digital and IP-led businesses and marginal improvements q-o-q in Services business 

Other Important Financial Information:

Persistent Systems Q4FY17 Revenue Mix.png
  • Operational Capital Expenditure for Q4 was INR 187mn
  • Cash and investments at the end of Q4 were at INR 9,180mn compared to INR 8,820mn at the end of Q3
  • The company may use this cash balance in future for acquisitions in digital and IoT space
  • Value of forward contracts outstanding at the end of Q4 was $90mn at an average forward rate of INR 70.67/$
  • The board has recommended a final dividend of INR 3/share which along with the interim dividend of INR 6/share adding to total dividend of INR 9/share for the year compared to INR 8/share in FY16
  • The dividend pay-out ratio was 28.7%
Persistent Systems Q4FY17 Geography mix.png

 Services Business:

  •  Q4 revenues were 1% down q-o-q at $47.87mn
  • The company is strategically trying to achieve 80% of the business from targeted customers

Non-Services Businesses:

  • Digital business revenue in Q4 stood a $20.67 mn, growing by 11.1% q-o-q and the for FY17, y-o-y growth has been >50%
  • The growth could have been better but some last-minute deals got pushed into next quarter
  • The company signed few large new fortune 500 companies in the quarter and 2 large ones of them are:
    • Boston based Partners Health Care
    • USAA, the bank for 14 million US military and paramilitary personnel – it opened up cyber security opportunities not just for banking verticals but also other verticals where the application can extended to
  • The company has built a strategy to establish itself as a leader in the healthcare and is also seeing good traction in financial services
  • IBM Alliance business in Q4 stood at $30.14mnwith a 10% dip q-o-q, however the dip was anticipated and n FY18, the company expects a double digit growth
  • There is a very robust pipeline on the IoT businessas the companyexpects to generate positive growth and set up a verystrong positioning in the IoT market for FY18
  • According to the deal signed last year, there was a commitment to employ only certain number of people, which resulted in an overall shortfall of $8-10mn. The company also looks to overcome these profitability problems by adjustments in terms of growth on other revenuesand also reduction of cost by redeploying resources from higher cost locations to some of the servicesopportunities
  • Lab services revenue stream has not been big so far, but the company has signed few entry level deals with some auto industry consumers which should give a boost
  • The company also signed a product called NPI through IBM which would be resold through IBM
  • One problem, the company sees with IoTbusiness is that, monetization potential for these devices is limited, as the real revenue opportunities come out only when the customer has made $20-30bn saving because ofIoT, which would take 2-3 years. However, being one of the first movers, the company is at an advantage
  • In IoT business, the company is primarily targeting Healthcare, BFS and Industrials verticals
  • Accelerite business in Q4 stood at $10.35mn with a 7.7% growth q-o-q
  • 2 new products Sentient and Concert have been launched in Q4 and the company is very optimistic about the revenues from these products in FY18
  • The company has also added ShareInsights and someother IPs
  • IP-led revenue in FY17 contributed to ~28% of the business and is expected to show good growth in FY18 with many partnerships

 Other Key Highlights:

  • Inaugurated new development centers in Riley,Guadalajara (Mexico), and Rehovot (Israel). These have been setup as aconsequence of IBM IoT partnership with some people working in IBM locations moved into the company’s own locations
  • Smart IndiaHackathon 2017 was organized in conjunction with All India Council of Technical Education under the aegis of theMinistry of HRD. 1,250 teams with ~10,000 students participated in this 36-hour hackathon

 

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