Quick Heal Technologies Q2FY18 Concall Summary

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 Financial highlights

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  • In Q2 the retail sales team focused on efficient selling and managed the credit lines and as a result the cash position of the company has improved by 17.5%.
  •  The EBITDA has improved by about 10.5% and that is a result of multiple measures - the in-sourcing of the software basically instead of third party software using in-house software developed by the R&D.
  •  It can be seen that the EBITDA margin has improved by 6% this point over 600 BPS and EBIT and PBT also have gone up in the same sequence.
  • In the consolidated balance sheet , Cash-in-hand is of the Rs.250 Crores is in the balance sheet which is on account of cash submitted by the company
  • Rs.156 crore is on account of IPO money which has a very specific end use.
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  • Rs.24 Crores is the salary which is to be paid on the first day of the next month.
  • Volume growth and the license growth were around 3%.
  • In September 30, 02017 versus 2016 the working capital has come down and basically on account of debt, the debtors and receivable days went down from 71 to 51.
  • The Company has moved retail platform from primarily credit model to now cash carry model. The margins for the distributors have increased in the process.
  • The Company has in-sources some of the outsource activities using own skills and own software hence drop down cost substantially, which is visible in the direct cost and growth margins have gone up and operating cost have been kept under control.
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Effect of GST

  • After GST implementation, Company started collecting 18% from the customers, but then that has really impacted the pickup by the customers, so 10% to 11% have to be passed to discount to the partners, so that the sale does not get affected.
  • The lower end product is getting more sales, maybe this is because of GST impact.
  • Because of GST, there has been decline in sales, and company was not able to achieve any goal because of that in first quarter.
  • GST hit is more or less being compensated by the ITC, which is expected that will not affect the margin.

New products/offers

  • Company has launched the encryption offering in this quarter, so that gives the opportunity to cross sell this product and offering to all existing and the new customers.
  • Company recently launched Seqrite encryption which is available, which provides tool encryptions this encryption and this will give more opportunity to up sale to existing customers as well as open up those experienced customer.
  • Company is also focusing on HNS products, which was supposed to get released in last quarter, but due to some technical challenges that product is getting delayed by almost six months.
  • In February, Company will be launching a product to scale up to 5000 endpoints and also cloud version, which will help to get into the larger installations.
  • Products in the IoT and the cloud space are basically the product is in alpha stage right now, company is hiring some field trials. There are some hardware glitches that are being sorted out, but is planned to launch in Q4.
  • It is a home networking solution that is primarily for at homes where we have router, this network will definitely help to protect the devices that are connected to the router.
  • Company launched a feature called Safe Pane, which basically indicates if a mobile compromised and that is whole intent of showing to the consumer that while they are doing financial transaction they should be cautious and careful about what is going on the mobile, and company has seen good adoption in this.

Growth

  • Gross margin has improved because company has in-sourced a lot of work , company has cut out vendors or have re-negotiated and brought the cost down and much of it is using company’s own tech force and creating solutions, which would replace higher cost external vendors.
  • Company has grown the enterprise and the government sector sale by almost 27% compared to retail.
  • In retail, there is a decline, but when it comes to enterprise there is growth.
  • There has been 20% increase in the number of license sold into the enterprise and the government. Total number of licences sold are 267000.
  • Quick Heal monetizes via adds and the through paid subscription, which is Total Security
  • Mobile business is not growing too much and the management is really thinking on the entire mobile strategy,
  • Company has on boarded a large distributor in Q2 and will give expanded reach into the market and that push will continue to get more Sales and partners in the fold in Q3 and Q4.

Retail vs Enterprise

  • The goal for the government and enterprise business it is about 20% of the overall sales.
  • By two to three years’ time, company is expecting 50% to 50% of retail versus government and enterprise business.
  • In retail, company is focusing on home users as well as home offices and small offices.
  • Retail is going to have slower growth for sure because of the reduction in the laptop and desktops adoption.
  • Management wants to focus on the enterprise because the market, total addressable market is much bigger.
  • Just at a structure level there is a 3% to 4% growth on the retail business and round about 25% on enterprise and government, which has just turned about 10% of the total business.

Mobile business

  • The mobile business is 1%-2% of the total retail sales.
  • Company have stopped over 200 million Malware infections across Quick Heal users and the highest infection month being the month of July.
  • By having the good focus on acquisition, retention, and monetization, the company hopes to get more traction in mobile security.
  • Quick Heal Security Labs detected nine new Ransomware infections in this quarter with around thousands of more variant and on the mobile front the detection of Androidware in Q2 rose 40% in comparison with that of Q1, so potentially unwanted applications grew by more than 200%.
  • Monetization on the mobile happens to through advertisement in products where subscription is offered for free
  • Threat vector on mobile is not as strong, so the tool for customers from mobile security perspective is still not strong.

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Bajaj Corp Q2FY18 Concall Summary

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Financial Highlights

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  • The Company has closed the quarter with a turnover of Rs.204 Crores
  • The growth in turnover vis-à-vis the second quarter of last financial year is 3.84% with volume growth being 5.1%
  • The EBITDA for the quarter is Rs.59.6 Crores, which is a decline of 12.74% over EBITDA of Q2 of last financial year
  • The refund announced by the Government of India for units under the excise free zones in Uttarakhand, Himachal, and Assam have not been accounted while calculating above
  • The EBITDA without the refund being calculated is a very healthy 29.3%, but would have been over 32% if the refund has been accounted for
  • The profit before tax and profit after tax are Rs.64.5 Crores and Rs.50.7 Crores respectively.
  • In terms of cost of raw materials and packaging materials, the strain continues
  • The average purchase price of LLP as well as refined mustard oil  in the second quarter is  Rs.51.80 which is much higher than the Rs.44.55 per kg that was the purchase price in the second quarter of last financial year
  • There is increase in overheads as salary costs are increased by 32% YOY, as the management is building bench strength in all the departments
  • The sale of Nomarks cream, which is being actively promoted, has grown by 48% in this quarter
  • The price increase in raw materials has been largely compensated by input tax credit
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GST Impact

  • The wholesalers continue to be watchful and have not reacted positively post the implementation of GST
  • 22317 wholesalers listed in the ERP system out of which 8801 have not yet started buying from our distributors after the implementation of GST
  • Though the Government of India have extended the dates for filing GST returns for July and August most of the distributors are finding it very difficult to file the GST return
  • With the strain on wholesale channel the importance of direct distribution would be very high, so focus is on increasing numbers of distributors as well as outlook covers by field force

Distribution Channel

  • The share of wholesale was more than 50% of the total turnover, it has dropped to below 40% already and is expected to drop even further
  • As of September the total number of distributors has gone up from 9695 as against 7707 as on March 17, 2017
  • During Q@FY18, two sales verticals namely canteen stores department and international business have shown a negative trend as a result the sales to CSD have declined by 21% in the second quarter.
  • The outlook for CSD, which is now under 5% of the total business, does not look very promising for the remaining part of this financial year

International Business

  • International business, which has been a growth driver for the company, had also declined during the second quarter by 15.4%
  • The regions of MENA have shown the highest decline of 35% led by loss of sales in UAE and KSA

Innovation

  • The Innovations Center started in April by housing the R&D Center in Mumbai has started working
  • With help of R & D the company plan to launch at least differentiated and well researched product every quarter from here on

Industry Update

  • The volumes in the hair oil industry have grown by 6.7% as against 50.6% during the last quarter
  • The volumes of the light hair oil industry have slowed down a little and slowed down to 2.6% however  the lead brand  of the company Bajaj Almond Drops continues to outpace the light hair oil industry with an off take growth of 4.8%
  • The rural volume growths of the total hair oil had dropped from 12% in the first quarter to 4.8% in the second quarter of this financial year.

Future Prospects

  • Going forward the primary objective is to be able to reach as many people as possible
  • Focus is also on increasing the reach of direct distribution otherwise company would lose a bit of what it is communicating as a brand as you cannot control the reach of the advertisement
  • The growth in CSD is not expected in future quarters because of policies (to scale down)the  Ministry of Defense and Canteen Store Department is following
  • The volume growth in Nomarks is expected to grow in future quarters as the company is moving into more settees with the concentrated chemist plant which will increase its base

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Arihant Superstructures Q1FY18 Concall Summary

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 Financial Highlights

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  • Revenues was Rs.576 million in Q1FY18 while EBITDA was Rs.109 million
  • PAT in Q1FY18 was Rs.49 million and Minority interest was Rs.39 million
  • The company’s target was to sell 1800 flats annually (1.7 to 1.8 million square feet)- 450 per quarter. The company could sell 361 flats
  • Rs.100 Crores sales for 361 flats (333000 square feet)
  • Distribution of 361 flats- 225+from Arihant Anchal, Jodhpur; and rest from Navi Mumbai
  • From Q1FY17 to Q1 FY 2018 basis, there is no improvement 
  • From Q4FY17 to Q1FY18 there is a decrease
  • The project in FY 2018 is Arihant Aloki Project, which is sub Rs.3000 per square feet of product line
  • Projects  in Q1FY18 were from group of lesser margins, like ArihantAloki as well as Arihant Adita where the margins has been relatively lesser than the 25%
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Two different baskets of projects

  • There are two baskets of projects with different behaviour of profit of margins and revenue
  •  Some projects are with margins of 15% and below and some of them are 25% and more
  • Where the project is on area sharing basis to the landowner, it is on asset light model, the margins are comparatively higher
  • In an area sharing or in JDA or in JV or in where landowners, the topline for the sales from our side remains the same, but the expenditure goes down totally to the project
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New members in Company’s Board

  • Two respected people in the industry joined the company's board
  • The additional independent director- Mrs. VijayalakshmiIyer, who is a former Chairperson,Bank of India; and the independent director- Mr. Raj Narain Bhardwaj, who is the former LIC chairman

Effects of RERA and GST

  • There had been a slowdown in real estate sales
  • From the RERA, the after effects at Jodhpur was not that much as the customers were less affected with RERA coming in or not
  • The company completed the second phase launch of Arihant Anchal, which was priced at Rs.22 lakhs
  • The no of flats in second phase was around 400 flats-the company could sell 206 flats in the first 15 days starting from May 1, 2017
  • In Navi Mumbai, people had been vigilant about RERA- the customers had been in a wait-&-watch mode
  • At present, around 4% rebate is being given to old and new clients
  • It appears that it is a matter of only 2%, which they try to get it bargained from the price point of view and be satisfied with the purchase
  • There is a huge burden of GST, as it is being passed on by the developer under anti-profiteering clause

Cash flows

  • Cashflows due to GST had been good in the month of June- People paid up a large amount of due amounts to get benefited from 6% of the total cost from service tax and VAT tax vis-à-vis to the 12%
  • At present, the correction cycle has moved out to around 60-90 days, even 100 days in some projects

Future effects

  • Uncertainty from the customer side how real estate pricing would be post GST,that is after the first quarter and post RERA registration
  • GST as well as RERA effects will fade in the next two quarters
  • There will be a completely different scenario in real estate- in terms of sales as well as implementation of the projects
  • From the point of view of collection cycle, the company hopes there would not be a large lagover

Registration of Projects under RERA

  • The company has registered all the projects, which fall into the category of regulation of RERA
  • Total 14 projects across Mumbai as well as Jodhpur fall in the category
  • The projects, which falls into completion category in Jodhpur as well as in Navi Mumbai are not registered as that was not required after getting the occupancy and the completion certificate once
  • The company has made all the applications on July26, 2017- the last project, which was registered under RERA
  • Registration certificate is being received on daily basis
  • Around 70% to 75% certificates have been received in Mumbai and other are to be followed up in the next 10 to 15 days

Change in process under RERA

  • The RERA regulator used to take seven days initially
  • At present, because of online process, one can give his file where the approval stage has moved across
  • Maximum of the applications of Maharashtra- around 10000 has been filed up in the last one week of July, so it would take little more time than one week
  • RERA is very fast to process up the applications- doing up 10000 in one month

Changes in company procedures post GST

  • For the implementation of the GST, the new chart of masters has been prepared and accordingly the book keeping is being done and accounts are being maintained
  • To pass on to the benefit of the GST input credit, the company has worked out on real time basis on project basis
  • Sale price and construction cost are the two factors, which maps out the total benefit to the company in terms of input credit
  • The company has already written letters to all customers of different projects with the outcome of the maps
  • 3.5% to 5% of input credit to be given as GST discount
  • The method of passing of the discount is not on rate basis
  • The bill format’s example- Say 1 lakh is the bill amount and 12,000 is the GST, so the bill amount would be 1,12,000; GST payable by customer is 8000 and GST payable by developer is 4000
  • Under anti-profiteering act, the company has taken up the right measures, where the department as well as the customer can identify that this is what has been passed to us

CLSS Interest Subsidy

  • The CLSS interest subsidy has to be availed by the flat owner himself directly by doing an application to the housing loan bank
  • People have filed up their cases with SBI Jodhpur where they fall into this category of availing the interest subsidy
  • The company does not have information on the numbers
  • The company has got some of the housing loans disbursed and some are still in process
  • People have applied for the benefits and it takes some time for the process
  • In the next quarter, one people get this benefit, the housing loan would be disbursed to the company

Input Credit

  • The company has kept 0.5% input credit benefit not to be passed- that would be additional cost towards the management setup and consultants and all the administrative work

Company strategy

  • The business development and land department have already got a good pile of projects, which the company are filtering out
  • The company worked on increasing its strength in the last quarter, in workforce for sales, admin and management
  • As of now, around 70 to 75 people are there both in Navi Mumbai as well as Jodhpur
  • People are getting ready for the increasing demand for the affordable housing as well as to cater to the projects, which have kick started marketing/sales as well as engineering
  • The management’s basic principles- affordable housing would be taken on outright basis by purchase of land
  • The company would prefer any project, which is above Rs.5000 per square feet
  • The projects will be taken on an asset-light model, where the company has to shell out less cash for the land payments

Company outlook

  • Company is hopeful of making up the shortfall of 20% in coming quarters
  • Blended EBITDA margins as per projections and the business plans,  is 33%, around 1-2% plus minus,
  • The projection is on the total project and total project cycle
  • This year the company expects to achieve EBITDA margins of say 27%- 30%, which would come to know more clarity only after Q3
  • The company is looking forward for project sales from new launches
  • Arihant Akanksha as well as ongoing Arihant Aalishan, which are within little higher ticket
  • size with higher margins and Arihant Anshula with higher margins

Industry outlook

  • Those companies which would adopt to the regulator and the processes set by it, they would always be in a good position
  • Those companies, which had been doing things not in a proper fashion and did not have any attitude towards servicing their clients, they will face some issues
  • All small companies will go off and the big would remain.
  • Undoubtedly the bigger developers would consolidate and strengthen the position because they are adhering to the act and the regulations

Annual Cycle

  • Real estate season, in reality, starts from October and last till March
  • April, May, June are always vacation period
  • July, August something seasonal,
  • This time due to RERA and GST, it would take one more quarter to get the momentum up
  • The company’s call centre at Navi Mumbai has generated something around 6000 to 7000 leads in the last 1-2 months

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Greenply Industries Q1FY18 Concall Summary

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 Financial Highlights 

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  • Top line was lower by 6% compared to the y-o-y quarter due to extensive de-stocking by dealers
  • Currency losses of Rs. 8.58 crores on long-term borrowings for the new MDF plant in Andhra Pradesh impacted the MDF margins as well as the overall margins
  • Gross margins expanded owing to better capacity utilizations and improvement in domestic MDF realization by 4%
  • Gross margins improved by 230 basis points year-on-year to 47.9%
  • Ad expenditure of 3.7% compared to 3.3% in the corresponding quarter
  • Operating margins down by about 100 basis points at 14.5%
  • Capacity utilizations of 101% for plywood and 117% for the MDF segment compared to 111% and 106%, respectively, in the corresponding year quarter
  • Profit after tax down by 10% primarily due to the currency losses
  • Working capital days improved by 2 days to 45 days compared to y-o-y quarter
  • Debt equity ratio at 0.55 as on June 30th owing to incremental debt for CAPEX
  • Expected 5 to 7% growth in top line for FY18 and real growth from FY19
  • In Q1FY18 price increase only for the amount of GST
  • Company is underperforming as compared to Century, however, industry growth would benefit the company
  • Restricting the credit terms due to CAPEX
  • About €32 million and USD 4 million borrowings for the new plant in AP
  • Increase in raw material prices in March quarter, but prices have stabilized in the first quarter
  • Unorganized players have taken price increases in the range of 5% to 7%
  • Rs. 6 crores out of Rs. 8 crores in Other Income is refund of excise duty relating to our Nagaland unit
  • The overall tax rate will be stable for the current year and from next year tax outflows will be in MAT
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Plywood

  • Degrowth of 13.6% due to destocking as dealers hold inventories of 30 to 45 days
  • Volume growth of about 6% in the outsourced segment
  • Average realizations lower by about 4% partly due to end of excise exemption at Pantnagar unit
  • Unorganized sector was impacted more than organized
  • 2% increase in plywood prices from August 1st
  • 5% expected growth in plywood

MDF

  • MDF top line grew by 9%
  • Blended margin of about 23% to 24% for the MDF business in future
  • No destocking as dealers normally carry inventory of about 10 to 12 days
  • Steep 73% volume increase in MDF exports to 6,009 cu. Mt. at Rs. 15,095 / cu. Mt. which 12% of overall volume
  • Last year, exports were 3472 cubic meters, roughly 7% of overall volumes
  • Export prices at a discount of 40% to 45% compared to the domestic MDF
  • 5% increase in prices in MDF and discount to dealers so domestic realization higher by 4.19%
  • 8 to 10% expected growth in MDF
  • Market could grow at rates between 15% to 20% during the next two years
  • Domestic realizations for plain MDF are Rs. 26,000 /cu. Mt. and imports are 14-15% cheaper

Future Prospects and Strategy

  • Gabon plant for veneer production commenced operations of three peeling units, and three units would commission in Nov-Dec, 2018
  • 13.5 Mn sq. meter plywood manufacturing unit in UP to commence production in second half of FY19
  • Decorative veneer unit in Gujarat is expected to start operations in the second quarter of FY19
  • Domestic margin is about 27%, and there will be 13% to 14% margin on exports
  • Timber inventories available till October or November, so if Myanmar shuts down, then timber will be procured from Gabon and Indonesia
  • Will invest US $4 or $5 million apart from investments in land which will be spread over three year.For UP CAPEX of Rs. 115 crores: Rs. 55 crore this year and Rs. 60 crore the next year.
  • Rs. 40 crores CAPEX for Gujarat to be spread 50-50 in next two years
  • MDF could threaten low-end plywood in next 4-5 years
  • Expected 6-7% premium on MDF compared to imported MDF because of
    • superior quality,
    • after-sales service and
    • currency issues
  • Debt of Rs. 650 to 700 crore possibly closer to about Rs. 670 crore in FY19

Andhra Pradesh Plant

  • Annual depreciation should be in the range of about Rs. 32 crore
  • CAPEX of Rs. 450 crores and remaining Rs. 200 to 225 crore in the current year and about Rs. 75 to 100 crore in the next financial year
  • 12-13% of freight cost saving with the new plant in AP
  • New MDF plant will be starting commercial production in September-October 2018
  • The company will be exporting about 30% to 40% of production from the new plant till demand improves in the domestic markets
  • Import for MDF would decrease once AP plant starts operation
  • Blended borrowing cost for the new plant should be about 7.5%
  • Exports would be completely shifted to this plant

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HCL Tech Q1FY18 Concall Summary

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HCL’s overall performance in Q1 FY18

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  • Fifth consecutive quarter of industry-leading performance
  • HCL Tech is emerging as one of the most reliable performers in the IT sector Q-o-Q
  • HCL’s success is due to their consistent focus driven by our Mode-1-2-3 strategy
  • Phil Fersht – the CEO of a leading industry analyst firm Horses for Sources described HCL’s reputation as “consisted of a rolled the sleeves up attitude' and a no-nonsense approach to business, determined, humbled, focused, quite but aggressive”

Prestigious company level recognitions

  • Ranked the “Number One IT Services Company” and “Sixth Overall” in LinkedIn “India's Most Sought After Companies List”
  • Included in the “Most Honoured Companies List” for Asia by Institutional Investors
  • Emerged as “No. 2 in Nikkei Asia's 300 Companies List”, which is a compilation of high-performing listed companies in Asia
  • HCL was no. 1 among the India listed companies in the Nikkei Asia’s 300 list

Financial Highlights

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  • In dollar terms HCL did 3.7% quarter-on-quarter and 11.4% on year-on-year at an EBIT of 20.1%, and from a constant currency point of view it is 2.6% and about 12% for the year-on-year
  • EBIT has enhanced, in-spite of currency headwinds due to accelerated execution of integration of acquired entities and assimilation of the IP investments made in the last few quarters
  • HCL bought home 13 transformational deals which represented a well-balanced mix across service lines, industry verticals and geographies
  • HCL delivered industry-leading revenue per employee of $63.5K, which is a 6% increase YoY
  • HCL had a pretty healthy mix of contribution from organic and inorganic
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Net income  

  • HCL had the benefit of tax reversal of $45.5 million in Q1FY18 which is not available this quarter
  • Net income has come down from $349.9 million to $336.7 million
  • From a Y-o-Y basis, the net income has grown 10.3% against revenue growth in dollar terms of 11.4%
  • Acquisition of the company Urban Fulfilment Services (UFA), whose revenue for calendar year 2016 was $48million, is getting delayed

Profit margins

  • There is an expansion of 10 bps from 20% to 20.1% in EBIT margin
  • There was a negative impact of 40 bps primarily on account of rupee depreciation, without which this would have been 50 bps increase in margins this quarter
  • Factors contributing to increase in EBIT margin are
    • Superior Execution
    • SG&A benefit due to acquisition
    • Increase of utilization
  • Net income to operating cash flows has been at 104% while EBITDA to free cash flow has been healthy at 76%
  • HCL bought back Rs. 3,500 crores in July and declared a dividend of Rs.2 per share

Days sales outstanding (DSO)

  •  DSO continues to be 82 days, both billed and unbilled put together, same level as it was last quarter.

Hedge book

  • Hedge book is at $13.51 million, primarily consisting of cash flow hedges and to some extent balance sheet hedges
  • Hedge gain of $16.5 million recorded this quarter which is reflected below the EBIT line
  • Last year HCL had several mega deals and a large contribution from one of the acquisitions

Margin guidance

  • HCL’s margin guidance is at 65.5 and they are probably at upper end of the range

Share count

  •  Share count has gone up by 1%
  • Buy back was about 2.5%

Revenue from new clients

  • Percentage of revenue of new client compared to existing client is 2.4% and this is the lowest number HCL has had at the beginning of year
  • New client does not show reset every year beginning and is continued on LTM basis
  • In terms of revenue translation new accounts are taking a little bit more time while the quarter two materializes into revenues

IP Amortization

  • HCL does amortization of IP on basis of expected revenue
  • A significant portion of that gets reduced from the revenues directly and other portion is getting shown in the line of amortization
  • In Q1FY18 , close to 12 million got amortized against the revenue, total is 17 million which got amortized and the balance got written-off in the line of amortization

Employee cost

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  • HCL has added 1.6% Employee in IMS QoQ so that costhas gone up only 0.9%
  • Overall HCL had a net addition of 1800 people and a lot of it was offshore
  • HCL had productivity gain (revenue per employee) of 6% on LTM basis
  • Multiple factors like the revenue profile and managed services contracts, fixed price contracts and some of the high-end offerings are contributing to this productivity gain

US protectionism

  • In US market there is slowdown in decision making
  • Traditional headwinds around smaller deal sizes due to automation, new consumption models are part of the slower growth
  • HCL has to factor in some softness in Infrastructure business

Performance in European market

  • Europe weakness has been contributed by two factors
    • One was Financial Services customer whose BPO scope of work was insourced due to regulatory reasons
    • The se  cond is the large Infrastructure deal, which entered in to the second year, there is a structural reduction in revenues
  • HCL has done their bit to make sure our costs are also reducing in line with the committed productivity benefits that HCL is passing on
  • Apart from these two reasons, Europe did very well in terms of generating growth

Industry Sector perspective

  • Four verticals - Financial Services, Manufacturing, Life Sciences and Retail-CPG delivered sequential growth greater than 3%

Financial Services Business

Banking and Insurance

  • HCL relatively had strong growth sequentially in US Banking & Retail
  • In last couple of quarters,HCL had significant new account wins in North America and Europe, especially in the Fortune500 set of financial firms, both Banking and Insurance sector
  • Reason for this win is repositioning of HCL’s offerings which are more engineering-oriented, more technology at core
  • Financial sector is hugely impacted by millennial and buying behaviour is intended towards need for mobile and always connected customers

CPG

  • SAP customers now recognize the fact that there is fair amount of bolt-on work for which HCL’s Mode-2 services can be used
  • HCL is doing additional work on top of SAP largely on Supply Chain side, partially also on the way merchandizing was being done and trade promotion in few areas

Retail and digital marketing

  • Driver for change of projects is the integration and onlineprocess in almost individually at each Retail shops
  • For the past three years a lot of the Digital transformation focus was in the frontend transformation on customer facing platforms
  • Now the focus has been around modernization of the back end, using APIsand micro services technologies

Client-partner program

  • Client-partner program “One-HCL” is driving increased revenues from HCL’s Top 150 accounts
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Mode 1 

  •  A large percentage of HCL’s large deal wins comes fromMode-1 Services - focused on gaining market share in HCL’s existing offerings
  • DryICE platform has become an essential and highly differentiating part of HCL’s solution in both Infrastructure and Application Services
  • DryICE focuses on automation, Artificial Intelligence, etc., to help customers reduce cost
  • HCL renewed and enhanced all of the deals that came up for renewal in the past quarter

Infrastructure Management Services

Achievements in Infrastructure Services

  •  HCL’s 360 Degree SDI solution called “Velocity” achieved VMware Validated Design Product Zero Certification globally, and this is a first in HCL’s peer set
  • “Number One IoT” in Everest Peak Matrix for IT Infra Automation in 2017
  • Recognised “Star Performer of the Year” for cloud native and Infrastructure Services by Everest
  • Gartner sighted HCL as a leader in “Gartner Magic Quadrant” for data centre outsourcing and Infrastructure, Utility Services in North America

Margins in IMS

  • IMS margins have improved significantly quarter-on-quarter, about 130 basis points
  • IMS is a very large component of managed services or fixed price kind of revenue construct

Delays in decision making by clients around IMS

  • Some significant component of infrastructure deals comefrom a solution perspective with cloud or little bit of security
  • There is no change in solution or new solution that is causing delay
  • Delay is because clients are taking a very deep look at what they are trying to do from a large-scale outsourcing perspective

Future scope in Infrastructure services

  • IMS is a sub-10% growth business for HCL Tech which is clearly a growth driver
  • IMS pipeline is more or less same and deal sizes are smaller, so the number of deals could be slightly higher
  • In the near-term there is little bit of sluggishness, but the long-term trend is still significantly underpenetrated market segment
  • Infrastructure Services from a global delivery model and India Heritage Provider addressable opportunity perspective, the penetration is in single-digit
  • HCL is very strongly focused in US, UK, Nordics,Australia and it will venture in several other markets where HCL’s presence is small
  • HCL is expecting that the current couple of quarters or may be this year could be an aberration due to US protectionism

Engineering services

  • HCL’s focus was on for the acquired entities – Butler and Geometric, portfolio rationalization initiativesto drive better margins and synergies
  • Butler and Geometric acquisitions reinforced HCL’s Engineering Services position in Aero and Defence Manufacturing and PLM respectively
  • Engineering services had traditional organic growth, some of it could have been subdued in the last quarter because of the ramp downs in the previous large deals
  • HCL’s strategy has been to add more Mode-1 services toEngineering Services in terms of acquisition, so the add different service lines like PLM adds strength into verticals like automotive, industrial and heavy engineering

Technology disruption in engineering services

  • Technology disruption is more positive for HCL, because they end up in participating in making those technologies so that they can be applied in rest of the IT
  • Some services in online an ISP space have marked to new services, but in traditional space which are more hardware engineering and mechanical engineering oriented, that disruption is not as high as in the rest of the IT services

Application Services

  •  At Sapphire 2017, HCL launched SAP S/4HANA solutions tailored specifically for the aerospace and defence industry
  • HCL's “Base90 Aerospace Company Solution” solution has been validated by SAP's A&D business unit
  • HCL focusses more on the margin as a whole of the business
  • Also IPDs are only positively impacting the margins

Mode 2

  • Mode 2 services consists of Digital and Analytics, IoT Works, Cloud Native Services and Cyber Security
  • Digital we won several deals, some notable engagements are in the “Investor Release”
  • HCL was featured in IDC's report on Design Thinking in European Digital transformation
  • HCL’s collaborative and ecosystem based approach to Digitalization was recognized as a strong differentiator

IoT

  •  Positioned in the “Winner Circle” and “Number 1 IOP” in HFS Blueprint Guide on industry 4.0 Services
  • HCL signing a deal to operationalize and run a dedicated remote operations centre for a global 2000 European consumer electronics major

Cloud Native Services

  • HCL achieved Amazon Web Services Storage Competency status
  • This status recognizes that HCL provides design implementation and managed services to help successfully clients achieve their storage goals on the AWS platform

 Cloud SaaS

  • HCL PowerObjects was placed in the “Winner Circle” of HFS' FIRST BLUEPRINT GUIDE on MS dynamics
  • HCL PowerObjects also won “2017 Microsoft Worldwide Partner of the Year Award” for Dynamics365, Consulting and System Integration Services

 Pharma solutions

  •  HCL launched Next Generation Research platform, which will reimagine the new drug discovery process in the pharma industry

 Cyber Security

  • HCL launched GDPR services to enable organizations to comply with EU GDPR regulations

 Mode 3

  • Under Mode-3 Products & Platform business HCL focusseson both in-house IPs and strategic IP partnerships
  • This quarter HCL filed 35 patents in next generation Engineering, Products & Platform in various domains like IoT, Machine Learning, Analytics, Automobile Engineering, Wireless Devices and machine to machine communications
  • Announced new solutions like “DryICE Cognitive Orchestrated Process Autonomics” (COPA Platform)
  • This solution extends HCL’s capacity to provide an end-to-end AI powered automation work flow for the business processes
  • Future investments on IP strategy depend upon opportunities in Mode 2 and Mode 3 services
  • Margins due to IP strategy are better than the company level margins seen so far
  • HCL intends, over a period of next couple of years to build a good portfolio across multiple technology providers

 IP partnership with IBM

  • HCL invested nearly $780 million (10% of HCL revenue) in IBM partnership and expect $200 million value from the deal
  • Partnership help Built HCL's expertise through solutions, innovation labs and Centers of Excellence across multiple product segments such as DevOps, Automation, Legacy Modernization and Data Transformation solutions
  • Partnership enabled expansion in marketing automation space
  • HCL has invested $140 million in this extended partnership
  • HCL has a revenue share relationship with IBM from the existing install base and the new product sales
  • HCL also has the permission to renovate these products based on the IP license
  • HCL had an annual impact of $35-30 million due to this deal
  • The very first investment that HCL did as part of IBM partnership has finished four quarters and HCL is above plan on that program

Go-To-Market strategy for Mode 3

  • HCL intends to launch several products on top of some of the IPs acquired
  • HCL has an independent go-to-market team within Mode-3 organizations to reach out to clients and build a HCL generated pipeline and sales for the Mode-3 services
  • HCL is also looking forward to in-house development of IPs which is really an offshoot of their DryICE proposition

 In-sourcing

  • 12 months back three to four quarters were muted where the company had its share of in-sourcing
  • They are happening now more on the margin rather than impacting the revenue. So, growth is kind of compensating for that at this point of time

 Employees

 Training HCLites

  • Focus remains on training HCLites on Next Gen Technologies, “Skill Lease Academy”
  • HCL has built a Proprietary Automated Assessment Platform for next gen full stack technology skills to ensure rapid and upscale, employee upskilling and employee acquisition processes

Women advancement initiatives

  • Hired more than 10 senior women leaders, including our New Risk and Compliance Lead and the top leader for Digital workplace SI business

 Community

  • Under the “Power of One program”, 2400 HCL employees volunteered in community activities, contributing 14000 hours, reaching out to 32,000 beneficiaries
  • HCL is working very closely with “Women Connect Groups” in Global Development or Delivery Centers” in North Carolina
  • In Frisco, Texas HCL was recognized as a “Trustee Partner” in the “Frisco Chamber of Commerce”
  • The centre is very powerful showcase for positioning and convincing customers on HCL’s onshore presence and solution that need onshore collaboration

 Future outlook

  • HCL is putting lot of leadership and attention in bandwidth to be very successful in Mode-2 and Mode-3 services
  • HCL is also trying to continue to strengthen their sweet spot in Mode-1 services
  • The company believes that it is best positioned in the industry to really emerge as the next generation services firm

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Mahindra CIE Q2FY18 Concall Summary

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Financial Highlights

Quarter Performance

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  • Excellent performance in terms of revenue and profitability
  •  Increase in EBITDA by 87% when compared to the same period last year
  • Increase in EBITDA margins by 1.8%
  • The growth of the divisions in India excluding Bill Forge was 21% vs 2016 3QCY17
  • Comparison with Q2CY17 has also shown an improvement in profitability
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Nine month performance

  • Nine months of MCIE growth minus Bill Forge is 15%
  • EBITDA margin without Bill Forge increased by 1% YoY; some part of this can be attributed to increase in steel prices
MCIE 9MFY18 Financials.png

Growth drivers

  • Positive market evolution across segments in India
  • Growth of key customers
  • MCIE grown higher than its key customers namely M&M, Maruti and Tata Motors both in 3Q as well as in the nine months

 Performance of Bill Forge

  • Performance in line with the expectations set during time of partnership
  • Growth of close to 20%
  • EBITDA margin of approximately 20%

European Results

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  • MCIE Europe has grown by 16% in 3Q 2017 that is approximately 22.6% growth after adjusting for currency movement
  • The 9 month growth was around 6% in rupee terms and 11% in Euro terms
  • Growth is driven by CIE Forgings and Metalcastello
  • Drop in EBITDA percentage between Q2 2017 and Q3 2017 due to stock consumption in August
  • EBITDA percentage over revenues on adding up both sales and stock variation is 12.7% in both periods

Consolidated performance

  • Net debt remains similar to the end of last calender year
  • CAPEX of Rs. 2,371 million on consolidated basis, spread across many verticals like the forging business in Spain and Lithuania, Metalcastello, Bill Forge (Both in India and Mexico), Gears and Stamping works in India etc.

 Impact of Electrical Vehicles

  •  Roughly 10% of MCIE business in India and 25% of MCIE Europe business could be affected due to Electrical Vehicles.
  • Consolidated, around 18% of the total business could be affected by EVs
  • No changes in the next two years; growth to be observed in the next 5 years; Impact on reducing revenues not expected for atleast next 10 years
  • Top automotive customers like BMW, Daimler, Volkswagen, Audi etc are likely to move towards hybrid vehicles instead of a fully-fledged Battery car

 European plant highlights

  •  Metalcastello plant – Awarded a project worth €15 million turnover per yer by Caterpillar
  • Lithuania – Supply of crankshafts to Volkswagen worth €5-6 million
  • Galfor company in Galicia supply crankshaft to several customers
  • Organic revenue growth in Germany in MFE was close to 8%
  • CapEx for Volkswagen line in Lithuania around €4 million; Peak Revenue : €8 million - €9 million

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Elgi Equipments Q1FY18 Concall Summary

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 Key Highlights

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  • The Sales level the company has grown at about 4.5%, the compressor business has grown at 6+% across the world
  • At the consolidated level, grown at about 4.5%. while EBITDA is Rs 323 Cr.
  • The company has lost about 60-odd million in contribution margin at material cost level primarily because of mix variation compared to the first quarter of last year.
  • The company did a minor voluntary retirement scheme wherein about 22 people were retied primarily at the blue-collar level.
  • April was a bit of disastrous month for the company but the company had recovered fairly well in May and more so in June
  • In the Second week of June, the company was hit with the effects of GST due to delayed payments resulting from confusion of postponement of payments.

International Market Scenario

  • US had done well in terms of Medical business, in spite of the confusion of the Obamacare prevailing with the Trump administration.
  • Brazil continues to be a part of a challenge but not due to the operations but owing to the Brazilian Economy.
  • Africa has been marginally better than the last year, but Middle East continues to be a challenge
  • Far East has performed well in terms of the company revenue contribution.
  • Australia has done well and China has continued to sustain at the levels that has been earlier planned.
  • Company is continuing to support and service our customers and parallel are working on a plan to come up with a new strategy for China but that is not going to be immediate.
  • General economic revival in all the key markets in US. US has been doing well for the last almost two to three years.
  • Europe after prolonged thing from 2008 are seem to be coming back
  • Australia after a long pause is beginning to invest, so part of our growth in these markets has been contributed by the revival of the economies and therefore investment in capital goods.

Impact on Compressor Segment

  • Dealer-based business has taken the biggest impact but there have been saviors like Railways.
  • Compressors are 28% but there is some clause, which says partsin railways, is 5%

ATS ELGi

  • In the month of April, we were significantly strung by our ERP issue and the recovery that compressor business made in May and June.
  • ATS, the automotive equipment business could not do primarily because the concern of many of the customers in terms of GST
  • Post GST what will be the savings that they could potentially have so that kind of dampened things a little bit and many of the passenger vehicle companies that were looking at expansion of the dealership did not go through with it. But June was good, July continues to be good for the company and the lost revenue is forecasted to be recovered.

Impact of GST

  • On an average it is pretty neutral that could be a marginal point, 3.4% increase in ournet cost to the customer.
  • Company has started extending the credit to our dealers and customers due to which the cost has come down.
  • Now distributors are carrying inventory of the old parts where the MRP is higher where as now the MRP is lower. The net difference is about around 1%.
  • In terms of input credit basically the only thing is that the company is receiving a net set off and had a 2% CST, which was our input cost earlier.
  • Spare parts is at 18%.

Dealer Ecosystem and Online Connectivity

  • The online system is still not in fully in place, but the system between the vendors and company is pretty stable.
  • But many of the distributors especially the smaller ones have to go through this new thing of 18 credit and keeping accounts of, so it is also for the company to take credit of miscellaneous expenses.

Dividend from ELGi ATS in Q1

  • First Q1 about Rs.5 Crores is the dividend received in Standalone.
  • Growth in sales of ELGi branded compressors outside India
  • ELGi branded compressor growth in our key markets has been high double digit
  • The dealers cover all industrial segments, hence company does not keep track at this stage of the entry into various markets.

Broad BCG plan

  • Designed and implemented the program, which is basically the go to market program, structured processes, evaluation, and review systems
  • Running this program for a little less than a year and we have covered probably 60%, 70% of the market
  • Small companies, small to medium size or even large companies that are looking at incremental investment

Domestic Indian Economy Plans

  • Share in India is relatively large compared to markets outside. Unless there is a trigger in the economy in India company cannot predict the growth, whereas is in markets where the market share is almost nothing and company is beginning to have a strong presence

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