Ladies and gentlemen, good day, and welcome to Tata Elxsi Q2 FY 2022 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity, for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator. By pressing star then zero on your touch-tone phone. Please note, that this conference is being recorded. I now hand the conference over to Mr. Lokesh Pareek from Christensen Advisory. Back over to you.
Thank you, Stanford. Good afternoon to all the participants on this call. Before we proceed to the call, let me remind you. That the discussion will contain forward-looking statements. That may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our businesses. That could cause further result performance, and achievements. To differ significantly, from what is expressed or implied by such forward-looking statements. To take us through the results, and answer your questions today. We have the Senior Management of Tata Elxsi represented by Mr. Manoj Raghavan, MD & CEO. Mr. Nitin Pai, Chief Marketing, and Chief Strategy Officer, Mr. Gaurav Bajaj, Chief Financial Officer, and Mr. G. Vaidyanathan, Chief Investor Relations Officer. We will start the call, with a brief overview of the past quarter by Mr. Raghavan, followed by a Q&A session.
We would appreciate your cooperation in restricting yourself to two questions. To allow other participants an opportunity to interact too. If you do have other questions, do join the queue. We would be happy to respond to that if time permits. I now hand over the call to Mr. Manoj Raghavan. Over to you, sir.
Thanks, Lokesh. Good afternoon, everybody. Thank you for joining us today. Hope you, and your families are safe. I'm happy to report, that we have delivered another quarter of steady growth. Across industry verticals we continue to execute strongly on both top line, and bottom line. Our revenues from operations for the quarter gone by was to be INR 595.3 crores. Registering a growth of 6.6% quarter-on-quarter, and 38.4% year-on-year. The growth was entirely volume-led. Reflecting in a constant currency revenue growth of 7.4% quarter-on-quarter, and 31.2% year-on-year. We had forex losses to the extent of INR 4.7 crores. While we had a normal 15% gain in the last quarter. We will continue to monitor our hedging policy, and tweak as required. The real focus is on driving operational performance, while managing down risks in currency. Our profit before tax grew 11.1% quarter-on-quarter, and 55.5% year-on-year to INR 121 crores.
Net profits for the quarter stood at INR 125.3 crores. Reporting a growth of 10.5% quarter-on-quarter, and 58.9% year-on-year. The company's growth was powered by the Embedded Product Design, EPD. Our largest division at 10.6% quarter-on-quarter, and 34.4% year-on-year in constant currency terms. Within EPD, the growth was broad-based across verticals. The Transportation vertical business posted a smart double-digit quarter-on-quarter growth of 12.9%, and 10.9% year-on-year. Media & Communication, and Healthcare verticals delivered another steady quarter. Media & Communication grew by 7.8% quarter-on-quarter, and 32.9% year-on-year growth. And Healthcare grew by 6.6% quarter-on-quarter, and 72.3% year-on-year. We have seen significant growth in automotive markets with large, and strategic deals. With both OEM, and suppliers in EV, and autonomous technologies. Underscoring our technology, and engineering leadership. Tata Elxsi won a multimillion US dollar Electric Vehicle software development program. For a new- age EV OEM, in the APAC geography.
We also won a software platform development deal for Level Three Autonomy, and beyond from a North American system supplier. Rest of the world, which is really Japan, Korea, and China for us. Has been muted for some quarters, especially because it is automotive heavy. And travel restrictions also, damped the start of new projects in these regions. We are seeing some revival here. We also won an EV system software development, deal from a leading Japanese Tier One supplier. Which will ramp up from this quarter. Our Media & Communication business continues to grow steadily. Led by organic growth, and deeper mining in our top customers. And platform-led deals, which are enabling entry into operators, and broadcasters. That were otherwise not accessible.
We were selected as a platform provider, and system integrator. For a multi-region Android TV launch, for a leading U.S.-based operator. This will be a multi-year engagement. Our award-winning iCX Platform for customer experience, was chosen by a leading global telecom operator. To be adapted, and deployed across multiple countries. We will see new countries signing on over the next few quarters. Our industrial design business declined 14.2% quarter-on-quarter basis. The sequential decline, was due to a shift in program timelines. For a large ongoing design-led innovation project. With a U.S. customer, who also featured in our top five customer list.
We have completed one phase of this large project. But subsequent phases are deferred, and we expect this to resume. In the next one to two quarters, but the values will be spread over a few quarters. In the meanwhile, IDV is creating traction through design-led deals. Which have a multiplier effect for the three verticals, and has won significant projects for itself. One example is a deal we announced this quarter. Where we are selected as a strategic design agency to redesign, an entire portfolio of appliance for a leading Asian Appliance Company. IDV grew smartly at 64.5% on a year-on-year basis, and continued to baseline. At a much higher number than the same quarter in the previous year. This is a better sign of long-term trend of sustained revenues. While some work is still project-based, and therefore subject to volatility quarter-on-quarter. Until new projects begin to load.
Overall, we are also focused on deeper mining of our customer beyond the top 10. We believe, there are great logos in our customer base that can deliver growth. We are also carefully, adding customers in each vertical that can drive future growth for us. We added over 700 new employees, to the Elxsi family in the quarter. While attrition increased to 13.9% for the quarter, we are still lower than industry averages. And continue to actively work on retention, especially for key employees. While continuing to plan, and add new employees to drive future growth. This has been a very satisfying quarter with superior top line, and bottom line performance. That was supported by industry leading operational excellence, and talent retention. We are entering third quarter, with a strong order book. And a healthy deal pipeline across key markets, and industries.
With that, I hand over to the Q&A session. Thank you for your time.
Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question, you may please press star then one on the touch on telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handset for asking a question. Aynone who wishes to ask question, please press star then one.
The first question is from the line of Vimal Gohil from Union Asset Management. Please go ahead.
Yeah, thank you for the opportunity, sir. Congratulations on a good quarter. My first question is, if you could just talk about the last quarter, you had a one-time large bonus payout. This time around, I guess there would be salary hikes that would have got executed. If you just highlight, what was the impact of the salary hikes on margins in this particular quarter? My second question was related to the transportation vertical. We've seen a very good sequential effect in transportation. If you could just take us through, what is the output there? In one of your largest clients over there, which is JLR. How is it doing? Would you say that it is probably, at its closest all-time highs as well along with third client? We expect medical devices also, we were expecting to take it to 20%.
Are we on track for that? Those are my three questions.
Yeah, thank you. There are multiple questions there. Yes, we've had a full salary hike in this quarter, starting from July. These salary hikes, one of the range is about INR 14 crores-INR 15 crores. Right? That's the sort of salary hike budgets, that were incurred in the quarter. You talked about automotive. Automotive business has been subdued for many quarters. In the last quarter, and in this quarter, we have shown some decent growth. This quarter definitely, that will be good. A lot of good traction in the marketplace in both OEMs, and tier ones. Our JLR business definitely has also grown. This is very satisfying. Again, we are nowhere close to the peak we were. I think the peak we were was sometime in 2017- 2018 timeframe.
We are much below that peak, there is a long way to go. We strongly believe, that as JLR pivots into full EV sort of OEM, and manufacturer. There are a lot of opportunities, that will open up for us. Hopefully, pretty soon we should be able to cross the peaks. That we achieved in 2017, 2018 timeframe. The medical business continues to grow. As you have seen from a year-on-year basis, we have grown significantly. We continue to focus our investments, and focus our sales efforts on that business. We hopefully, will grow that business quarter-on-quarter as well as year-on-year basis.
I'm looking seeing as the engineering budgets for OEMs. Don't really get impacted, because of any temporary slowdown in their volumes. Does that hold true? Are the engineering budgets or, let's say engineering outsourcing budgets. Typically for OEMs, and other large OEMs. They have sort of de-coupled from that volume growth. This trend has been sort of accentuated in recent times. Would that be a fair assumption to make?
Yeah, I think so. Yes, the industry is struggling with the semiconductor shortage, and so on. That's more of a temporary this quarter, next quarter sort of situation. Long-term outsourcing, long-term projects and so on. We don't see any effects of the temporary situation on any of that. We are pretty confident that, unless this continues for the next six to eight quarters. And industries face this difficulty, we don't see effects of this on our business.
Thank you. The next question is from the line of Bharat Sheth from Quest Investment. Please go ahead.
Hi, good afternoon Raghavan and Nitin, a nd congratulations on good set of numbers.
Thank you.
Raghavan, I guess I'm trying to get some sense from medium-term perspective. If we really look at, till Q3 of FY 2021, and full FY 2020. We hired almost, say in these seven quarters, 756 employees. Whereas in last three quarters, we have hired almost 1,800. Which is almost more than double. How do we really seeing this medium term? Second thing on this attrition. Attrition, have we seen on medium, and higher end or at lower end? In this net addition, whatever we have done. So how do we see the overall employee cost as a change?
Yeah. If you look at it, overall employee cost. I think we have been able to manage pretty well. If you look at it, 50%, 55%, 60% of our revenues is employee cost. We have been able to manage it pretty well. Yes, you're right. We have seen accelerated hiring in the last few quarters. That will continue in the subsequent quarters also, because our utilization has gone up significantly. In the earlier quarters, the growth came. We had resources, and we were planning for it. But the rate at which we have been growing. We definitely need to add more resources, both lateral as well as freshers. Whatever we have seen the last couple of quarters, that we've been adding. I think this quarter we've added over 1,200 engineers, and last quarter. Also we added about 1,000 engineers gross.
We hope to continue this in the next few quarters as well. What we are doing is we are planning for this growth, that we are seeing right now. For us, if you look at it, I would say there is huge demand in the marketplace. And we are gearing ourselves, we are getting ready to meet the demand. That is why, you see this accelerated pace of hiring.
Last year, despite we grew 13%, since change in onshore, offshore mix. We grew more than 40% if we really like to like basis, and even offshoring is increasing. How do we see the margin trending from here onwards?
I think if you look at it from a head count perspective. We are about all the time 27.5%, 27.7% in a head count perspective. I think that's a good sort of margin. It gives us cushion. It gives us cushion even if we need to go out, and hire experienced people, and so on. It gives us a good cushion to be able to manage it. Without really, bringing down our margins significantly. The fact that we have been able, to move more work offshore also gives us a cushion. Yes, we are sitting on a good cushion as far as margin perspective is concerned. That gives us a good confidence, that if whatever investments. Are needed to grow business, we can confidently go ahead, and do that. Without really affecting the margin overall performance for the year.
This kind of growth, and with the addition of the employees. That we have grown almost 40%. This kind of growth, do you think is sustainable for at least a few years? The kind of a pipeline. Second thing is on then in our commentary, you are saying that. We, have won a very good business on a product and platform basis, digital platform. How we are seeing this platform traction increasing?
Yeah. Yes, we need to add our headcounts just keeping in mind. The sort of demand, that we are seeing in the market. As far as platform is concerned, yes, we have been building a number of platforms. Including FalconEye, iCX, QoEtient, a number of things. That we are building, especially in the digital, and communication vertical. That has really helped us to win customers, and operators. That are otherwise difficult to really. You need to bring something of value to them, that they will engage with you. Our strategy of building these platforms has been pretty useful, and we have shown some good customer wins. Including this quarter, where they have really licensed our platform. And built solutions around it, to win such communication. Customers who otherwise would be very difficult to engage. We definitely, would continue building these platforms, building these interesting topics.
Of course, the licensing revenue from those, may not be very significant. But what it really helps us is it helps us to get engaged? And then build our services revenue around that platform. It also gives a very strong value proposition, to differentiate ourselves from competition. And also build an adoption with the customer. I think there are many reasons, why we will continue to invest on these platforms.
Thank you, and all the best. I have more question. I'll rejoin the queue.
Sure.
Thank you. The next question is from the line of Naveen Bothra, an Investor. Please go ahead.
Congratulations, sir, for continued operating excellence in the industry. Within every time organization, highest ever quarterly profit, sir. And we've seen all the revenue, sir. Bharat Sheth has already asked about the magnet-based system of employees, and the platform of tools. I won't like to repeat that, sir. If you can throw more light on our inorganic acquisition, and further capital allocation. Towards the organic R&D, and innovation-led investments or inorganic acquisitions. If you can throw some more light on that. Relating to that, if you can provide us the data. Whether our IPR-led revenues are even now below 5%, or if you can throw up plus more than 5%.
Yeah, no, the IPR, launching a second question. The IPR is definitely, below 5% from a standalone basis, right? As I said, what really is good for us is IPR-led revenues. If you have services around the IPR that you have. That is showing a good traction, and that is what we are depending on? From a inorganic side, we have always repeated. That we're not shying away from inorganic activity. Repetition is the same. There is nothing to report as of now. I think when there is something for investors, we will let you know.
Okay. Second question regarding the introduction of new verticals. Possibly EduTech, and all the training, and all that. Because in the social media, we are seeing some posts, and all these things. About the training, and all these things. If you can share, that just light help in the going forward. We will be introducing new verticals to standalone verticals. Would you more focus like EduTech, and all this?
We are continuing to invest in EduTech business. It is still a very small business, but that is a definite focus. Similarly, on industrial product or manufacturing, we are continuing to invest. These are two new areas, that we're not calling it out. As separate industry verticals, and so on. We continue to invest in that, and we have early customers in both those spaces. However, at an appropriate time, we will lay it out to the investors. It is still at an incubation stage right now.
Okay. Just a small question, regarding the hiring target for the next two quarters. If you will be touching the five-figure employee, 10,000 or just like that.
I guess we should be able to. Our hiring would be in the range of again similar 1,200-1,500 a quarter for next two quarters.
Okay. By end of the year, we will be around 10,000 net additions.
Yeah. Looking at the way we continue to hire, that is a reasonable estimate.
Okay. Thank you, sir. Thank you very much. All the very best.
Thank you.
Thank you. The next question is from the line of Saravanan Balakrishnan, an Individual Investor. Please go ahead.
Yeah. Thank you so much for giving me the opportunity. I just have a couple of questions. First question, primarily on the client concentration risk, right? Earlier, top five clients used to contribute somewhere around 35%-40%. How that is changing? Second question, primarily on the ER&D space. We read announcements, the global OEM spend has increased. What's the trend you are looking at? What I see is, across all ER&D companies? They show similar growth rates, maybe let's say. Revenues is growing higher than our industry is growing. Is it more of data center? Like what's driving this trend? Will this trend continue for three to five years? If for any reason the trend reverses, how are we capped there?
Since we are adding 1,500 employees every quarter. So how is that project portfolio mix getting balanced, in terms of any macro impact?
Our top five customers concentration is 36.6%, almost 37%. What we have been definitely looking at, is to definitely mine the top 10 accounts? As well as get beyond the top 10 customers, and also aggressively grow the top 10-50 customer base also. There is an active effort going to really look at the top 20%, and see how we can grow that customer base. Regarding the ER&D question, it's well-known that there is going to be a boom in the ER&D. I think all data, and trends indicate the same. The entire digital overarching basic space between ER&D space. Including AI, big data, digital twins, this trend towards digital manufacturing. All of that would definitely, mean a lot more growth for companies like us. We are seeing traction if you look at the industry, or industry segments that we are in.
Automotive, because of EV, and the entire car industry going digital in a way, right? That is a positive trend for us. And the company can leverage, and benefit from that trend. Of course, the Media & Communication with OTT. With distribution, with digital ads, all of that's coming in. The opportunity in front of us is pretty big. The same for medical devices, and healthcare as well. So, all the three industry verticals, that we are in are showing growth. And the investments that we are doing right now in headcount. And so, on is to really cater to the growth. I do not foresee a slump in any of these industry segments, in the next two to three years at least.
I think when, if at all, there is something happening. I am sure we will be able to see it much before a lot of others. And we will take corrective actions, and that's why we've also built in adjacencies for ourselves. I would say, we are pretty much covered from an industry risk perspective. Unless something drastic happens in the world. I think next two to three years, we don't see suddenly. The RPI of around industry segments going down, and decreasing, and so on.
Got it. One last question we have regarding the M&A front. Since almost all the ER&D companies, are also trading at extraordinarily. High valuations, especially from a price-to-sales. Are you facing any challenges, in getting the acquisition targets finally from a valuation standpoint?
Yeah. We are not looking, to acquire any company which fits the bill. What we're looking at is, we are very focused on adjacencies. That we are in, and we're trying to identify companies. That can come at a reasonable margin, right? Yes, I agree with you, the market is pretty hot. And companies are overvalued at this point in time. Unless something comes up that really meets the criteria. We will not rush in, and buy a company just for the sake of buying.
Got it. I think that sounds good. Thank you so much.
Thank you.
Thank you. A reminder to the participants, to ask a question. Please press star then one. Next question is from the line of Amit Savani, an Individual Investor. Please go ahead.
Hello.
Yes.
Hi. Thank you for taking my call. I just want to confirm, that is JLR our largest client this quarter?
No, JLR is not the largest client for us this quarter.
Okay. The other point is that you mentioned that employee cost. Went up to INR 14 crores, because of the increment. The QoQ increase in the employee cost is INR 8 crores. Our number of employees has also gone up. It is just not adding up.
No, there is a number. I think there is one clarification here. Try to remember, that we did have a one-time bonus last quarter, right? That came in last quarter, but does not have much of an effect in the quarter that just gone by. I'm talking about Q1 versus Q2. Q2 really, sees two big ticket items. One is salary hikes that are deployed with existing employees. And one the additions, that we did of new employees.
Understood. Thank you for the advice.
Sure.
Thank you. The next question is from the line of Kshitiz Shroff from Tata Investment. Please go ahead.
Yeah. Hi, thank you for taking my question. Kshitiz from the M&A vertical. Mr. Raghavan mentioned on the geography, as well as the capabilities front, right? In terms of the M&A, what are the adjacencies that Tata Elxsi is looking to get into? That's one question. Related to that is if, given the market scenario, and trends. Are there any plans to build certain of these capabilities in-house, in the event that a good deal doesn't go through?
Thanks, Kshitiz. This is Nitin here, and maybe I'll take that question. I think the natural path, and the preferred route for us. For entering new areas, building capacity as well as capability is organic. To that extent, we are very clear. Anything that can be done by us, and can be done in a given time period. With a reasonable chance of success, and customer acquisition is preferred. If you look at M&A, when we do our NPV calculations. That the path of organic is not as efficient as M&A. Therefore, the value that we are acquiring at the rates of integration. Then balanced out against, what we save up three to four hours. Is really, what creates the difference. To that extent, we are not waiting for M&A to deliver for us.
I think Manoj, did refer to certain integrations of certain new practices. Some new technology capabilities, as well as some new verticals. All of these are being done organically. What we're doing is examining inorganic options, to accelerate our journey. This is true for adjacencies too. When we talk of adjacencies, we have called out rail, and off-rail, off-highway vehicles. We called out OTT, and new media in the context of Media & Communications. We called out Pharma, and Digital Health. All these are declared adjacencies, and these are some things that we're working already organically on. We are building, and accelerating our M&A there. When M&A comes in, it's only to create a shortcut. Or a shorter path to scale, only if it makes sense for us.
Perfect. Thank you so much.
Thank you.
Thank you. The next question is from the line of Manish Mulkani, an Individual Investor. Please go ahead.
Yeah. Hi, good afternoon. There have already been rumors of Tata Elxsi merging with TCS. Every now, and then this news keeps coming in. What are the possibilities of that happening in the near future if there is? Considering for the investors, the prices right now are skyrocketing for the investors. Any chances of a stock split or bonus in the near future?
Yeah. This question keeps getting asked every now, and then. This is not only now. 25 years ago, when I joined the company, Tata. It's amusing to see that it is still continuing. Yeah, if it happens, it happens. But right now, I don't think there is any indication whatsoever on this topic. On stock split, yes, I think, usually these are decided in our people board meeting. Because people wait for them.
Mr. Mulkani, do you have any further questions?
Thank you so much. I'm okay. Thank you.
Thank you. The next question is, from the line of Hiren Ved from Alchemy Capital. Please go ahead.
Hi, Raghavan and Nitin. I have no questions, actually. I just came on the call to congratulate the two of you. On a very strong set of number, and fantastic execution. Keep the good work going.
Thank you, Hiren.
Thank you.
All right. Thank you.
Thank you. The next question is, from the line of Apurva Prasad from Elara Capital. Please go ahead.
Thanks for taking my question. Manoj, I have a question on the client bucket. This looks like top two- five, had a close to double-digit sequential decline. Is that comparable to the previous quarter, the top five, or has that changed? Because it looks like a double-digit sequential decline. That is one question. The other is, if I can get the utilization numbers for the quarter. Finally, on the impact, is there going to be another one-time add-on impact in the third quarter?
Sure. The top five, there is no change. It is just that in the, what do you say? Order of sequence, there is a change, but otherwise the top five is still the same. There is no change there. And I think, we've already called it out. It is a specific customer in our industrial design business. That we were executing a large project, a design-led project. Which concluded, and the follow-on project. Which was supposed to happen immediately, got delayed. That's the only reason. We don't see any impact of this going forward also. Of course, even this particular client engagement continues. But the ramp-up will happen now over a few quarters. To that extent, there will be some muted growth there. It will not impact our overall top five customers, and so on. Utilization, as such, 80%. That's what we are.
Any other question?
Yeah, no, I think that is it. Just a note there that although, that excludes fresh campus hires. If you include campus hires, that number rises up. When you consider only lateral, and experienced resources it's about 80%.
Got it. Is there a follow-on impact of the wage bonus. That comes in Q3, or is that all done in the first quarter?
It's all done in this quarter, Q2. Q1 and Q2 put together, it's all done.
No. I mean, the one-time which happened in the first quarter. Has that also spilled over to Q3, or is that also part of the Q2?
No, it is also done. It has moved on to Q3.
Yeah. Finally, Q1 with a little bit spread to Q2, and that's it. That kind of effect.
Got it. Thank you so much.
Thank you. The next question is, from the line of Dhruv Shah from Ambika Fincap. Please go ahead.
Hi, thank you for the opportunity, and congratulations on a really good set of numbers. I really want to know, what's the outlook on our onsite and offshore mix? Because every quarter you surprise us positively with the mix. Do you see it going above this or with work from home slowly ending? We should go back to 65%-70% range.
Yeah. We are at 25/25 right now, right? Onsite literally, speaking is lesser effort, right? For the same hard work you put in, I can get double the revenue. You should probably imagine this growth. We are primarily, pushing this growth through offshore revenue. And which means we have to work doubly hard to get this revenue growth. Unlike other companies, and so on. This growth comes from purely project-led offshore engagements. If you look at from a headcount perspective, so that's also another reason. Why we are aggressively adding headcount, right? Because we are growing offshore project execution, and offshore revenue. Having said that, Q3, some economies are slowly starting to open up. So, we could see a little bit of onsite opportunity, kicking back. I don't see too much of an effect of that in Q3.
We would closely watch Q4, and the next Q1. To see how the situation changes, right? At this point of time, I think we would be trending between 25%, 26%, 27% offshore. That's the visibility that we have.
[Break]
Excuse me, this is the operator. I'm sorry to interrupt, sir, we can't hear you that well.
Oh, can you hear me now?
Yes.
Thank you.
Yeah.
I don't know. I wanted to pick your head on one point you made. That Japan, Korea, and China are coming back. Maybe three, four years, what would be their percentage of transportation, these three countries put together?
Three, four years down the line?
No, before, like three to four years back. What would be their share of the transportation vertical?
Nitin, I can take that. This is Nitin here. That's probably about 20% or so. You have to remember something. That at that time it was primarily Japan only. While China, and Korea were just starting to build up their geographies, right? Over a period of time, we have added China and Korea. We have added a lot more customers there, and an addition of customers in these two regions. On the other hand, Japan has always been muted for some years now.
Yeah. Okay. Understood. Thank you, and all the best, sir.
Thank you.
Thank you. The next question is, from the line of Ravin Naredi from the Naredi Investment. Please go ahead.
Congratulations to Mr. Manoj Raghavan, and all his team. When everyone is facing attrition, you have done wonderful job. Sir, some investor has asked to split the share, and bonus. Please never do that for investor benefit, because you do this so many small investors. In the company, and whenever the market goes down. They depend their share price impacted from the bottom. Our request is this. No bonus, no split please. Thank you.
Okay. We will consider that.
Thank you. The next question is on the line of Rishabh Surana from NEUM. Please go ahead.
Hi, can you repeat my question? First of all, congratulations on your really good set of numbers. My question is basically on the work from home culture. Are you seeing any structural shift, in working for employees working from home? Are you planning to bring them on board, and working from offices on a case-to-case manner? This is my only question.
Yes. Right now, still maybe 6%, 7% of the employees work from office. But majority of our employees are working from home. Over the period of next few months, we are gradually bringing back. All the senior people, the leadership teams, and so on back to office. Of course, certain customer engagement, that is more efficient. If they all work together, because of lab facilities, and so on. Some of those we will bring people back to office. In general, from January onwards we see a move towards. This hybrid working culture, wherein a few days in a week on rotation basis. People will come to office, and otherwise they work from home. I think, way forward is clearly a hybrid sort of an option. And we are exploring various ways, of making this more effective for these people.
Okay, got it. Thank you. Thank you so much, and all the best.
Thank you.
Thank you. The next question is, from the line of Tushar Bohra from MK Ventures. Please go ahead.
Thanks for the opportunity, and congratulations to the management. For a spectacular set of numbers. [Aparajita Sarawgi], Sir, you had few quarters back mentioned in one of the calls. To a question of mine, that you have a stated intention of say, 10% quarter growth run rate. 10% revenue from IP, and also looking at shifting more projects. To a sort of long-term engagement base. If I could just understand, where we are in that journey today? And qualitatively, how things can shape up in the next few quarters?
Very clearly on the long-term projects, and engagement. That is work in progress, and the sort of growth. That we are seeing over the last eight quarters, is a prime indication of the sort of client mining. That is happening, and the sort of long-term deals that we are winning. All the policies within our region, from an incentive policy, sales force incentive policy, et cetera. Is really focused on rewarding long-term deals, and so on. I think we are progressing pretty well, from a long-term perspective.
From an IP perspective, I think we are still below 5%. What points towards for you, is that we are pretty okay with that. Because what we see instead of a standalone IP, and revenues attached to that alone. The sort of add-on revenues, that we get by licensing our IP and building. The services around those IPs, that is what we are leveraging. And that is what is helping the company grow. I would say that is okay.
10% quarter-on-quarter.
What was that question, 10% quarter-on-quarter revenue growth? Sir, you had in one of the earlier calls, sort of hinted the management intention. To see a double-digit quarter-on-quarter sort of a growth run rate. That was the stated intention. This quarter we are there in many times.
I'm not sure if in terms of we double digits quarter-on-quarter growth. Yes, double digit year-on-year, is what I've talked about. I'm not sure if I said anything quarter-on-quarter. I didn't specifically, mention quarter-on-quarter. No, I think the bigger point is, that the kind of growth we are seeing right now. Is this something you think, that can be sustained for a few quarters? Do you think that this is a more strategic shift, in terms of your own business trajectory?
I think we've grown this. If you look at our eight quarter performance year-to-date. You'll see that we are around that 8% sort of a mark. We have been consistently growing at within. I would say, 6.5%-8% over the last eight quarters. Yes, one or two quarters, one quarter maybe. We had a little bit of a dip here, and there, but by and large. PBT perspective, we have grown in this range. That's the sort of focus, that we have as a management team. And as an organization, a nd we're putting in everything. Including investment, hiring, focus in customers, data mining, cross and up-sell the account. All of that focus has been to really push, continue to grow at this rate. That's what the intent is, and that's the focus.
We really don't know what the future looks like, and what challenges we face? Whatever comes, come whatever our challenges. I'm sure that we will be able to get over that, and continue at that momentum.
Thank you. The next question is, from the line of Bharat Sheth from Quest Investment. Please go ahead.
Hi, thanks for the opportunity. On this designing-led growth, which we were harking a big, of course. It's an initial stage, so when do we really think that this designing business? Will give us a sustainable growth every quarter-on-quarter.
Yeah.
How much is it in our relation with the client, and winning the business on that? Like what we are doing on the IP side?
Absolutely. Industrial design is critical, because it's entry strategy. For us to be able to mine, able to get into, and mine customers. And also maintain our margins due to, the sort of design-led innovations that we deliver. If you notice it, Mr. Bharat Sheth, compared to last year. You know, the industrial design business, is almost sort of at 70%-80% higher than last year's run rate.
Okay.
That is going to give you a good indication of the sort of changes. That we have made, to enable this sort of a growth. Yes, design-led deals, and industrial design customers. Not always do we have multi-year deals, and that is still a work in progress, I would say. We have a great team, a great potential. It is just that we need to be a lot more consistent. I say it'll take another three to four quarters to get there. I'm saying that even at this stage, I'm pretty happy. But we are in a good shape as compared to the last year.
This is really, related more with media business or healthcare?
It cuts across media, healthcare, automotive, industrial, manufacturing, education. It cuts across multiple industry verticals.
Okay. Second thing, since we have done lot of campus hire. How much time really it take us to deploy the same people?
Usually it takes about 9-12 months. Then we take them through a rigorous training program, and so on. This time what we have done is? We have moved everything into online learning, and so on. In fact, with many colleges, we’ve also had hire clearance. Even before an employee has joined, we really make them ready. Right now we are hoping to crunch the timeline to within 3-6 months. We really need to see how that works out.
Okay. Last question, with your permission. Earlier in ER&D business, clients were insisting more of on-site. But since the COVID has provided us the opportunity, and we have been able to prove successfully. That offshore also can do, which can help saving in the cost to the client also. Even if things open up so how do we once, look at this onshore-offshore mix going on medium term perspective?
If things open up, I would say medium term. We should be anywhere between 65%-70% offshore, and remaining on-site. I doubt if we will go back to our earlier 50% on-site, 50% offshore, those ratios. We may not go back to those ratios.
Okay. Typically it will looks little lower, initial quarter growth terms will be lower, correct?
Yeah.
Okay. Thank you very much.
Thank you. The next question is, from the line of Mayur Madhani, an Investor. Please go ahead.
Good afternoon, sir. Thank you, sir, taking my question. In our earlier calls, we mentioned that there is order book visibility. For our kind of company for next six to nine months. Now that you are talking that you are confident of growth, for the next two to three years. What has made you change your mind? Or what has changed in the industry, that makes us confident for growth for the next two to three years? The second question is that, how is the rail segment picking up. Within the transport vertical, and what kind of opportunity do you see for that segment? And how much it can contribute to, the transport segment maybe within the next three to four years?
Order book visibility, as I said, it is better than before. Order book visibility is one thing, versus overall growth in the industry. When I say growth in the industry, growth expectation. I'm not saying that next two to three years, 100% we'll grow. What we're talking of from order book visibility is for six to nine months. That visibility is there. All indications, whatever you read, the trends that you see in the marketplace. Whether it is from the EV side, whether it's from the OTT side, from the connected Healthcare side. You talk about customers, you talk about the overall industry. The ER&D trend, whatever you read indicates that this cycle will continue for next two to three years. That is the confidence that I talked about. It's not that, we have a order book coverage for next two to three years.
That's not true. Rail segment, yes, rail segment continues to grow for us. We won some good deals even in this quarter. From a five-year perspective, I would say we would expect rail and off-road. That segment to contribute about 20% to our aspirational business.
Right, sir. Thank you.
Thank you. The next question is, from the line of Naveen Bothra, an investor. Please go ahead.
Thank you for giving me the opportunity, Anshul. My question is regarding the taking from the last con call. Our aspirational $1 billion revenue target, if you can enlighten us more about this. Is it the right time or it would take a little bit more time, to articulate that $1 billion revenue aspiration by 2026?
No, we've never talked about anything like that, Mr. Bothra. We talked about having some internal goals, and so on. But we have never talked about it to external investors. We're not in a position to talk about something, about which we are not ready to talk about.
Okay. In the last con call, we had the discussion that you are in the process. Right now, we are in the process.
No, what I told very clearly is there are internal goals, and we're working on those internal goals. But that is not for the external world.
Okay. Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, we take the last question. From the line of Rohan Advant from Multi-Act. Please go ahead.
Yeah. Thanks for the opportunity. My question is, for example, onshore-offshore mix, which is 75%-25% now. Say in FY 2023 or 2024, we go back to 65%-35%. What does this mean for revenue growth, and margins? Many customers reduce volume, because otherwise they'll have to pay a lot more for resources. Very high revenue growth, but lower margins. But more absolute profit. If you just could throw some light on what happens? When we move on the other direction to, say, 65%-35%? What happens to the huge volume growth, that we've had in the last 18 months or so? Thanks.
Yeah. This is Nitin here, and maybe I'll take that one. I would put it very simply. These are all scenarios. What is desirable is different, from what scenarios may play out? I think what is desirable for us is very clear? We would like to demonstrate offshore delivery, because that is where both scale, and capability has truly at play. When you deploy people onsite, the capability of your organization is limited to who is onsite. Mohammed, there was looking between 100 to 200 heads or hers in this case. We are very clear that from a strategic perspective. Offshore is far more preferable to onsite. It's not really for margin alone. It is simply, because the value delivery is higher. Having said that, how does the market trend is slightly different.
Because there may be certain customers who, by interest. Have a slightly greater preference, for a lot more onsite than we might think. There may be certain industries, which naturally demand a lot more onsite. Similarly, if you look at mature regions, especially Japan, Korea, China, and so on. Because of language barriers, there is a natural inclination for some onsite. Especially multilingual as well. We have to look at it as a combination of, what dynamics come from? The kind of projects we execute, regions we're executing in, and what is desirable? We are very clear. We would like to promote, and accelerate offshore delivery. Because we believe, that is not only margin accretive. But more importantly, strategically differentiates us from everybody else in the market. Because of our ability to deliver.
I'll just make the point that 65%-35% is not a desirable solution. And nor is it that we expect it, to go all the way there in a hurry. We expect it to progress very slowly, and that is where a large part of our focus will be? How do you make sure you continue to deliver offshore?
Got it. Thanks for taking my question, and all this.
Thank you.
Thank you. Ladies and gentlemen, that was our last question. I now hand the conference over to the management for closing comments.
On behalf of Manoj, and the management team at Elxsi. I would like to thank all our investors, for taking the time to join us today for the call. We had a good quarter. We hope to keep performing on this line, and we look forward to connecting with you again at the end of the quarter. Happy festive season to all of you. Goodbye.
Thank you. Goodbye.
Thank you very much. Ladies and gentlemen, on behalf of Tata Elxsi. That concludes this conference. We thank you all for joining us, and you may now disconnect your lines.