Q4 20/21

Apr 23, 2021

Ladies and gentlemen, good day, and welcome to the Q4 FY 'twenty one Investors Conference Call for Tata Alexey. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Lokesh Parekh from Christensen Investor Relations. Thank you, and over to you, sir. Thank you, Luzhn. Good afternoon, all the participants on this call. Before we proceed to the call, Let me remind you that the discussion may 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 future results, performance or achievements to differ significantly from what it 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 Alexey represented by Mr. Banu Trakhon, MD and CEO Mr. Murgidharan Nephi, Chief Financial Officer Mr. Nathan Pai, Chief Marketing and Chief Strategy Officer and Mr. G Beddinathan, Chief Investor Relations Officer. We will start the call with a brief overview of the past quarter by Mr. Hoffman, followed by a Q and A session. We would appreciate your cooperation in restricting your questions If you do have further questions, do join the queue and we would be happy to respond to them if time permits. I now hand over the call to Mr. Manoj Agapan. Over to you, sir. Thank you, Rupesh. Good afternoon, everyone. Thank you for joining the call today and both you and your families are safe. At the outset, I would like to thank the entire team, The employees of Tata Alexey, it's been a great performance in an extraordinary year And with the COVID, the huge challenges to maintaining our business continuity and customer centricity, while at the same time ensuring the safety and well-being of our employees across the world. The entire team has demonstrated great commitment and passion To ensure that we stay focused on our customers' needs and focus on delivery excellence, customer delays And then you look at opportunities for growth, right? Coming to the quarter, it was definitely a very satisfying quarter with continued growth across Our offerings, industries and geography. And to wrap up a remarkable year for us, right, Of course, our revenue from operations for the quarter was INR598.4 crores, Translating to a growth of 8.7% quarter on quarter and about 18% year on year. And As you may have noticed, the growth was entirely almost entirely volume led with a constant currency growth of 9.1%. PBT for the quarter was INR161.7 crores, again registering a growth of 10.6% quarter on quarter and Net profit stood at INR 115.2 crores, reporting a growth of 9.5% quarter on quarter and 40.3% year on year. So indeed, it was a very, very satisfying quarter with great top line and bottom line performance. The Tata growth was driven by strong performance in both our key divisions, Embedded Product Design. The division is the largest division. It grew by 5% quarter on quarter and 15.5% year on year. And Industrial Design and Visualization, the IDB division also had a Very smart growth. They grew by 40.1% quarter on quarter and 39.2% year on year. Our design business continues to grow strongly with improved deal flows and deal sizes as well as cross selling into our existing customers for our upstream and design led work. Our system integration business also grew by 21.2% quarter on quarter in Q4. And all of you who have been following our results for many years know that C4 is typically a good quarter for our SI business as our customers spend their residual interest budget for the fiscal year and as it's also the year end for them. The margins are significantly higher this time Due to a higher proportion of services involved in one of the large projects that we have already tied in the quarter and that we commissioned in the quarter. So and that's the reason for pretty good performance in our SI business. And also if you look at the SI business, At the beginning of the year, because of COVID and so on, lot of the deals were really put off and many of those deals specified in the Last two quarters, that's also the reason why that business showed a good growth. Within Italy, again, it was a broad based Growth across verticals, we had growth in the transportation business. Media and Communication business also grew. Transportation grew by about 3.2% quarter on quarter and Media and Communication grew 5.8% quarter on quarter. And healthcare continues to accelerate faster than the rest at 11.8% quarter on quarter. So for the full year ending March 31, 2021, revenues from operations grew by 13.4% year on year. Both EPD and IDB grew by 14.6% and 9.1% year on year, respectively. So All in all, in a very tough year, this is a very credible performance from the entire team. So from where we started in Q1 with last year with so many uncertainties, I'm very pleased to end the year on a high note. Delighted to exit FY21. It's an all time growth in revenues, margins and customer additions. It gives us a Great confidence going forward into a new fiscal year. And I'd like to thank our customers for their continued confidence Differentiated capabilities in technology design and digital. Finally, I would like to Also thank all the shareholders and I'm happy to announce that the gold has approved a final dividend of 2 40% for the year. Along with the one time special dividend, again at 140%, translating to a total dividend of rupees48 per share. Of course, we are subject to approval of shareholders at the forthcoming AGM. So when you look at The oral situation in the country with COVID and so on. And what we have noticed is over the last In close to 24 months, the number of retail shareholders or individual shareholders has increased significantly. So given the situation with COVID and the economy and so on, since we have done well, The Board decided to really give a good bonus to that all individual shareholders and all the Investors in the company benefits from the returns that we gave. So with that, I would like to hand over to the Q and A session. Thank you for your time. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Participants Participants, in order to ensure that the management is able to address questions from all participants in this conference, We request you to limit your questions to 2 for participant only. The first question is from the line of Akshat Naredi from Naredi Investments. Please go ahead. Hi, congratulations on the good set of numbers. I have a first question regarding the sensor technology. So As the sensor technology is increasing, so are we aggressive on this segment or this is not your cup of tea? Sure. Sensors, when you say sensors are used in multiple places including in IoT. So whether it is automotive, whether it is media Communication with Healthcare Sensor and Technology plays a very important role. So a lot of the products that we work on have different types of sensors. So it's very much an integrated part of our service offerings that we have for the last more than 15, 20 years. So that's what we do. So yes, it's very important for us. Okay. And my second question is in Life Sciences business, Is this truly long term? And how many months physically you are having right now? Please share a reason there. How many months? Sorry, could you repeat the question? In Life Sciences business, is that story long term? And how many months visibility you are having right now? Yes. So, instead of calling Life Sciences, we call it Healthcare and Medical business. That business we have been investing over the last 5 years. And yes, indeed, it's a long term story. And people who have been following our staff knows that We have been aggressively growing that part of the business. And in this quarter, we have had a pretty good growth. And definitely there's a good Long term visibility over multiple years. So we have no concerns there. Okay. And my one last question is, I heard about The VR technology is like going very is a very vast industry and going very fast. So Can you please tell something about it? Like are you working on this segment or something like that? Yes. This is Nitin here. So if I can take that, yes, we do. And I think we have a play in 2, 3 directions. 1, our system integration business helps integrate and sell VR gear For corporate, where we're setting up large enterprise visualization setups and so on. In fact, even in the last quarter, we've actually had some These on that front. So that's one hand. On the development and design side, VR is becoming integrated part of how you sell and market New products and services, including automotive. So we are working in such areas where we've used VR work for education, for training As well as in some cases for product development itself. Okay. And do we feel like there's a great margin in this segment? The margins are not exceptional, and I think the business is just about ramping up. So we are in that sense, I would call it as still riding the hype cycle. So we'll have to give it some time to really settle down into large scale use cases, widespread usage. Thank you. The next question is from the line of Vimal Goel from Union AMC. Please go ahead. Yes, sir. Thank you for the opportunity. I hope I'm audible. So sir, I have two questions. One was, firstly, on Just wanted a clarification on the INR102 crores line item that is there. What would that be related to? It's in the other section, other assets. Just a minute. That is the fixed deposit having a maturity beyond 1 year period. Got it. Got it, sir. Got it. Okay. So it will be considered as cash, Right. But they just said that these are 50% driving majority of over and over 1 year, which is why they are not in the current cash balance. Yes. These are all bank balances, but the India has required us to categorize it differently this year. Fair enough. Fair enough. So now on the margins, 30% EBIT margin, it's sort of unheard of in the Indian IT services industry. So how sustainable are these margins? And I also do note that there is a fair bit of offshoring pickup that has also happened. If you could just break us the margin improvement what you're seeing this year into how much has come from auxiliary and how much has come from utilization uptick? And is it possible that UBS and Jabber are still sort of undershooting and they still have room for growth? So there are many levers for margin improvement, right? 1 is, of course, increased offshoring. 1 is more long term projects, more Long term engagements and so on. Of course, better realizations And so on, more complex projects, more well efficient and so on. And definitely This year has been very, very different because primarily because of COVID and lot of expenses including travel, Even the normal expenses, employee related expenses, celebrations, none of that has Actually, Hassan. So it is a one off sort of a situation. So we don't want to leave an impression that Margins will continue. But as and when the economy recovers and as and when travel picks up, We will go back to our agile margin profile that we have been talking about, right. Having said that, yes, we have been guiding the wave and If we can improve the margin, then of course we will try to improve the margin. No issues there. But whether this will continue or there's no way that I can say that, hey, we will continue these high margins. Right, right. Sir, what would be the reason behind coming to the gross margins, your gross margins have seen a sequential uptick of almost 2 60 basis points to 43%. I mean, clearly, it seems to be that employee productivity has improved quite sharply this quarter. Is there any IP led revenue that has been included here? Or how should we read that? Look, there is IP led Revenue also, but more important than that. There are certain new business models that we have gone into. And that is really not linked to Number of employees that we work on the projects in Toulon. So we have been very innovative in the way we handle our customers in Toulon. So there are certain things that we have done well and over the last 2, 3 quarters and that's actually resulted In our Thank you. We'll move on to the next question. That is from the line of Ashish Agarwal from Principal India. Please go ahead. Yes. Thanks, guys. Just a couple of things from my side. On the Industrial Design business, last 2, 3 quarters have been very strong in this business. So how should we look at the growth in this business? So the last 2 key quarters have been great. If we look at last 3 years, it has been the revenues have been flattish. So should we consider that this business can grow at high double digits? Or how should we look at this business growth and the profitability in this business? And secondly, on the overall profitability, you said that once we travel returns, the normal returns, we will go back to our paper rate. So earlier, your preferred range was 22% to 24% EBIT margin. Are we looking at those type of range once the normalcy returns? Yes. As I've been talking about our industrial design business, yes, we have been underperforming for the last many years, right? However, we did do a number of things, including senior leadership and so on. So this is a business that is immensely scalable and I Strongly believes that design is a very, very key differentiator for us. So we have done certain things including on the front end sales, including in the And including in the type of deals that we go after and also how we integrate our EPD offerings as well as our design offerings together, right? So we have done a number of things while we were all stuck with COVID and so on. There has been a lot of transformation initiatives in that particular The issue that we had embarked on. And I'm happy to say that whatever we did over the last 4 quarters It really resulted in this sort of dramatic return of growth into that business. So even though we have grown Very significantly, 30%, 40% growth and so on. But you look at the year on year, we are still about 9%. We have grown at 9%. I think that is also because Q1 that particular business was deeply hit because of COVID and later being Q1. Q1 and Q1, even in Q2, we were sort of We are sort of down and but however, there was a very, very smart recovery in Q3 and Q4. And that is how we are able to really show that 9% growth. So we are definitely bullish on that particular business. We would see definitely much more accelerated growth as compared to the previous year in the coming financial years. And that is a key differentiator for us and that will really drive our business. So that is what we are also pushing. And you talked about margins. Yes, see, yes, what are the margin profile you've been talking about over the long term, right? Don't ask me what is long term in the current scenario, I don't know. But over the long term, definitely that is what the margins we continue to have that However, in the short term, because of all these savings that we have in other expenses and so on, Margins will definitely be on the higher side, but it will taper off eventually as the economy recovers. And lastly, sir, any issues on the supply side? Yes. So supply side is getting into a little tight situation in the big banks, Especially among the senior management or the senior leadership roles in Prahran, because we have been growing significantly over the last 3 quarters quarter on quarter we have been growing in France. So yes, we are stretched at this point in time and we are actively hiring. So that is why if you look at If you look at the numbers that we have added in this quarter, we will give you an idea of we will be really going out and hiring people. So yes, we need to add a lot more people. And with the situation in the industry, Everybody is hiring and salaries are shooting up. So we have all these issues, but we still hope to attract people because of The brand that we carry and have the work that we do. And we are hopeful that we'll be able to address the situation. And so the next part of salary will be again in Q2 or? Sorry? The salary hikes, FY 'twenty two will have a normal salary hike Yes. You can give it in Q2, please. Yes. We will have the salary item from July. Okay. Got it. Thanks. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, We request you to limit your questions to 2 for participant only. The next question is from the line of Mayank Babla from Dalal and Brocha. Congratulations on a great set of numbers. My first question pertains to the transportation segment. Sir, as it's reported, we've seen that the performance has been a big rollercoaster over the last Yes. So going ahead, what can be the sustainable sort of growth that is visible in this segment? So this segment is most affected due to COVID and so on, right? Even if we look even now if you look at The 2nd wave is coming in India. Automotive companies are back to clothing factories in Poland. So it's very difficult for me to give any position On the sector, within short term or mid term. So however, over the long term, yes, whatever trends that we are talking about, whether it is Electrification, whether it's autonomous, whether it's connected car, all of those trends both continue. And there is no we don't have an issue in the long term perspective. But short term to midterm, definitely there will be some amount of stress and we'll have to navigate with that system. Sure. And so my second question is on the Healthcare and Medical Devices segment. So could you As to what is driving this phenomenal growth, some examples of some projects that we are existing that is differentiating us from the peers? Thank you. Yes. So we have been as I said, right, we have been investing in this business for more than 5 years now. We have a very, very clear set And the executing on that strategy is both on we're extremely good on product development on different medical equipment Devices, diagnostic devices, point of care devices, a number of things that we're doing. We have very strong capabilities on the regulatory aspect. That's one area where we have built our own frameworks, IPs that really helps us differentiate from any other service provider And really show tremendous value to the customers. See, the only reason why customers will continue to give us growth And at these rates, the growth rates that we're showing is, are we adding value to them or not? Are we solving the important part, the customer problems that they have? If we are adding value, if we are solving the problems, the business will continue. So we have sort of focused on Few problems that the industry has, few problems that the customer has and we are attacking that. We are building inclusive property. We are building frameworks. We are going with that. And we have a differentiated play in this as compared to competition. So that's the reason why we're doing. Thank you. The next question is from the line of Sirayan Weis from Alchemy Capital. Please go ahead. Yes. Hi, Manoj and Nitin. Congratulations for a very, very good set of numbers. I think This is top notch execution and needs to be loaded. And It's pretty much the same question that I had last time Also is that what are we doing to maintain or increase the pace of The opportunity set that we go after across the 3 verticals, we have Obviously, we for whatever extraneous reasons, partly because of that and partly, obviously, because of the A new way of doing business, our EBITDA margins are very, very healthy. And what are we doing to reinvest? So while I'm very happy with the EBITDA margin, I think I'm more interested Increasing the opportunity size for our company so that we can grow to $1,000,000,000 revenue Size company quickly. What are some of the steps that we are taking to reinvest some of that margins or even otherwise to increase the opportunity size? Yes. So if you look at it, There are 2 rules, right? One is, of course, organic and one is inorganic rules, right? From an organic side perspective, we have been investing a We have a huge portion in our front end sales and consultants and industry experts and that process continues. We have not stopped that investment in the company And that is a way we are opening up new accounts, new logos. And also within our existing large accounts, we have been mining them well. If you look at our top 5, top 3, top 5, top 10 accounts, you will see that they have all been growing, right? And that is because of all the investments that they have been making in Mining those accounts and new payment power, right? At the same time, there are a number of initiatives that just also started and we talked about adjacencies, we talked About growth initiatives. So we are investing in all of those areas, whether it is health care, digital health, whether it is on the Rail segment, whether it is on the OTT phase, the product development that we're going on. So all of those investments are ongoing at this point in time. And the hope is all of these investments over the next 6 to 18 months will give us force multiplier, We'll give us those weapons to go after and increase our business. So that is one part of it. Of course, the second part of the inorganic amount, have already identified areas that we need to strengthen and we are targeting Companies, we are in discussion with different companies. But the only thing is that good companies' valuations are very expensive even at this point in time. And those that we believe that they'll add value to us comes at a premium. So there is that sort of evaluation happening at this point in time as to How the company can help us? And hopefully, when things start to fire, you'll hear from me there. Sure. Just one more question from my side. While traditionally we have been working with The top automotive companies who are trying to kind of Move into more connected cars, autonomous cars, etcetera, and build those technologies in their platforms. Are we also I mean, and I think last quarter and I think even this quarter, you mentioned that you acquired 1 North American EV How serious is the opportunity amongst the new age EV players are do they have a concept of Tier 1 like you have in a typical automotive environment? And do you see a large to work with some of those players as well? Yes. I'll let him answer that. Yes. Hi, Irin. Yes. So the answer there is a yes and a no in the sense that new age OEMs on one hand represent the ability to work ground up To participate in absolutely cutting edge ways of doing things because they tend to innovate. On the other hand, they also represent risk simply because They are as good as their funding in some time, but in many cases, right? And therefore, they have, In some cases, fairly bright but short legs, if I may put it that way. In terms of funding, in terms of R and D budget, How they want to get things done, that's 1. So I think at this time, we are taking a very judicious call on who do you want to work with, 1, and How much effort and time do you want to invest with those as against the traditional OEMs who have to pivot to the new tool, Right. I think at this time, I think we're just taking the balance sheet. Got it. Got it. And thank you for the special dividend. I hope it is not a onetime dividend. We continue to give that unless, obviously, we go ahead and make an acquisition. But congratulations to the team again. I think this is fantastic work. And all I can say is, I'm a happy shareholder. Thank you, George. Thank you. The next question is from the line of Bharat Seth from Quest Investments. Please go ahead. Hi, Manoj and Nitin. Hi, Alexey. How are you? I'm fine, sir. Thank you. And really both of you, I mean, deserve a lot Apart from the whole company teamwork, so I mean, Manoj, you have given a very good color That how we are moving from, say, onshore to offshoring, we then complex the long term vis a vis short Some duration contract. So how to really what kind of opportunities still we have in Each of the now and all these 4 vertical, I would say, 3 in services and apart from that, Industrial Designing, all are now showing a good growth traction. So how really we look at, I mean, sustainability, That is offshoring because despite offshoring, I mean, we have grown substantially on in value term. Sure. So, sitting on here, I'm pretty confident of the short to mid term prospects of the company. Long term, we never know. Hopefully, long term also, we should not have any issues, right? So all our segments are firing very well. Yes, transportation is a little slow, but I'm sure that the situation in the economy and the COVID and all this will improve. I am pretty confident that that segment will also pick up rapidly, right. So the good thing is we have invested appropriately in various new initiatives And adjacencies, so that even during COVID, even when other companies and other industries and even customers were struggling, We were able to figure out areas of growth, areas of opportunities and really ensure that the company grows, we don't stagnate And as a result, we reward our investors and our employees also accordingly. Okay. So this I mean, I believe margin is Short of, I mean, not as in long term may come down a little, but not earlier because of more offshoring complex deal, So higher realization and all these things and plus industrial design also started, I mean, contributing. So that is one thing. And secondly, earlier, we had, I mean, of course, ambition of growing, I mean, 8% to 9% Or 10% QoQ. So in that journey, where do we really see as our and how is the Deal win that we have currently and deal pipeline also. Yes. The last quarter was very good. I think consecutively even during the peak of COVID, I think the last three quarters we have definitely closed a lot more than in the previous years in Q1, right? And it is only possible this growth 8% or 9% quarter on quarter growth that you see, It's only possible if we close those large deals and if we are able to ramp up and execute and deliver, right? So that discipline has been there. The teams have been extremely disciplined. We have kept our customers happy and we have really delivered value when In fact, our customers were on unable to work and they were having furloughs and they were closed. It is our engineers will really help them, support them and help keep their business running. So to that extent, I think we've done an extremely good job. Many of our engineers have put in many hours per day, right, many hours per week solving customer issues and problems and so on. Lot of appreciation from customers for the efforts that they have put in. And I think all of this will really hold us in good shape, right, especially when things return to normal and so on. Most of the customers will hopefully realize the value that we have delivered to them and continue the business with us. Coming to your escalation of 8.5% growth. Just last question, sorry. Operator, Mr. Seath, can you request that you return to the question queue? Sure. The next question is from the line of Dipesh Mehta from MK Global. Please go ahead. Thanks for the opportunity. I have a couple of questions. I think partly addressed, But considering our focus on 3 verticals over medium term, if you can help us sub segment Our sub vertical where we are investing to fuel our growth over medium term. So if you can provide some perspective, transportation, Communication and Healthcare, which are the sub verticals which we have identified to drive future revenue growth? And second question is, Can you share the utilization where we are in Q4? Thank you. Hi, this is Nitin here. Maybe I'll take that. In some sense, the subsegments are reasonably clear, right? Because if you look at automotive, it really calls out into connected, autonomous, shared and mobility. Shared is, in some sense, secondary derivative of connected and autonomous and electric. So to that extent, we are we clearly are investing in all 3. We're growing capabilities and capacities in all 3, right? And I think all of them are Training towards digital technology. So it's not just about what is in the car, but what's also in the cloud and how do you optimize and manage and run Both the cloud and the in vehicle piece better. As far as Media and Communications is concerned, I think we are very clear. On one hand, you have the device companies, whether it is boxes, network equipment and so on, that's tradition. We are the operators who formed the 2nd wave. When they started to take control of software, then they wanted to innovate faster and Not the tied down to black boxes supplied by the device companies. And I think the 3rd layer that is coming in now is the new media companies, We don't necessarily need any infrastructure or CapEx to run services. Their asset lies in some sense, Though content, etcetera, can be quite asset heavy, but these are broadcasters, media studios, content owners, aggregators who can now Deliver services directly. So these are the key segments in the Media and Communication side. In Healthcare, we started with medical devices, right, but we have now expanded to pharma and to digital health. So in that sense, these are new subsegments that we are both investing in and building on. In addition to all of this, I think rail and off road vehicles, So you can call them and you can call off road automotive, but it's really not automotive. It uses the same skills technologies but in a different way. So off road and rail for us are in some sense B2B or B2G kind of businesses, which are not directly dependent on consumer sentiment. Broadly, I would call this out as the entire segmentation. On the utilization rate, it has improved further. So we are, I think, at about 27% now For the quarter. We still have room to go. So like I think Manoj said, I'm just making this point for everybody. There are levers. There is still room in the levers. Unwinding of these levers will take time. So it's not that there is going to be a sudden change or drop in margins and so on. But having said that, yes, 77% is that we are on neutralization. Sure. And Last related question, do we say, let's say, breakup? You said auto, we have said mobility, connected vehicle, electrification. Do we say size and scale of, let's say, each sub segment In some way? No. At this time, we don't because we believe that the tumor data has to Exactly. Thank you. Thanks. So it's not that you do only autonomous or either no connected and autonomous or there is no Digital and electric. So it's a thing, sometimes impractical, we won't try and market it. Understood. Thank you. Thank you. The next Question is from the line of Madhan Babu from Canada HSBC. Please go ahead. Yes. Hi, sir. Sir, earlier we used to have some volatility in revenues. I think that over the last few quarters, it has stabilized and we are doing very well. But going into next year, do you see any softness in 1Q or any volatility on the revenue trajectory or we are confident considering the deal pipeline? This pipeline is good. So I don't see such issues happening at this point in time. But All said and done, our business depends on our customers' budgets. And so can I say that there will not be any For any customer dropping their budget and so on, at this point in time, we can't make that assumption? So what I can tell you is even if 1 or a couple of customers, you know, pulled the plug, they have some budget issues. Tata Alexey is resilient enough to work on that And we have proved that. We have shown it multiple times. We will be able to recover and grow. So our basket of customers has improved. The Size and scope of business that we delivered to customers have also increased. So we are fairly confident and believe that we have a resilient business model. And just one more, sir. Of the 7,300 employees, how many are in the on-site in Europe and U. S? Can you give the exact number? On-site is a smaller number, exact number, I think it should be around $900,000,000 or so. I don't have exact number, but ballpark it is around 700, 710. Okay. 10% of your headcount. Okay. Thanks. Thank you. The next question is from the line of Hossen, an individual investor. Please go ahead. Hello. First of all, sir, our congratulations on the good set of numbers. And our question is, Where do we see ourselves in the medical space due to the uncertainty in COVID-nineteen scenario, I think? I think medical business continue to grow for us. I don't think because of COVID we have had any issue in our medical In the healthcare and medical devices space, so that business continues to accelerate. So as long as There are no massive lockdowns and the only problem that will happen with this, how medical companies they make money It's truly elective surgeries. So when elective surgeries come down, the medical companies don't make money. So as long as for example, in abroad in U. S. And Europe and so on, things are returning back to normal. Of course, in some countries, We still have COVID related issues. But world over, most countries are coming back. And then vaccination, many countries have vaccinated more than 50% of their population and so on. So things are returning back to normal. So electrosurgery is happening. Medical companies are making money. So that business will continue. Okay. Sir, I mean, second question is regarding the shortage of semiconductor, which is exerted a lot. So will Will there be any kind of opportunity in this segment? We don't see an opportunity in semiconductor shortage, right? So we don't mix it We don't so it's not an opportunity. It's sometimes a risk is some of the key markets like automotive market, There is a shortage and carmakers are not able to sell their cars. And as a result of which, they decide to back their budget and so on and so forth. So However, that's a very small group. So we don't see the semiconductor shortage as either an opportunity or a risk for us at this point. Okay. Thank you. Thank you so much. Thank you. The next question is from the line of Rohan Doshi from Synvest Advisors. Please go ahead. Yes. Can you hear me? Yes. Yes. I have two questions. My one question is this, certain to shortage of So what is your take? Like any of your clients have suffered probably because of the shortage of chips, but in The JLR products are maybe affected because of the chip shortage. Sure. So as far as we hear automotive company is being affected, But it has not affected any of our business so far. We don't see an effect of it on communication We're not on the health care or medical devices so far. We have not got anything from our customers. Okay. But do you think it can affect us in future? Yes. So maybe I'll answer that, right? So the semiconductor shortage is fundamentally a disruption of the supply chain, right, and some extraordinary events. Fire in a factory in Taiwan or sorry, floods in Taiwan. No, water shortage in Taiwan, fire in some factory somewhere else is also. If you think about it, these are one time disruptions, extraordinary events. The industry is reworking the supply chain and already investing in additional capacity and plants. So Yes. For the next 6 months, 9 months, you will find disruptions. Disruptions will be in certain segments, certain types of chips and so on. So my view, I think the industry in that sense is quite resilient to work around. And this will not be a quarter or 2 quarters, But I think the impact also is not going to be so bad for a quarter or 2 quarters. Okay. So we are not getting affected? Yes. Yes. Okay. Now my second question In the earlier conference, you said that because government has not announced this export incentive rates, you have not accrued any income. So what is the position as of now? Same question. We have not taken any the government parent now has not announced anything. Okay. Fine. Thank you very much. Wish you all the best. Thank you. Thank you. We'll move on to the next question that was from the line of Apurva Prasad from HDFC Securities. Please go ahead. Thanks for taking my question. I have 2 congratulations on the numbers. So Manoj, looking at the acceleration in top 2 to 10, Can you say that is the visibility also higher as the pipeline driver appears to be more from larger accounts? And related to that, Based on your comments on addition of customers and large deals across the industry segments, is the trajectory of 5% plus Q on Q Yes, Alexey visibility in the top five, top 10 customers is It's pretty good for us. The order book and the deal pipeline is good. And I think we have spent a lot of bandwidth In mining these accounts, and I think we are in a good position, especially with our future top 10 customers. At the same time, as we've announced, we've also won some new deals and these are all again good logos that will eventually help us over the 6 months, 12 months To really ramp up our business. So yes, so we are in a good question and unless Something happens in industry or any particular customer decides to pull the plug In many which we are right, we should be able to show healthy growth. Right. That sounds good. And on the margins, while we Spoke about this earlier, but this is more from a near term perspective. Do you see near term headwinds to the margins, So be it offshore coming down from the current levels or supply side impacting your attrition levels? And also if you can talk about the hiring plans for that side, I think, too. Yes. So I think margins, we are pretty comfortable. And as I said, right, in the near term, yes, So only issue are not issued. The only thing is that we will have a salary hike again. And it's not a salary hike. We have also because our employees have really put in all the hard work And supported our customers and the remote working has taken a toll and so on. So we've also rewarded our employees with Apart from the normal salary hike, we have given them a 1 month bonus. So that has also been we will roll it out. So There will be an impact of both salary hikes and the bonuses. And to that extent, our margins may dip a little bit. Well, I think over the next 4 quarters, we hopefully will be around the same Margins in the last fiscal. All right. Just to clarify, you mentioned 1 month bonus, Which will be given out in the Q1 and the wage hike that happens in the Q2? Yes. So we will not give the entire thing in the The first quarter will be divided during the 1st and the 4th quarter. Great. Thank you and all the best. Thank you. Thank you. The next question is from the line of Shyam Sundar Shiriram from Sundaram Mutual Fund. Please go ahead. Yes. Hi, sir. Good afternoon. Thanks for taking the question. Very strong performance both from a revenue perspective as well as the operational I think just one main question. So you've been highlighting our approach to increase Our project from a project based to a more annuity based kind of a structure, which will give you more visibility and margin leaders, Okay. So if you can give some perspective on how your average deal duration for the new deal wins that has happened in, say, in this year, how is that being? These are multi year deals that we have won in S21, and that is the first part of the question. Secondly, Given that you made such high gross margins, are these you being priced more aggressively by sharing some of these efficiency gains per se If you can give some context on that as well. Yes. I would say at least the large deals that we have been closing Definitely multi year deals, right? We have those 3 year deals, 5 year deals and so on. So definitely that is that part of it. At the same time, it's not that all the deals that we have are these multi year deals. We also have 6 months, 12 months deals and so on. So again, it depends on customers and The area of growth standing up. But what I would definitely want to say there is The number of large deals that we are facing is definitely much higher than the previous year and so on. So to that extent, yes, That is a moment that is this moment towards the large multi LD. Pricing wise, I think pricing is a function of The area that you are operating in, the value that you bring in, the type of deals that are there, for example, digital or AI based, we talked about virtual reality and all the new skills. So depending Depending on the area that we operate in and the capability that we bring in, whether we have inclusive property, whether we have You know, accelerators that you bring in, so the pricing is not a trade fit, right? It's not like an IT company where we just price based on So many dollars per hour, right, based on the unit resources we bring in. So that's we try and avoid such a pricing scenario. We bundle value and price according to that price customers according to the value that we deliver. So yes, it is not a safe harbor answer, but yes, that's how we do it. Sure, sir. That's very helpful. And when you spoke about the inorganic way of growing, you spoke about The capabilities that we may want to acquire, which are some white statements that we want to that we want that we'd like to strengthen ourselves From a state of the business perspective, is it more in the India OPG segment? Is it more on the medical equipment side or on the automotive and Hi, Eddie. It is Sai. If you can just throw some perspective on what are some of your top three focus areas where you can look for acquisitions? And what is the kind of deal sizes you understood? Thank you. Yes. At this point of time, we don't want to talk about all these white spaces. This is something that we're working on, right, and it's Confidential to the organization. I'm sure you can guess what areas that we have just we have actually talked about some of those areas in the past also, right, regarding Those are areas that we are really focusing on in terms of looking at inorganic. However, at the right time, we will update you. I think then we The next question is from the line of Harish Kavalkar, an individual investor. Please go ahead. Sir, good afternoon. And my very much heartfelt congratulations to you in elevating this COVID-nineteen situation and delivering outstanding results. My first I have 2 questions, sir. And first one, regarding the special dividend. I think you have ROCE of around 45% to 40% And return on return earning that is ROE of around 15%. And you have reserved Around INR1200 crores. And you declared INR 149 crores around 10% of INR 30,000,000, Right. So I think if you have that money, then it has a chance to grow at more percentage points Then giving it to the retail investor. I'm a retail investor. I don't have any issues with that. So that might be the personal opinion. But if that amount remains in the company, it will help to grow the company in the future. So what is your take on that, sir? Yes. So as you said, right, it has been a tough year for many people, right? And there are many people and as a group, as a Tata group, We felt that we have to really give back to the society, especially in the past year. And that is the reason why the Board decided to give a special dividend Because people are struggling, people are suffering, it will help them. And so that is only logic where we decided that, okay, this year Let us be in advance with the returning the money to the stakeholders and that's why it's a position. Okay, sir. And my second question regarding the transportation vertical. Other than COVID situation, you have identified any risk Over there in transportation, why it is not growing other than COVID situation? Yes. So listen here, I think we've talked about this in the past. The point is that, that industry is also undergoing some structural changes Because of the fact that EVs mean that you do not need the kind of structures and people and skills that you had in traditional OEMs Manufacturing methods are different. The decisions on what you need to own versus what you could afford to get supplied by 3rd party suppliers is also changing. Software is becoming very, very important. So earlier OEMs did not have to worry about software. It came in a box. You gave it, sold it and didn't really have to worry about it. Now software has to change over the year. It gets your input image system gets updated, your ECUs get updated and set a task. So I think there are structural changes that go beyond COVID, right? COVID only Worsen the situation by making it even more difficult to spare R and D budget on all these things that you need to do, So we believe in some sense technology will continue to accelerate in the automotive space. Electronics and software and digital is what will drive the industry. And I think our capabilities are very aligned to those areas. So that is where I think we are quite confident in the long term. But in the short term, yes, we'll have to deal with The dual problem of structural changes and COVID and revenue and stagnation in the industry in terms of sales. Thank you. We'll move on to the next question that is from the line of Raj Rishi, a Private Investor. Please go ahead. Yes. Hi. I would like to know what's your plan for the education sector? Are you making a For your part in the education sector? Yes. So we have definitely worked with 2 large players in this segment. Our design team, the industrial design and There's a lot of work in the education sector, especially around the graphics, So you're looking very close like AR, VR and all of that, right? How to make it interesting for kids and so on. So we have a very serious play in that sector. Can that become another pillar like your automotive broadcasting or the medical devices and adjacency? I'm not sure whether it can be a period as such, but definitely it can be a good sub segment within the industrial design business. Okay. It will be part of the industrial design business? Yes. Okay. And of course, software team is also there. So we cross leverage capabilities from Other things like media and communication and so on, but it's driven by the digital design business. Okay. Like Given my understanding of the areas which you're trying to address, the scale of the opportunity seems to be such At the present turnover of, say, Tata Alexey, the revenue which is generating around not even INR 2,000 crores, like many times that is possible. I'm sure like given the optimism which you have generally when I've heard you, you have some internal assessment as to where you can reach in 3 to 5 years. Can that be a multibillion dollar possibility, Mr. Manoj? There is a huge opportunity, no doubt, right? We are in the midst of huge market, which is growing and exploding. Technology is really, really exploding. Yes, I wish I can say yes, that there is a multibillion dollar opportunity and we will be there. Yes, definitely we have our own plans and these are significant Significant large, what we call like large Harry Gold that we have. It is a large goal that we are taking in the next 3 to 5 years and we are working on it. But it can be a large opportunity, no doubt about it. Thank you. A reminder to the participants, In order to ensure that the management will be able to address questions from all participants, we kindly request you to limit your questions to one for participant only. The next question is from the line of Ravi Naredi from Naredi Investments. Please go ahead. Really, it is a very fantastic result and shareholder since a very long year. And it is a surprise to know if you have given a fantastic return. And sir, in this 3 d printing is going well, Are we planning anything within this segment? Yes, Mahesh. Listen, listen here. There is no direct plan for us in the 3 d printing segment. Why? Because Technology is fairly stable there. It is just that 3 d printing kicked off big time after the patent's expectation. Okay. It's held by 1 or 2 companies and therefore it was not available for the rest of the market. Once the patents opened up after 20 years of Closed Kingdom. That is where 3 d printing has taken off globally because economies of scale are trickling. Everybody can produce at actual cost rather than What came with royalties and so on. So in that sense, I think it's a transformative opportunity for 13 secondtors like Very complex engineering, footwear, personal growth and so on. So design will benefit greatly. From a software development, etcetera, I don't think there is too much to count on. By the way, our system integration business does sell and service and support 3 d printing technology for very specific sectors. So they are starting to see some business too. Okay. Thank you. Thank you. Thank you. The next question is from the line of Nitin Chaglade from Green Capital Single Family Office. Please go ahead. Hi. Good afternoon to Manoj and Nitin, and congratulations on the efficient execution of your IMM plans. My question is more specific to looking at the geography of Japan And looking at the business update on the Health and Life Sciences segments there, can the management give a small business update On that segment and geography, both in terms of outsourcing and design investment. Also, we understand Japanese People to be more using their workforce rather than outsourcing, so a bit of comment on that as well as any opportunities which have come directly or indirectly to the And the upcoming Olympics or companies that you would be working with or customers that you'll be working with? Thank you. So, Tata Alexey has been working with Catalyst Companies for the last 25 years. Right. Since 1996, we have been operating in Japan. And we have a pretty strong and stable customer base there. Yes. You're right. You said Japanese companies typically there are issues, there are cultural issues, there are language issues, They typically tend to work with their own subsidiary companies and so on. And outsourcing is not an easy decision for many GAP net companies. Having said that, I think from Tata Alexey's perspective, we have more percentage here. Yes, it should have been tomorrow, somewhat About 8% to 9% of our revenues come from Japan, right? So and And it's been relatively stable. It's been growing, but not at a very accelerated growth rate. And a lot of our business That comes from automotive companies right now because as you know Japan, they are leading both OEMs and Tier 1s there. And in general, the automotive industry is also because of all these issues Also, he is not going that rapidly, right? I said that, yes, there have been winning projects. And especially for Japanese companies, When there have been projects overseas, whether in Europe or U. S, it's very difficult for them to manage those projects because of the language And so on. So that is when companies like us, they tie up with us and then we support them in their customer communication And really understanding what the end customer needs and how to deliver that value to them, right. So yes, Japan is an important market, It's a steady market and we get good projects from there. We get good technology related projects And we were typically long term customers also, right? Regarding the healthcare and Medical Devices business, yes, and as we have already stated in the press release in Fluance, it's been growing pretty well. In fact, the past is growing This was for us. I think year on year we grew up over 60% in that business. And you see a lot of headwinds there mainly In U. S. And Europe, we are expanding that to other areas including India and Japan, But it will take some more time. However, that business has been growing pretty well for us, and we hope to Thank you. The next question is from the line of Navin Gotra, an individual investor. Please go ahead. Congratulations for industry leading excellent performance of the company's 3rd quarter in a row. We leave out the Q1. It's, I think, last 5, 6 quarters, we are performing excellently. So congratulations to the all management team and team Tata Alexey. First of all, I would like to appreciate You have already from appreciate the thing about the capital allocation almost Delivered on that promise then earlier in the last 2, 3 calls. So we appreciate that very much We have already all the free cash flow is embedded this year. That has been almost been distributed. So congratulation for that one. I appreciate. My one question is regarding the hiring plan targets. What are our hiring plan targets in view of the large multiyear deals? We have 1 in all the 3 verticals. So in this year, we have hired around 11% to 12% in anti addition. So going ahead, this year's target, if you can throw some more light on this one, it will be helpful, sir. Kumar now, sir? Yes, yes, definitely. So thank you, Navinji. So yes, we have been going pretty well and Our utilization is also going up. So definitely, as you have seen in the last couple of months, we have hired a number of people. And our plan is 2 fold, right? 1 is, yes, we will be hiring people from colleges, test guides and so on. Approximately maybe 700 or so engineers will be hiring from the colleges. And on top of it, yes, we will have an accelerated hiring from lateral pools Because of the opportunities and the projects that we have tagged and we really need to execute. So we will be hiring maybe an equal number or even slightly more depending on how the deal pipeline and the closure pattern influence. So hiring will definitely be accelerated this year to meet the requirements of the deal and improvement. So if I can understand right, sir, it will be 700 plus 700 letter items? At a minimum. At the minimum. Okay, sir. That will be better. So second question is just regarding pharma, we must maintain, sir. What do you mean by pharma in the health and medical devices space? We have entered into pharma space. So what you mean by pharma? Are we hiring scientists and all these things in this vertical? No. So let's say, Gautam, maybe I'll take that question. So in pharma, we see 3 different types of pieces. 2 of them are skills that we carry on from The medical device space. So a lot of pharma companies also provide for drug delivery devices. So The drugs are delivered to insulin pens through single dose pens through very specific kind of delivery devices. So there is work to do Just like we do with medical devices, there's work to do with pharma on drug delivery. 2, there is work to be done on packaging, labeling, regulatory and related work, which has similar skills as what we do in medical devices. So of course, we need to bring in domain experience, core teams and so on, but Lower level skills are the same. But what is the only thing that is absolutely different would be in drug discovery and so on, which at this time we're not focusing on. So we're really trying to build on a different skill set, but applying to the pharma industry. Thank you. The next question is from the line of Ankit Shah from White Equity. Please go ahead. Thank you for taking my question. Can you share your thoughts on on-site offshore mix, let's say, for next 2, 3 quarters? And what could be a sustainable mix over the medium term? Thank you. I think the on-site topso mix over the next 3 quarters will continue to go around the same, right? Because most countries have already started stopping Indian millennials So I'm traveling. There's no flights now and so on. So at least 1, 2 quarters, I don't think situation will improve. So and also Customers have got used to this offshoring and working delivering value from offshore. So I think we may never go back to those early days, I mean, earlier days where 50% needs to be on-site and If you want me to be offshore. So even after 3, 4 quarters, maybe we should be in the same maybe 35, 35, 35, that range. Got it. Thank you. That's it for matter. Thank you. Thank you. The next question is from the line of Rudresh Kalyani, an individual investor. Please go ahead. Hello, sir. Are you audible? Yes. You are. Yeah. Okay. What from home is the evening? I got to know that we expanded Mr. Kalyani, Sir, we're able to hear you, but your voice is not clear. Can you use the handset mode while speaking? Yes. Thank you. Yes. Okay. What I want to ask is when the meetings is work from home, but I want to know that we extended our office premises. What is the reason behind that? You've extended on office spaces? Okay. I'm not sure, okay, what you're picking up on, but We have definitely looked at expanding capacity, especially in the SCVs and so on. That is more to take benefit from what we do as overseas work. Otherwise, we have been careful about expanding office space. Okay. And one more thing is, Can you give me a broad based growth guidance for at least for 3 to 5 years? We don't do that as a rule. So I don't think we'll change that for the next 3 to 5 years. I think our growth you can look at our growth territory and I'm sure you'll be able to plot it yourself. Thank you. The next question is from the line of Nami Shah from MK Investment Management. Please go ahead. Yes. Thanks for this opportunity and congratulations for a great set of numbers. Most of my questions have been answered. Just one data point, what will be our effective tax Tax rate, I think we should be about 25%, 25% in that range, right? So what we are doing is also we are in this year we will expand our exclusive capacity also. So we will have a lot more of our business coming under LVNV. So they will be tax free. So we will have an opportunity to reduce that Thank you. The next question is from the line of Sanjay from Ampersand Capital. Please go ahead. Yes. Hi, sir. Can you hear me? Sorry to interrupt, Mr. Sathwati. We are not able to hear you. Can you hear me now? Much better. Thank you. Yes. Thanks, sir. And it's a fantastic set of result. And in fact, I can see that most of the people have not been able to Digest the pace of growth that you have shown in last couple of quarters and you yourselves are appearing to be a bit shy of Accepting that as a tremendous achievement, because 8%, 9% quarter on quarter growth seems To be too strong too good to be true. So the way I just want to say my question is that, of course, there has been tremendous amount of operating leverage benefit, etcetera, etcetera, is happening. On, let's say, The kind of the name that you're addressing, is it suffice to say that you are unlike typical IT Companies which who are in that 18% kind of growth industry, you are in 20%, 30% kind of growth industry. That is what if you can just make us understand. Yes. So maybe I can take that. The answer is not a simple dimension of saying, are we in Our area of service is growing at 30% business, our IT company is in our area of service is growing at 10%. I think the answer will be multidimensional. One part of the dimension is Industries that we operate in and their growth rate. 2 is the areas that we operate in, in terms of what are we doing in terms of technologies and so on And what is that adoption going to be? For example, automotive or electric or connected cars may be growing at completely different rates than the automotive industry itself, Technically, at this time, is stagnant, right? The 3rd dimension, I think, also comes from within engineering, what do we do? So we traditionally I've been always focused on electronic software and digital. I think that by itself has higher growth and adoption and spend In relative budgets of customers and in all other areas. So I think if you think about it, you should actually multiply all these factors and not look at it purely as One single dimension of Agni in the growth industry at all. So that would be my suggestion. Yes. I really appreciate this Kind of a bit of a subjective understanding, but since we don't have the data, can we Will you summarize it by saying that you are essentially catering to a much higher growth industry than the plain vanilla IT service system? Absolutely. That can be a straight assumption if you make. Yes. Thanks a lot, sir. Thank you. Thank you. The next question is from the line of Arjun, an individual investor. Please go ahead. Hi. Thanks for giving this opportunity. The first question is, can I know a bit more about the multimillion connected car opportunity that you have declared in the results? What is the nature of the opportunity? Yes. So I personally referring to the deal announcement that we made. Yes, right. So if you look at it, we have built an in house platform for IoT that is Tuned to deliver connected car services for customers. And there is a development for OEMs who want to deploy their own platforms On control over software and so on. It works on the cloud, but it is fundamentally delivering software ownership to OEMs. So Tata Motors, by the way, was our 1st customer and that we went public with last year. So we've now won another OEM who is global and they have Philips for a specific market. That will be the 1st market that we launch in. And it's a multiyear program, obviously, because we'll have to work with them not just by licensing the platform, but also Helping them integrated, implemented and run it. So we believe that the 1, the deal itself is multiyear and Not a million, but we're also hoping that there's an upside of being able to address other regions by demonstrating the capability And the power of the platform that we're deploying. Okay. My second and last question is, All right. Industry is only the disruption. So which disruption what do you do the most? I always look forward to disruption. Thank you. The next question is from the line of I have two questions. My first question is regarding the deal announcement what we have done and one of the deal announcement is about the cybersecurity services. I just wanted to know, is this a new very strategic area for us, something similar to what it was we held here for some time back? Yes. So maybe I'll take this again. For us, cybersecurity is more of a horizontal. So while healthcare technically is an industry vertical by itself, You see, cybersecurity has become an important topic for all our customers across industries. Now we have to note that we are not dealing with enterprise security. So we are not here to be a makethi or equivalent. We are looking at the context of what does cybersecurity mean for the kind of devices we work on. What does it mean for gateways? What does it mean for cars? Where are the ways to enter these devices? How do you protect them? What do you need to do from system software, both in the device and So I think we are coming from our domain and our deep understanding of these devices and these industries and then trying to address the cybersecurity issue. So I hope that clarifies. So is that a consulting assignment? Is that a consulting assignment for individual clients? No. So it tends to be both. So there is some amount of consulting and let's say, like you have a design project, You will have to think of cybersecurity in the design stages, sir. So it becomes just another dimension of what you need to design and develop for. And then there are also services where once products are deployed, will you continue to monitor and make sure that there are no further risks occurring? Sure. My last question is regarding the exchange gains. Do you have anything in the this quarter to report, gains or not? Murli, are you there? Can you handle that? Yes, Manj. I'm there on the call. Let me handle it. Yes. We do have a loss from the exchange gain in this quarter. Loss from exchange, you mean if a loss, how much is the loss from exchange currency fluctuation? Yes, it's the currency fluctuation because we had Some forward covers booked in advance. So that and the currency movement went in the other way. And so and the collections did not materialize as We got and so we had a loss there. How much? Can you quantify the number? It's crores. It is disclosed in the results in the press. It is so gross. Okay. Thank you. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments. Thank you. Thank you, everybody, for the call and look forward to See you again on the next call. Thank you. Ladies and gentlemen, on behalf of Tata Alexey, See, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.