Q1 21/22

Jul 16, 2021

Ladies and gentlemen, good day and welcome to the Q1 FY 'twenty two Investors Conference Call for Tata 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. Lexi Limited. Please note that this conference is being recorded. I now hand the conference over to Mr. Lokesh Parikh from Christensen Advisory. Thank you, and over to you, sir. Thank you, Aisha. Good afternoon to 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 achievement to differ significantly from what is 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. Manoj Raghavan, MD and CEO Mr. Nitin Pai, Chief Marketing and Chief Strategy Officer Mr. Muralikaran H. V, Chief Financial Officer Mr. Gaurav Bajaj, CFO Designate and Mr. G Vaidyanathan, Chief Investor Relations Officer. We will start the call with a brief overview of the past quarter by Mr. Avan, followed by a Q and A session. We would appreciate your cooperation in restricting yourself to 2 questions per participants to allow others I now hand over the call to Mr. Manoj Jaghavan. Over to you, sir. Thank you, Lokesh. Good afternoon, everybody. I hope my audio is clear. Yes, Safir. Okay. Thank you for joining us today and hope you and your families are safe. I'm happy to report that we have delivered another quarter of strong All done performance. We have actually carried our momentum from the last fiscal year to the current one, and we continue to execute strongly on both top line and bottom line. Our revenues from operations for the quarter gone by is INR558 crores, translating to a growth of 7.7 percent quarter on quarter and 39.4% year on year. The growth was predominantly volume led with a constant currency growth of 6.4% quarter on quarter and 37.4% year on year. The PBT for the quarter The INR153.9 crores registering a growth of 63.9 percent year on year and net profit for the quarter stood at INR113.4 crores, reporting a growth of 64.6% year on year. Please note that I think we have even disclosed in our fact sheet that the bottom line factors An additional $33 of employee expenses on account of the special one time bonus for all our employees as conveyed in the previous investor calls. Growth was driven primarily by strong performance in both our key divisions, EPD and IDB. The Embedded Product Design, EPD, our largest division, grew by 7.5% quarter on quarter and 31.4% year on year. And Industrial Design and Visualization business, IDB posted a smart growth of 13.9% quarter on quarter and 132.1% year on year. So geography wise, our growth was led by the Americas with 17.5% quarter on quarter and 69.3 percent year on year growth. Europe grew by 5.4% quarter on quarter and 30.1% year on year. India grew by 2.8% quarter on quarter and 49.6% year on year. And again, within EPD, the growth was broad based across industry verticals. Healthcare continues to grow faster than other industry verticals with growth of 19.3% quarter on quarter and 80.2% year on year. Media and Communication delivered another steady quarter with 8% quarter on quarter and 31.6% year on year growth. Transportation business continues to show revival with a 3.4% quarter on quarter and a 20% year on year growth. So if you look at it, the growth was in our business, right, was primarily driven by deep mining in our existing customers, especially in the top five customers. Even as COVID first started to affect our customers around the world, we pivoted quickly and supported by our mature offshore delivery capabilities. And for the past few quarters, we have been focusing as a business focusing on creating sustainable and long term engagements that allow higher degrees of predictability and order book as we progress from 1 quarter to another. We have been constantly improving on this front With all our customers and which actually builds confidence as we move forward. Equally, we have been focused on High quality customer additions, especially led by solutions and design led digital engagements. I'm pleased to see that starting to work well and sets up a platform for larger growth and mining. So all in all, it has been a pretty satisfying quarter. It grows across both our key divisions, all our key geographies and all industry verticals. We are entering the 2nd quarter with a strong order book and a healthy deal pipeline across key markets and industries. With that, I hand it over for the Q and A session and would look forward to interacting With your investors. Thank you. Thank you very much. We will now begin the question and answer session. We will wait for a moment while the question queue is ended. Please go ahead. Yes. Thank you for the opportunity. And congratulations to the team on Very good set of numbers. Sir, my first question was on your automotive vertical. So if I were to look at the numbers, Your top customer has grown at about 12% on a quarter on quarter basis. But if I were to exclude that from The automotive business, the non top automotive business has actually shown a decline. So if you could just give me some reason as to why that has happened? And second reason and the second Question that I have and if you could just provide the overall outlook on your automotive business going forward. The second question I have is on margins. The company continues to be surprised on the upside. So if I were to look at your adjusted margin, they are still 30% plus. And I think they are About the band that you have sort of provided of 25% to 27% EBITDA margin band, Is there a need to sort of relook at that band and probably revise it upwards given the fact that you've been very In reporting these numbers, this is notwithstanding the eventual salary hikes or wage hikes that we see next quarter. And lastly, if you could just give us the base hike number that you are planning to do in Q2 of FY 2022? Thanks. Sure. I'll take the EV question first. So from a wage hike perspective, I think it will be in line with what we have done in the last We are about 7% to 8%, that will be the rate hike and the rate hike will be effective from July 1, right. From a margin perspective, yes, if you look at adjusted margins, yes, I think We are in line with what we delivered in the last quarter. However, again, I would come to the situation that look, these are extraordinary times. There will be Expenses which will come up once travel and everything starts. So I think we are pretty comfortable with what we reported in this quarter. And that is something that we would focus on. Regarding the top customers, I think The automotive industry in general has picked up for us, so which is good and we have been Continuing our growth from the previous two quarters. If you look at it when COVID hit, Most of our competition both in India as well as abroad had a revenue dip of anywhere between minus 10% to minus 6% And so but we managed to be almost flat, right? So from that we have grown, I think we have grown Almost 3%, right? So that is a very creditable growth. Again, you have inferred You had inferred the top customer at 12%. I think that is I would like to say that That is a wrong inference that you have taken. The customer that you have indicated is not a tough customer. So from that asset, all your assumptions have gone wrong. So you need to really look at it. Okay. So I mean if you talk What are top customer? Basically, okay, fair enough. I'll probably get back to the queue. I'll probably take the next question offline then. Thanks Sure. Thank you. Thank you. The next question is from the line of Bharat Sheth from Quest Investment. Please go ahead. Hi, Mr. Raghwan and Nitin, Same, good congratulations on good set of number. Thank you, sir. Mr. Raghavan, see you In this last two quarters, we have added more than 1,000 employees, which is roughly around 15% of the Total employee as of June 30. So how do that inferred or I mean From the growth perspective, since we are on very good strong order book, so if one has to really look at, I mean, Medium term, our growth number, this quarter we have grown 7% and if we continue to do, So our growth number would be anywhere annual should be around what we were inspiring about 30% plus. So do you think it is This number indicate those kind of things? Yes. So The fact that we have been adding significant headcounts would give you an indication of how We see our business and how confident we are on our business. So what we are doing is we are building capacity to The address the pipeline that we see and address the deals that we have already won and that shows the confidence that We are moving in the right direction. Whether we will achieve the numbers that we have talked about, that is secondary, right? But We are doing what right now what we see. We see the pipeline, we see the strong order book that we have and we are building capacity to address what we have. Please address what we have. Okay. And second question, in this quarter, we have done 1, a new deal of including EV space also. So how do we one has to really Which earlier was not very I mean, we were talking much on the EV side also. So with the side of the play, how do we really look at our company? No, if you look at automotive industry, Automotive industry is moving the electric vehicles there, right, JV. Most companies, most OEMs, most suppliers are investing in that. So I think there was a little bit of a slowness because of COVID and because of all the structural issues in the industry. We see all of that slowly Situation improving and we see a lot of deals coming our way. So and we have been preparing for this and we have been And I don't think this is the first deal that we have, right? We have already we have had earlier deals also in the space. But we are calling it out now as because these are significant deals for us and we hope that will help us as the automotive industry recovers And investments begin to flow in and we are ready to catch on the opportunities that come our way and deliver value to our customers. So that's the way I see it. And last question, I mean, when we say large deal, can it be upward over €25,000,000 or When we what is our definition for the large deal, if you can give some color? No, large deal, when we say, see, many of the deals when we start off, Unlike IT deals or I mean I don't know that even a few of our competition talks about large deals, But those are typically projected deals, right, assuming that the deal will go on for 3 years or 5 years. But typically in our space, in the engineering space, Customers would start off with about 12 months sort of an opportunity. And then as the engagement As we grow that particular engagement, it converts into a multiyear opportunity and so on. So in my view, if the deal is around 5,000,000, Especially a new customer, I would consider it as a large deal. Thank you. We would request the current participant to please come back in the question queue for any follow-up questions as we have several participants waiting for their talk. The next question is from the line of Hiren Baid from Alchemy Capital. Please go ahead. Yes. Hi, Manoj, Nitin And rest of the team, congratulations on yet another great quarter. Thank you, Hiren. I had one question Jim, on your Q on Q run rate, you mentioned Americas was 17 point Percent. I mean, that's quite staggering, right? Because and Europe was just 5.4%. So was there something in the base In Americas, that we've had a strong quarter or it's just organically a strong quarter and do we continue to see A strong run rate in the U. S. And why is Europe still lagging compared to Americas? So just wanted to understand this geographical run rate is quite differential, 17.5 and 5.4 For Europe, considering both of these are significant geographies for you? Yes. So if you look at it, Number 1, we have been investing in the U. S. Geography for quite some time, including building up sales capacity, consistency, and so on and so forth, right? Europe is also important for us, no doubt about it. But if you look at our revenue distribution, our automotive Business tends to be a lot more Europe centric and our mid end communication and healthcare business tends to be a lot more U. S. Centric. Right. So if you look at it, if you see the growth that we have had, we had the growth both in media and communication and healthcare against significant growth. And automotive also grew, but at a slower rate. So that naturally reflects in the regions also, U. S. Versus Europe. And therefore, you believe you'll continue to see strong growth in the Americas going forward? Yes. We are pretty confident the way business is going. We are pretty confident that We have done all the right things as far as U. S. Is concerned. And we hope that whether we will Has such a strong growth? It's a very difficult question to answer. But we believe we have some sustainability there and On the customer pursuits and so on, right? So all the investments that we have done, we believe will continue to help us grow our business in the U. S. We also expect Europe will recover and that's something that we will we are definitely working towards and we hope It will be driven by the new spending in the automotive customers there. Right, right. Okay, thanks. I'll come back later on. Thank you. The next question is from the line of Navin Bota, an individual investor. Please go ahead. Yes. Congratulations on the strong set of operating performance continuing from the last financial year. When we see the results and adjusted profit margins are quite good, My first question is regarding the gross incremental revenue. And against that adjusted salary increase is 5 crores. So how would you like to describe this sales due to Utilization improving or offshoring increasing or the major incremental revenues are coming from platform and licensing revenues. This is my question regarding platform and licensing revenues. How much this is contributing to operating this quarter As compared to last quarter, that is my first question. And second is regarding, sir, Our Tata Alexey Vision 2026, when we see on the public platforms, our website, Social media, we are giving data from 2021. We have various research reports, which says that this asset is going to grow 42% in 202.1% to 206% and all these things. So we would like to No. We would request you to kindly throw more light on our Vision 2026, if you it will help Investors, very well, sir. Thank you, sir. Yes. So regarding the platform and licensing, our licensing revenues are still below 5%. But that is not really the metric that we track there because we really look at how these enable us to really win new customers Or within existing customers, how does this platform and intellectual property that we have, how are we able to differentiate ourselves with With respect to competition and ensure that our business continuity is assured with some of these customers, right? Because of the investments that they made, because of the strong inclusive property that we have that is embedded In the solution that we provide for customers, it is very difficult for some of our customers To really move I mean, of course, if you're not delivering value, the customers will definitely move out. But there is definitely Carrier for them is not an AC decision. So to that extent, yes, we continue to look at the Products and inclusive properties that we have and use that to really get into new customers and also strengthen our relationship with Existing customers. Regarding Vision 2026, that is an Internal thought process inside Tata Alexey is nothing that we at this point in time that we would like to talk to investors about. It's something that we are planning on our very ambitious goals. It is in a very early stages, though we are refining it and so on. So Maybe at appropriate time, we will let you know, but there's nothing at this point in time to disclose. Appreciate, sir. Just coming back to the platform and licensing there will be, my question was basically the incremental revenue in this quarter, out of INR 40 crores, How much we would attribute to platform and licensing there? Because the salary increase is excluding the 1 month, we start INR 33 crores. Excluding INR 33 crores, just INR 5 crores. So is it due to better utilization? Yes, Utilization has improved, on-site offshore ratio the offshore on-site ratio has improved. We've also had other income that is a foreign It's in gains for that. If you look at it, all of that has helped us really bridge that gap. Okay, Okay. And my last question is regarding recently we have signed a MOU with KIM, Kerala Government Regarding our 3 year end program expansion, where we are talking about in 3 to 5 years, we're scaling up From 2,500 employees to around 7,000 employees, if you can throw more light on this MIMO which we have recently signed. So in a single city, in that 4 to 5 years, we are going to expand our current strength from, Say, RMB2500 to RMB7000. So if you can draw more light from this? Yes. I wouldn't request you to go by that. I think that is That release is done by the government of Kerala. Yes, we have signed an MoU with them. We are entering into a new AC set there. It's an extension of our current Avisit. So the Phase 1 would be about 1500 to 1600 seats, Right. So at this point of time, we are only focused on that. And maybe 2, 3 years down the line, if Things go well and as per our growth plans and so on, we have an option to take another similar facility again at the same Another 1500 or 1600 seating capacity. At this point of time, the commitment is primarily on the 1500 seating that we are looking at. And that should come maybe by end of this calendar year, December, January time frame is what we expect. Thank you. The next question is from the line of Mayank Bhakla from Dalaland Bhuta. Please go ahead. Hello. Am I audible? Yes. Yes. So who would be our direct peers in the Global space, if you could give us a name give us some names. And second question would be in terms of headcount, what would be the percentage of people on-site And offshore? And related to that, what was the utilization level during the quarter, if you could give me that? Thank you. So this is Nitin here. So maybe I'll take the first part of the question and then of course I can comment while I'll let Manoj and Gaurav take the other 2. So on the competition set, you really have to remember that we compete with a spectrum of players, right? So at one hand, we do compete with everybody who is a scaled IT player. So whether it's an Accenture, Capgemini, TCS, Wipro, HCL and so on. They've always been there. They've always had some amount of engineering work, and we continue to compete with them. We compete with different Organizations among this set in specific industries. So for example, in media and communications, we always treat Accenture as a primary competition. Similarly, Bharat Industries is somebody else. So that's layer 1. There's another layer which is specialized players, right? And those specialized players include some which are already been acquired like Altra and so on And some which are still there, Aka, Alten, Bertrand in Germany, all these represent multi industry as well as very auto or transportation focused players. Then as you come to India, of course, you have Companies like KPIT and LGTS and so on, right. So in that sense, if you look at the global landscape, we compete with 2, 3 different sets of customers sorry, competitors. India headquartered outside of India for pure play ER and D and then the large IT players are always in around. So that's a quick note on the first point. On utilization, I think we have moved up 2% from 77% to about 79%, Right. So to the earlier question from Mr. Bothra, yes, this is also one part of the reason why our margins have improved Or contributed to margin improvements. The last question was on on-site offshore. I think headcount perspective, I think about 10% of our employees are on-site. I mean, approximately 90% is offshore. Thank you so much, sir, and congrats and best of luck for the rest of the year. Thank you. Thank you. Thank you. The next question is from the line of Sanjay S. From Ampersand. Please go ahead. Yes, sir. Congratulations on a very strong growth. I just noticed that your accretion level has gone up quite a lot 5Q announcing such a massive bonus, is it because employees have become quite restive about Opportunities outside? Yes. So the market, as you know, is very hot right now, right? If you look at it, most companies' competition, everybody has Shown attrition because like 15% to 15% and so on. So yes, there are lots more opportunities for Employees, given the fact that everybody is working from home and so on. And earlier, if you're based in Bangalore, typically you would look for work only in Bangalore. But right now, No, situation as I said, you can look for work in maybe next 12 months to 18 months. Most companies would allow people to work from home. So So there are a lot more options for employees. So definitely attrition is picking up and that's industry issue, it's not a Tata Lecks issue alone. But are you comfortable with the rate that you were planning, which is similar to last year Despite this change in attrition level? No. The wage hike, as I said, is an average Right. So we know who are the key people and we will do we will ensure that our key people continue with us. Okay. I said Just two more questions. I noticed that your revenue from engaged industries has fallen sequentially from this quarter. Is it has it got something to do with COVID? Like otherwise your numbers should have been better. Yes. It is not just in India, but yes, India also, right? Yes. So yes, COVID is definitely one of the issues that resulted in numbers showing that. So is it a loss of revenue or you will be able to kind of bring it get that back in quarter We hope that we'll be able to bring that back. Again, it depends on if there's going to be a wave 3 or not and so on and so forth. Okay. And the last question is that your offshore mix has improved quite substantially, but you are thinking that once travel So something will change. But do you think that there will be again the option mix will go down to previous levels or it will stay at around this level Despite travel lifting up? Once the travel lifts, then we will definitely see an increase in our on-site Because even though a lot of our customers have got comfortable with Tata Electric delivering value from offshore, But still there are a few customers who would prefer engineers being closer to them and so on. So yes, if travel restrictions are removed, there will be some Increase in our on-site numbers, but it may not be it may not go back to the pre COVID, so it will settle some In between, I would say. Thanks a lot, sir. If I can just ask last question that you just said that you have Prepared or are we about to prepare vision statement for 2026? While you don't have to really give us numbers or anything, Can we just get some thoughts like what really is going to set that vision statement? The vision statement definitely we have our own as employees as senior management, we have our own aspirations for this company, right? Of course, we have that is the Tata Group from our Board of Directors and so on. Also, there are Aspirations in terms of where this company can go. Then there is the whole market, the whole the business out there That we can tap into. So it's a combination of all of this. And we believe that there is Significant growth potential and significant opportunities for us to tap into. So we are working on those lines. Understood. Thanks a lot and all the best. Thank you. The next question is from the line of Anish Numba from JST Investment. Please go ahead. Yes. Good afternoon, sir. So my first question is, so we have observed that most of the global auto companies are facing huge supply chain pressures due to the semiconductor issues and much of their cash flows have evaporated. So this situation looks to be over in the next will be over in the next 18 months and not before that until the new foundry capacity will come online. So what makes the OEMs continue to spend hefty amounts To be future ready when they will continue to face VUKA type situations on a consistent basis. And what would you attribute to us gaining market share in a degrowing auto ER and D market? Thank you. Maybe I can take that first. On one hand, you have to note that certain short term pains cannot be Cannot have magical answers in the short term either, right? So for example, if you're looking at the kind of electronic software and hardware that goes into cars, And that is where the chip shortage comes from. The ability to substitute one component for the other or one product for the other is not very easy And nor is it going to deliver in the short term either, right? So to some extent, there are some measures going on. There is some participation from our side in some of these switchover programs. But we also know that there are no short term or magical fixes, right? So that is part 1. R2, if you look at customers and R and D spend, yes, of course, R and D spend is always discretionary. I can choose not to continue to do any R and D, But that is not true. All companies have to do R and D because you will be that much more of a dinosaur 2 years later if you decided that you want to stop everything from now, Right. Equally, what I will decide on even as I reduce R and D spend is where do I want to spend it on. And I think that alignment is important. That if we are aligned and we deliver services in the areas that they would want to invest and where they see the future, then you're in a good place. If you are in a place where it is that particular R and D spend brings does not bring as much bang for the buck in the future, yes, you would find yourself cut out. So I believe based on this, we are in a reasonably good place especially set for the future. Thank you, sir. So my next question will be, what are the initiatives other than the INR 33 crores one time bonus that the company has undertaken to showcase the best attrition rates in the industry and that too quite consistently. So do you see it as a big risk Going forward that there is a supply demand mismatch for good engineers, which will lead to higher than expected inflation in the upcoming years. So what's the plan for the company to Increase its employees from the current 8,000 odd to 50,000 or the 20,000 or 50,000. What are the 20,000 or 20,000? To increase the pace of To increase the employees number from the current 8,000 and also deliver consistent numbers regarding the attrition? Sure, sure. So attrition is a function of many, many parameters, right, Including the market situation, including the competition play, including the investments by multinational companies and so on and so forth, right? But we have been through these cycles multiple times. This is not the first time that we're seeing attrition go up. Even in Tata Alexey, we have seen earlier Up to 15% and so on and we have been able to manage attrition. So we will continue to do it. Why do employees continue to work with us? This is primarily because the quality of work, the sort of employee friendly policies that we have, It's all of open communication that we have with all our employees. And in effect, it's like a we are like one Big family wherein each one of us support each other to ensure that ultimately the company moves forward in the right way. So I'm extremely proud of the culture that we have built in this organization and a lot of that will help us As we move forward, of course, we are investing in our employees. We've done the as I said, we've done A bonus for our employees to ensure that during the tough times, right, especially when COVID was hitting, we took care of our employees. We've had lot of support for employees from medical Whatever services that we have provided, the vaccination camps that we have run, the sort of Mental health campaigns that we have provided for employees. There are a number of things that we do to take care of employees. So it is not just money at the end of the day. It is what do employees feel about working for us. And I'm proud that look We did an employee satisfaction survey in the midst of COVID and COVID is happening, we did that survey. And as compared to the previous survey, We increased our employee satisfaction points by almost 22%. So that is a pretty significant thing that shows that employees are committed and Value working with us, right? So yes, there will be short term issues, short term pain, slightly higher attrition. But I think in the long term, I think we have a great culture that we're building here and definitely the quality of work We'll motivate good engineers to really come and work with us, right? So yes, and moving forward, we will definitely take this as and when we see So, attritional speaking, we would take care of it. We have hand and feet eyes and ears on the ground. So we will take appropriate action. Yes, noted, sir. Thank you so much. Thank you. The next question is from the line of Pranav Thakkar, an individual investor. Sir. Please go ahead. Yes. Thank you for the opportunity and congratulations for a great set of numbers. I would if you can throw some light on the opportunities that lies within India, especially with EV initiative and how in growing Tata Lx with Tata Motors And also if there are some opportunities lies with the Indian Railways? Sure. Both I mean we are Tata Motors is an existing customer of ours and we look at that opportunity Especially as Tata Motors move pivoting to the EV space, that will definitely be A significant role for us. So that's something that we are discussing with Tata Motors. Of course, not just with Tata Motors, but there are a number of other customers also in India. So I think we are pretty confident that there will be recovery in this space, especially in India. And a company like us would stand to benefit because of the deep domain knowledge and capability that we have been building And our experience with global customers, which will definitely help us deliver value to our Indian customers, right? Railways, Indian Railways is something that we have been working with for quite some time. We have been working on especially from improving The station infrastructure and we have done a number of projects for railways and also for companies that supply into railways, right. So we have been already working. And I think as modernization happens and as government spends a lot more money on there, We have a very good opportunity to really get a buy of that. Right. And a follow-up question to this That how many automotive players like exactly if you can give number of accounts Tata Alexey is Specifically number of accounts, I don't think I'll be even a question To tell you that, but I can say 5 of the top 10 OEMs are our customers and 8 of the top 20 suppliers are our customers. Thank you so much and all the best. Thank you. Thank you. The next question is from the line of Ashish Agarwal from Principal India. Please go ahead. Yes. Thank you. So just one clarification, most of my questions have been answered. So one of the other questions you mentioned and you indicated that the top client is not from the auto vertical. Just wanted to get some clarification, if that would mean given the fact that we are expecting more than $13,000,000 of revenue from JLR this in FY 2022, Will that mean that the top 2 customer will be down around 25% of our revenue? Sorry, the question was not clear at all. What is the 25%? See, in one of the examples you mentioned that The top client is not from the auto vertical, right? So if we are expecting more than $13,000,000 of revenue from D and In FY 2022, so that would mean that top 2 customer will be closer to 25% of our annual revenues. Am I right in what you mean there? If JLR gives $30,000,000 is that what you're saying? Yes. So, JLR is not a top customer and it's common Maybe I can't do the math immediately, but yes, between 20%, 25% you can say. The first question will be dotted line in the number. Yes. Okay, got it. Thanks. So which vertical will be the top line now? It's in the Media and Communication vertical. Media and Communication. Okay. Got it. Thank you. The next question is from the line of Apurva Prasad from HDFC Securities. Please go ahead. Hi, good afternoon. I hope I'm audible. Yes, Apurva. Go ahead. Great. So congratulations on the number. Manoj, just 2, 3 questions from my side. So I mean, I noticed a strong sort of number of strategic partnerships In the release, so in terms of nature of deals, it does appear that deal sizes are increasing, becoming more strategic. So based on the overall demand environment and the kind of wins and the overall pipeline, do you think Fair to assume similar sort of sequential run rate can be maintained in the near term? That is the intent, but there are no assurances in this business, right? So we are doing everything we can to really Keep up that growth momentum. But any color on terms of deals and how that is progressing to Gift card for desktop. I mean, as we sit today, we really have a very, very strong order book. And that is that confidence that we can continue to grow at least in the short term, right? And you would have seen the performance in the last four quarters. Right. And Secondly, this is more from a group entity's perspective. So we've heard TCS as a group entity Focusing a lot more on areas which are core competency areas of Tata Lx. So I'm referring to connected EVA DAS segment Or it is the OTT based on some of the deals that has been out. So 2 part question to that. Is there a joint go to market with TCS in automotive and the OTT side? Or If the related entity is competition, is there any demarcation really to avoid overlaps? So there is no demarcation or there is no collaboration per se, right? It's again deal to deal. We collaborate. We Coexist, we compete, it's all everything together, right? But however, it is not just only about PCS, right? You look at the global So, let's see. I mean, the last 3, 4 years, ER and D segment has always been touted as a fastest growing segment. And you know that companies like Accenture or Capgemini, they have made a number of acquisitions to really strengthen the ER and D space. So it's not just about PCS. We see this focus on the R and D from all the big IT players. And not just that, We've always had strong companies like Wipro, HCL, TechEm and so on also getting a good Percentage of the revenue from the ER and D space. So this is not something new. The large IT players have always been competition and we continue to see the competition. And we have to really deliver value and what based on our value proportion and based on our core competencies, Customers decide to work with us and not with the large IT companies, right? So this has always been there. It is not new for us. Got it. Got it. And just your comments on strong growth in top 5. So you did talk about Top account, but broadly on top 5 showed very strong growth. So has there been a John, within that or are there any driving factors which you can talk about? No. So when COVID hit us right, We really took extra care to ensure that the relationship with the top 5 and the top 10 customers, We've ensured that we do everything possible to address their customers address their requirements, right? So as I said, I think in Q1 of last year and so on, right, we even had Discounts and rate cuts and so on, so that we take care of those customers. So what has happened is that Because of all that we have done to really be with the customers during their tough times, each of these customers Now we have a far deeper engagement with them. We have a lot if you look at it, we have done extremely well in mining these Customer relationships and strengthening these customer relationships and that really has helped us deliver the growth that we are seeing. So I think it is and then we are now strategic to each of these customers. So I think that is something that We're very proud of and we would want to continue. Got it. And just finally on margins, just wanted to get your That's correct. You said that you're comfortable with margins where they are currently, notwithstanding the way it impact and some of the discretionary spend increasing? Sure. I think we would strive. I mean, unless suddenly everything opens up Well, our SG and A goes up, our travel budget goes up and so on. We should be pretty confident or comfortable with what I would say. The next question is from the line of Hansel Heffert from Lebarge Securities. Yes. Thank you so much And congratulations to the management. So I'll just take Mr. Apurva's question a little further. Apart from TCS, Tata Technologies has also expressed their interest in venturing into mobility. So I just wanted to understand essentially at a group level, I mean, what is the broad strategy? No. See, whether it's Tata Technology or whether it's TCS, they are different companies. We are a different company, right? So we really cannot tell what that company should do or That company shouldn't do. So we have to focus on our business and that's what we have been doing. Okay. Got it, sir. Thanks so much. Thank you. The next question is from the line of Arjun Balakrishnan, an individual investor. Please go ahead. Yes. Thanks a lot for the opportunity and congratulations on a great set of numbers. I have two questions. One is on the and congrats on the 3 product award on the NASSCOM. So on these products, are we trying to pivot from being an ER and D service company to eventually being A product and a licensing company with services being a portion of the revenue, thereby we can expand margins? No, we are not getting into the we are not trying to be a product company in the sense that Significant part of our revenue is coming in from products, right? No. Products for us are enablers to really build services around that and help our customers It's time to market and so on, right? So we don't want to compete with our customers. If you become if you start launching your own product, sometimes in this industry, customers will start worrying whether is this a company that We need to work with we'll get worried about helping a competitor, right, Build up capability. So we would not we would never be a full fledged product company. However, we'll continue to build products and inclusive properties That will help us make a meaningful impact from a value delivery perspective to our customers. And that's the intention. Right. So all of these platforms and these things that we develop is more for our delivery rather than giving it to the Similar and getting revenue as licensing. So with more thought and things are better, is it? Yes. We definitely license these in case of software platforms to customers, but it is not a product by itself. Around it, we need to build a product. So these are you can say like building blocks or stepping stones. Right, okay. Okay, finally one question is No, because we have we are working with our existing customers and deeper as you said. Just to understand from the customer's perspective, how Expense would need to be switched from, say, a partner like Tata Alexey to another partner. How would switching costs work for them? I'm trying to understand what is the competitive advantage. So can you throw some light on how strategic we are for the customers and how difficult it is for them to switch from Say Lx to somebody else who probably offers a lower price or something like that. I'm trying to understand if you want to. Yes. So we are in the ER and D space, Right. This is very different from the IT space. In IT space, it's typically the platform is already built that is you need to maintain or Take a bank or any of the applications, right? So all it needs is some domain knowledge and skills on around programming languages or databases and So and switching costs is not very different and many of the You can replace one competitor, can easily replace other by providing value which could be price or anything else or some IPs that they have and so on. But in the case of R and D services, it is also to do with the relationship that you build with the customer over a long time. See, R and D is like and globally also it is known, right? Not all R and D succeed. So if you have a partner with whom We have built that relationship and we have been delivering value and success to that customer. It is a lot of risk for them to move away from us and go into another relationship, especially because The nature of work, the processes, the type of people that we have, there is a confidence that is already built In with the customer. So that is something unless the product development is not a very complex product, Unless it is say maintenance or a support sort of activities where domain knowledge is really not very, very critical and so on. It is relatively not easy to make that switch. But however, there are some of these large organizations that Go ahead and do a vendor consolidation or do some such activity, right, primarily driven by the IT start process. But every such case, we have seen whether it is a large deal that you have read in papers over the last 5, 6 quarters, especially in the engineering space, have not really been successful because though it is all pushed by the procurement of the finance guys, The engineering guys feel that this is not the right way to move forward because That's very concerning to you. Yes. Yes. So even though there have been competition that comes and says that look we have won over a deal over Tata Alexey, for example, I can confidently say that we continue to exist in all those engagements and we continue to deliver value. Thanks a lot for those answers. Thank you. Thank you. The next question is from the line of mavesh from Karakin Industries. Please go ahead. Pavesh, the line is in top mode. You can go ahead, please. Due to no response, we can move to the next question, which is from the line of Vimal Gogul from Union Asset Management. Please go ahead. Great, sir. Thank you so much for the opportunity once again. Sir, over the past few quarters, you've been alluding to some opportunities In some newer areas in automotive. So if you can just highlight what has there been any progress there? I know it may be too early to ask, but at one point of time, even medical devices was strong and today it is one of your key revenue drivers. So maybe if we are at that stage in those segments as well in automotive, if you could highlight that. And secondly, I just wanted one data point. You said that your effort mix currently is at 10% on-site, 90% offshore. What was this mix pre COVID, if If you could just give me that data. Thank you. Sure. Maybe I can take both. I can start with the second one first. In some sense, it will be directly proportional to the revenue, right? Because what we declared on the website is revenue. About 25%? Yes, correct. So in some sense, you will find that it's there is some correspondence directly of revenue to people. So you can use the same percentage. Pre COVID, I think one side would have been anywhere between 25% to 30% or so. Correct. And you don't see this going back anytime now. I mean, this is a structural change that will happen. Maybe some 5% maybe 2%, 5% here and there, but it's definitely not going to 25% to 30%. Yes, yes. That's what we Not going to 25 to 30. Yes, yes. That's what we said. Got it, got it. Perfect. Yes. And on the first What I presume you're calling out the adjacencies in transportation, which is rail and off road. And I think Like we said, we want that to be to accelerate faster than the core vertical, automotive, Not because we want to grow automotive slower, but we believe that growth is faster and possible in these two other segments that we have called. And the other reason why we celebrated those were also because skill sets are complementary. We can carry over skills and capabilities to deploy it in automotive into these sectors. And we are measuring only 2 metrics, right? 1 is total revenue composition. How much of volume does it contribute? And is that changing? Is that accelerating? And 2, are we acquiring the right logos? Because those industries are obviously much smaller. So we need to acquire those, If I may call it premium logos in those segments. And I think we are doing very well on both counts. So would you want to quantify it right now? How much does it contribute? Or is it too early to or it's not meaningful right now? It is not meaningful, right, but in the sense that we have sent very, very definite parameters, and we expect that there'll be a time where we can start to call that out separately like we call medical 1? Until that point, I think it does not provide any great insight Two call out numbers on that front. Perfect. Perfect. Thank you so much once again. All the best. Thank you, Amit. Thank you. That was the last question. I would now like to hand the conference over to Mr. Manoj Sharpen for closing comments. Thank you all for your patience and I hope you were able to Thanks for the questions and answer all your queries. We look forward to meeting you again in the next quarter. Take care till then. Bye bye. Thank you. On behalf of Tata LxB, that concludes this conference. Thanks everyone for joining us and you may now disconnect your lines.