Ladies and gentlemen, good day and welcome to the Cyient Limited Q4 FY24 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and anyone who wishes to ask a question may enter star and one on the touchtone phone. To remove yourself from the queue, please enter * and 2. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to the Executive Vice Chairman and Managing Director of Cyient Limited, Mr. Krishna Bodanapu. Thank you, and over to you, sir.
Thank you very much, and good evening, ladies and gentlemen, and welcome to Cyient Limited's Earnings Call for the Fourth Quarter of Financial Year 2024. I'm Krishna Bodanapu, Executive Vice Chairman and Managing Director. Present with me on this call are Mr. Karthik Natarajan, Executive Director and CEO, and Mr. Prabhakar Atla, President and CFO. Before we begin, I would like to mention that some of the statements made in today's discussions may be forward-looking in nature and may involve risks and uncertainty. A detailed statement in this regard is available in our investor update, which has been emailed to you and is also posted on our website. This call will be accompanied with an earnings presentation, and the details of those have already been shared with you.
If I may take a minute to quickly highlight some of the key achievements for this quarter, we signed a strategic partnership with Deutsche Aircraft Group, or DAG, which will include detailed design for manufacturing for the rear fuselage for the new 40-seater turboprop aircraft that DAG is now building. We're excited for this partnership to support the development of this new aircraft, which is a once-in-a-lifetime new development that is coming up. Our involvement underscores our commitment and our capability in delivering innovative engineering services in the aerospace sector, which, as you know, is core to our organization and core to our strength.
Our expertise in this area will play a critical role in the development of this new aircraft, and it's also very gratifying to hear from them that much of this aircraft will be designed and manufactured in India at a component level before it's finally system-integrated in Germany. So that's a very key event that we're very proud of. We also signed a new long-term relationship with Airbus, where we will partner for the Cabin Information Display System . This will last for. It's a 16-year contract, so it's a very long-term contract. And Airbus is moving towards intelligent and digital cabin management, and they've chosen us as a partner because of our positioning of intelligent engineering solutions. Of course, it's not just a positioning or our capability and ability to generate intelligent engineering solutions.
This will be above and beyond our current engagement with Airbus, which is more in the traditional engineering hardware-software development phase. We've also been ranked as a leader and a noteworthy player for the overall ER&D in North America and Europe, as you know, zones for ER&D services. We were recognized for our innovation in solution development in a range of industries spanning aerospace, automotive, semiconductor, and telehealth, among others. In a significant achievement, we also debuted in the data analytics and AI with a leadership ranking. This recognition is another great testament because, as many of you know, does a very comprehensive assessment and ranking, and it's a great testament of our capabilities and our industrial expertise and, of course, the innovation that we bring to the table. I'm also happy to announce the final dividend of INR 18 per share.
The board has approved it and will recommend to the shareholders for their approval. It's INR 18, which brings the total to INR 30 per share, which is the highest dividend that we've ever paid. So overall, things look quite good for the future. Of course, we will talk about the Q4 numbers and give you a bit of background to the Q4 numbers, but more importantly, give you the forecast for how or give you the view for how the next financial year will evolve and also give you some detail behind what gives us the confidence that we will continue to execute at an excellent level. With this, I'll hand over this call to Prabhakar, who will take us through the financial performance report in the future.
Thank you, Krishna. Hello, everyone. I hope you're all doing well. Thank you very much for your time today and for your kind participation in the call today. Given that this is the end of the earnings call, we will present two sets of data, one for the quarter ending March 2024, which is essentially Q4 FY24, and the other for full year FY24. The focus of this call will be Cyient DET. Just so that we have enough time for Q&A, I'll only call out the key numbers in each page in terms of full and detailed commentary, and the nomenclature of our businesses remains the same as in the previous call. The page in front of you presents the key metrics for DET for Q4 FY24 in dashboard format.
The Q4 FY24 dollar revenue for DET stood at $179.3 million, a QoQ degrowth of 0.5% in constant currency, and a YoY growth of 1.8% in constant currency. In rupee terms, this revenue stood at INR 1,489 crore with a QoQ degrowth of 0.1% and YoY growth of 2.8%. This Q4 revenue was lower than our expectations, and this is just a our aerospace business after seven continuous quarters of growth and a flattish quarter in Q4, and the recovery in communications business was back-ended during the quarter. Karthik will cover these moments in more detail in the later part of the call, but I would like to underline that in our view, the underlying medium and long-term opportunities and momentum in DET space remain quite solid and very much intact. The Q4 FY24 DET EBIT margin stood at 16%, up by 90 bps YoY.
As you will notice, there is no normalization done in this quarter in line with the commentary provided by us in the previous quarter. Also, you will see that we were able to hold the EBIT line despite the QoQ momentum revenue. While this then makes it the fourth consecutive quarter of 16% EBIT for DET, I'd like to mention that going forward, we intend to sharpen our focus on further strengthening our investment towards growth. The Q4 FY24 PAT for DET stands at INR 173 crore, translating into a growth of 9.1% year-on-year. This also translates into an EPS of INR 15.79 per Cyient DET. The Q4 FY24 DET FCF stood at INR 232 crore, our best-ever quarter, with a growth of 25.6% year-on-year. In the next chart, we'll also see that our full-year FCF has significantly improved year-on-year.
The next chart presents the full-year numbers for Cyient DET, the full-year FY24 numbers. The DET FY24 dollar revenue stood at $713.9 million, a year-on-year growth of 12.6% in constant currency. In rupee terms, this revenue stood at INR 5,911 crore, INR 5,911 crore, with a YoY growth of 16%. Given that the Q4 revenue was lower than our initial expectations, the full-year revenue performance was also below the previously guided range, while we have endeavored to ensure that the margin momentum and the earnings trajectory are intact. The DET FY24 EBIT margin stood at 16.1%, up by 2.6% year-on-year. As we discussed in detail in the previous earnings call and in our Investor Day, the significant expansion was made possible due to a number of focus initiatives executed through FY23 and FY24.
We will now endeavor to maintain this as a platform for FY25 as we sharpen focus on investing further into growth. The DET FY24 normalized PAT stands at INR 689 crore, translating into a growth of 31.6% year-on-year. This also translates into an EPS of INR 62.84 per Cyient DET on a normalized basis. The DET FY24 free cash flow stood at INR 754 crore, our best-ever, with a significant improvement of 71% year-on-year. Before I close the full-year chart, I'd like to draw your attention to the balanced progression of various metrics through the years. With a revenue growth of 1.6% in constant currency, EBIT margin expanded by 2.6% year-on-year, and earnings grew by 31% year-on-year. While retaining focus on free cash flow.
Ladies and gentlemen, please stay connected. The line for the management has dropped. We'll reconnect the line quickly. Thank you. Ladies and gentlemen, we have the management line reconnected. You can go ahead, sir.
My apologies for the drop-off. I'd like to continue where we left. Before I close the full-year chart for DET, I'd like to draw your attention to the balanced progression of various metrics through the years. With a revenue growth of 12.6% in constant currency, EBIT margin expanded by 2.6% year-over-year, and earnings grew by 31% year-over-year, while retaining the focus on FCF, which also improved by 71% year-over-year. We believe that this is a good demonstration of balanced performance, especially in the face of what is an uncertain and challenging operating environment in FY2024. The group numbers that you see in the following page are a combination of all three segments we have, including Cyient DLM. I'll just call out one comment on Q4 numbers for group.
Group revenue stood at INR 1,861 crore for Q4 FY 2024, which is a growth of 6.2% year-on-year in constant currency, with an EBIT growth of 7.4% year-on-year and PAT growth of 7.5% year-on-year. With the recovery of FCF in DLM business, which we have commented upon in the previous call, you'll also see that the QoQ movement in FCF is very significant, with a year-on-year growth of 45%. Now, in the next page, for a quick look at the full-year numbers for the group, FY 2024 was a very interesting and a very exciting year for Cyient as a group. This year saw us making clear choices of who we want to be, where we want to play, and how we execute our strategy.
Some of the important milestones for us along this chosen path, as you all know, are: one, the DLM reverse tickets; two, the development of a balanced portfolio for DET business; three, conscious focus on margin improvement; and four, focusing on investing into future growth. Therefore, for us, FY24 group performance, in some sense, is a testing ground, a testimony, and perhaps even a trajectory of our long-term approach. As you can see from the numbers in this page, group revenues for FY24 stood at $863 million, a growth of 15.6% year-over-year in constant currency, driven by balanced growth across our portfolio of DET and DLM. This is the highest-ever revenue for the group.
While at that, the group EBIT stood at 14.5%, with a healthy expansion of 173 basis points year-over-year, which is the highest EBIT we've had for the group for the last 10 years. Group PAT stood at INR 735 crore, representing a growth of 30% year-over-year, and this is the highest-ever PAT for the group. The FCF also has improved significantly by 32.6% year-over-year. While these are objective metrics, we also have sharpened our focus on building a longer-term sustainable core to our business, especially in the areas of ESG and financial discipline, which we will talk a bit more about in the next page. The next page presents the progress we are making along three important dimensions of our business, and much of this commentary is specific to DET. The first is on ESG.
As you all know, being a responsible corporate business has always been the guiding principle of our business philosophy since our inception 33 years ago. Our social consciousness has always been an integral part of our purpose and has played an important role in how we shape our business and our culture. The Dow Jones Sustainability Index, DJSI as it is called, as you all know, is a highly trusted and a very comprehensive index that captures the ESG focus of various organizations across the globe. We're happy to report that Cyient's score this year in this index stood at 72, and within that, we were an industry best quartile on the social front. The score of 72 is also an improvement from the score of 66 we had last year, and that last year was also the first year we were rated under this index.
We also continue to focus on our passion to support education of underprivileged children, with special focus on girls' early education and empowerment. We're very happy. And if I may say, we're also very proud to report that we now support over 21,000 underprivileged children in their educational endeavors, and we are looking forward to welcome some of them into our future workforce. A more detailed report on Cyient's ESG initiatives and the progress we made has already been published and made available on our website, and I would like to invite you all to go through this. The second dimension, as you can see from this chart, is our focus on free cash flow. We've already talked about this in the previous pages, especially on the improvement.
So I will not comment further on this, except to say that cash generation needs and will continue to remain a key focus area for us going forward. I'd like to spend a bit more time on the PE ratio improvement year-over-year. The Net Debt ratio, which was 0.24 at the end of FY 2023, has now improved to 0.12 at the end of FY 2024. The Net Debt position, which was $94 million at the end of FY 2023, now stands at $54 million at the end of FY 2024. This was made possible since we retired about $40 million of debt within FY 2024, and we have leveraged our focus on cash generation, which we talked about earlier, to retire debt proactively. We will continue to focus on this in FY 2025 as well.
We're also very happy to announce a final dividend of INR 18 per share, which translates into a full-year dividend of INR 30 per share. With this, I would like to thank you again for your time and for all your zeal and support as we navigated an interesting and equally challenging FY 2024. We look forward to your continued support and your engagement, and I do hope that we have earned the privilege of your time and your attention. With this, I'll hand it over to Karthik for a more detailed commentary on DET performance.
Thank you, Prabhakar. I hope all of you are doing well. Hope you can hear me.
On top of what we started working for the last 2.5 years about getting our digital and technology solutions team in place and our ability to really have more customer conversations around the transformation that they are going through, and how do you think we are able to really bring some of the solutions which are cutting edge. We inaugurated our customer experience center during last quarter, and that's one of the key milestones for us. Moving forward, like Prabhakar Krishna talked about, the important partnerships in aerospace with Airbus and Deutsche Aircraft and on the Intelligent Connected Cabin platform development, as well as supporting on the new aircraft platform. Also, happy to share the 2 large deals that we have been able to deliver in Q4 on top of the 9 that we delivered for Q4 overall.
I just want to highlight on the two of them. One is about the Digital Aftermarket Platform , mapping the customer journey. This is with one of our top customers. This is going to be run over the next five years, and it's a very interesting project that would really establish us as a digital engineering leader in this segment. We would also be able to take some of this offering to the entire set of customers that we operate in today. Also, the second deal that I would like to highlight is about next-generation Intelligent Smart Meter, which has edge compute platform, and we'll build a complete SoC and the software that goes around it.
This is one of the end-to-end deals that we have been engaged with the customer for the last six months, and we have been able to close on this deal last quarter. On back of what we have seen in the entire 12 months, and the growth was led by aerospace, sustainability, and automotive, and we are pleased to note that we have been able to see the growth that we have seen for the extent of 12.6% year-over-year consistency growth, and also some of the investment that we started making are starting to play out. Also, happy to report about 1,000+ leaders who have been certified on generative AI, and this is one of the key initiatives we started working for the last six months.
We have also engaged some of our key decision-makers, and happy to share that 60% of our key decision-makers, which is from top 40 customers, want to see Cyient as a strategic and advisory partner in their transformation journey that they are likely to take for the next 5-10 years. So with that, and quick view on the view performance, as you can see from this chart, I'm going from left to right. I'm focused on the constant currency column. And transportation has degrown by about -1.5% on the back of the challenging rail vertical that we have been in for the last few quarters. And connectivity has shown -2.3% degrowth at $40.7 million, and sustainability at $54.1 million, which has grown about 0.7% quarter-on-quarter. And this is the eighth consecutive quarter of growth as far as sustainability vertical is concerned.
New growth areas, which is not done well in the initial part of the year, come back to growth. We hope this will continue to have the momentum for the rest of the fiscal 2025. And if you translate this at the DET level at INR 179.3 million, it's about -0.5% constant currency growth. And if you translate into year-on-year, it's translated into 1.8% growth, a strong growth delivered from sustainability vertical at 19.3%, and transport grew by 2.1%, while connectivity and new growth areas have declined year-on-year. We also have secured orders worth of INR 227.8 million in Q4. This is reported numbers at 7.1% year-on-year growth. Q to Q, this is about -6.2%. And we also won about nine large deals worth about INR 197.6 million in Q4. This is one of the highest-ever large deals that we've booked in one quarter.
Moving on again for the full year, and we have seen transportation, which ended up at $216 million, has shown a growth of 14.5% in constant currency year-on-year. Connectivity, which has been challenged in fiscal 2024, has ended up with $169 million with - 7.1% year-on-year degrowth. And sustainability, which ended up at $204.1 million, and it grew by 45.6% year-on-year. New growth areas at $124.8 million, and for the full-year basis, has shown a growth of 1.5%, resulting into 12.6% year-on-year growth. For the full-year order intake, we ended up with $902.2 million, which has shown 25.2% year-on-year growth. In a net-to-net basis, this is about 15% growth. And for the full year of fiscal 2024, we are close to 28 large deals with a total contract potential of about $435.4 million.
So this is one of the key achievements that we had, and we continue to make progress on the large deals, and we hope we'll continue to build on the momentum. And moving to look at the business performance and outlook, as all of you are aware about the macro and the challenges due to high interest rates and geopolitical uncertainty and the global demands slowing down, we do feel ER&D services is resilient, and it is likely to see an increasing demand with smart and connected ecosystems, software customization, digitization, and sustainability as important themes. And we do believe some of the initiatives that we started working on will start yielding results even in this difficult environment. We continue to see momentum in aerospace, led by manufacturing and aftermarket, more than engineering part.
We also see increased spend in defense as well as urban air mobility, and digitization continues to be one of the key topics, and we also talked about some of the deals that we closed in Q4. Connectivity, and we had a rough start for the last 12 months, and we hope we can start getting back to growth in the next financial year. Led by Aldous and Dean, we do start seeing, as Prabhakar indicated, some of the wins that we started seeing late Q4, I think, will start playing out in Q1 and Q2 of fiscal 2025. We continue to see, from the connectivity standpoint, that software-defined networking and autonomous network operations and premium customer experience are the areas customers are willing to spend. I think there is definitely a lot of cost-out programs many of the telecom operators are focused on.
Sustainability, which has done well for the last eight quarters, we continue to see a momentum on energy transition and carbon capture and alternate energy sources and decarbonization, asset management. They continue to be the key focus areas of growth, and we continue to strengthen our ability to address the sustainability opportunity, not only from the U.S. and Europe. We are also expanding into the Middle East, and we'll talk about some of them when we're part of the discussion. New growth areas. Automotive has done well for this year with the software-defined vehicle and connected platforms. Semiconductor, which is likely to see a growth due to high-performance computing and data center and cloud. Healthcare, likely to see a growth from patient monitoring, customer experience, and connected devices.
With that, happy to share some of the deals that we won and just want to pick up on two things. As part of what we started investing on the technology solutions and advisory group, which leads with customer workshops, helping the customers to define the roadmap, and some of the key wins that I would like to highlight include on the autonomous systems and process, design and development of perception systems to improve safety of the operator and mission through various set of sensors that will avoid any pollution and sign the alerts. We also are building the aftermarket kits that can be added on to any of the retrofits of the existing product as well. I'm just moving on due to lack of time, and I'll just pick up something about the next-gen connectivity.
We talked about next-generation IoT gateway and edge computing capabilities using LoRaWAN technology. We've also built a platform, which is an AI-driven, rule-based algorithm to detect anomalies in the network and configure the network elements for zero-touch configuration scripts. On the generative AI part, which is one of the key areas of investment over the last 12 months, we started seeing some of the interest from customers using generative AI to help them improve the collaboration from engineering to all other functions and also streamlining some of the processes inside the organization, as well as helping them with vision-based LLMs to comprehend the image and drawing content.
Some of the areas that we are starting to see definitely look very interesting, and generative AI will have a role to play in engineering, and we are excited about what we have been able to do in the last few months. With that, I just want to conclude by saying that what are we looking at for fiscal 2025? We understand the challenges that are seen from the industry, and we are confident that we should be in a high single-digit DET revenue growth year-over-year in constant currency terms. We expect the margins to be in the range of 16% for the financial year 2025. With that, and thank you for your time. I'll hand it over to the operator for Q&A.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sulabh Govila from Morgan Stanley. Please go ahead.
Yeah. Hi. Thanks for the opportunity. My first question is with respect to the revenue guidance. So I just wanted to understand how should we think about this guidance panning out across verticals? With respect to which verticals would you expect to do the heavy lifting for the year and which verticals would relatively lag? So whatever is the current expectation as per the guidance?
Yeah. As we talked about, we continue to see momentum from sustainability and aerospace, semiconductors, automotive, and we do expect connectivity to come back to the growth terms during this year as compared to what we have seen in fiscal 2024, almost in the same order.
Okay. Understood. And with respect to the quarterly trajectory of this guidance panning out, should we think about this year to be a back-ended growth year with respect to this guidance, or you think that the growth would be equally panned out across quarters?
We do expect some softness in the early part of the year, and it depends on how things pan out, and we should probably do well for the rest of the year. That's the current view that we are carrying.
Okay. Understood. Given that this year is a high single-digit growth year as of now, how should we think about the medium-term guidance that we had provided on the Analyst Day, which is from a 3-5-year perspective? Does that also undergo a change, or that remains intact as of now?
So we do feel that, I think, based on what we heard from our top 40 customers, and they are going through their own challenges, and they do see this is going to be a potential growth segment as we have envisaged earlier. I do feel that our medium-to-long-term growth prospects are absolutely intact. We do expect, with demographic changes that are seen in Europe, and this is going to be a great opportunity for a company like us having invested in the last two years with a lot of capabilities in Europe. We have started doubling down on Japan, and as we talked about, our entry into the Middle East, and some of these areas will continue to see momentum.
When we talked about energy transition, we do expect, while there is significant investment growing from Europe and the U.S., we do feel that the Middle East could be another potential growth opportunity that we are planning to invest on. So we do see that for the medium to long term, the growth prospects are absolutely intact.
Understood. Last, on margins, I just wanted to understand what are the areas of investments for growth that we called out in our opening remarks, which we will be investing from incremental margins that we'll get this year?
Hello. I'll take this question. As in addition to what Karthik said about your earlier question on the medium-term trajectory, in our view, the underlying drivers for the ER&D space remain very much intact, whether it is the ER&D spend growing year-over-year, the addressable market growing year-over-year, the partnership capacity increasing year-over-year, or the technology evolution driving the pace of ER&D acceleration. Those underlying drivers, and therefore the medium-term trajectory we see, completely remains intact as we have previously spoken about. Within that, the investments that we have made in the past in the technology space to accelerate the margin and revenue trajectory is where we will continue to invest in FY25 also. We're talking basically about organic investment in technology that will accelerate revenue growth and the margin trajectory.
This is what we have showcased also during the Investor Day as a part of the experience center visit that we have demonstrated.
Understood. Thanks for taking my question.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we will request you to rejoin the queue. Thank you. The next question is from the line of Kawaljeet Saluja from Kotak Securities. Please go ahead.
Yeah. Hi. My question is for Karthik. Karthik, the back-end guidance never works for the industry. The environment is challenging. You have missed your guidance, perhaps possibly in three of the last four quarters. I mean, what gives you the comfort here of going out and getting such a guidance which is back-ended all over again?
Yeah. Kawaljeet, I think we also see that many of the conversations that we have with our customers, and they do see some of the difference that are happening or getting started, which happened from Q2 to Q3 in Q4, and some of the difference that they are asking us to move to Q1, Q2. We hope some of them will still materialize. We do see that it becomes too difficult to start getting the specific quarter guidance right because of the kind of challenges that we have seen from projects getting moved to the right and getting pulled back. But we do see that the trajectory for the next year would definitely be a growth year, and based on the momentum that we have seen in three of the segments and the lack of it from other segments. And that's the reason why we said we wanted to back.
Karthik, can you correct me if I'm wrong, but I thought that normally, in this industry, your normal year visibility is the highest for the immediate quarter, and the visibility reduces as you progress through the course of the year. What you're indicating is possibly quarterly trajectory, which is uncertain. So if quarterly trajectory is uncertain, how does one give an annual guidance here?
Yeah. I think this is definitely a challenge that we have deliberated internally with our teams, Kavaljeet, and what we believe is something that we'll have to work towards during the first half of this year to ensure that we are able to define it as we move forward. And that's the reason why we want to keep it at a broad level instead of a specific number.
Okay. What are the underlying assumptions that you have made and given your experience on the guidance last year? What are the underlying assumptions and fine-tuning that you have done to ensure that you'll land up with a better outcome on your guidance this year related to last year?
Sorry. Kawaljeet, before Karthik answers, I just want to also say that what you addressed is very right. I mean, how do we get to that number and that guidance? The board also had those questions. And therefore, we did quite a bit of a deep dive internally to look at how the buildup happens, right, because what can happen in Q4, really, nobody really knows. But then there are a certain set of assumptions, and we got to the second degree of those assumptions to say, "What are the orders that we need to win? What is the probability? And therefore, can we come up or can we commit to a number?" Of course, it's a bit of a range, but can we commit to a number based on the buildup? I think your question is very valid.
And also, I just want to highlight that the board also shared that concern at the budget point. And therefore, we went into quite a bit of deep dive both as a management team and then presented the summary to the board to say, "How does it add up?" Because, of course, to your point, there's absolutely no 100% confidence in this industry or, for that matter, any industry. But the confidence comes from the fact that we've done a bottom-up rather than just a certain aspirational top-down. I just wanted to leave that because I thought that was a good question because we also had it, and we addressed it.
Yeah. That's fair. That's fair. I just wanted to get. I mean, we are in the assumptions that you have made this year and given your experience last year. How are the process of guidance and the underlying assumptions different here? Sorry, Karthik, I interrupted you. Go ahead, yeah.
Kawaljeet, I think I'll just add to what Krishna said. So if you look at last 12 months, where did we miss our forecast versus the initial guidance? Because essentially, we did not anticipate the drop in connectivity and rail. I think those are the two surprises that we saw during the year. And that's one of the key inputs that we have taken into account when we really wanted to plan for fiscal 2025. And again, we tried to map out based on order backlog, order intake, the pattern of what customers do. But I think the best estimate at this point of time is where we have arrived at.
Okay. That's fair. Thanks a lot for the inputs, everyone. Thanks a lot, Karthik.
Kavaljeet, if I may step in, Karthik, thank you for the candid question. I'll just add a few notes from my end to what Krishna and Karthik also mentioned. To your question on Q1, there are two things that we are going to watch out for. The flattishness of aerospace in Q4 was essentially because we want a lot of new business, a lot of new contracts. Now, the supply that we are building matches up with the demand that we have built. And that will take for us at least one more quarter before we see how that transfers for us to translate to revenue. Similarly, all the contracts we want at the end of Q4 for communications, we have to execute them in Q1 and to realize what is the growth that we can see in Q1 compared to Q4.
Those were the variables that we considered for Q1. But if you take a step back and the good question you had on the full-year guidance, there are three things in our mind. Firstly, if you will see, the order book we had for FY2024 is fairly strong. We closed FY2024 with an order intake which is 15% above the previous year. The order book grew by 15% year-over-year. That's a positive sign, as one might say. But that said, you also rightly pointed out a key learning here in FY2024 was the degree of macro uncertainty that we are handling. When you combine that with the two topics I mentioned before about aerosupply catch-up and comms watch for Q1, that's the second thing I'd like to say. And therefore, certainly, we've taken a cautious and pragmatic approach for the outlook.
We will go through this for Q1, and we'll come back at the end of Q2 and make an update to the trajectory as we see things progress.
Yeah. On that, Prabhakar, is the book-to-build ratio different or basically the ACV number or the order book different in FY2024 relative to the last year? So when you're saying 15% growth in order book, is it really like-for-like, or is there a change in the tenor of the deals that you have signed in FY2024?
Okay. This number is like-to-like, Kavaljeet. The thing I'd like to say is an interesting development that we see. When Karthik talked about spend being moved around in the quarters, we see a propensity of customers cutting smaller POs for shorter terms as compared to longer-period POs for a longer term. So therefore, in a way, if you were to look at it from a pragmatic perspective, in a way, the order book we have in hand should be more executable in the short term than in the previous year. But that said, I also go back to my earlier comment on the degree of macro uncertainty, which can move things a bit around. Therefore, the cautious pragmatism. So to answer your question, it's like-to-like, but we see much more shorter-term POs right now compared to the past.
Okay. That's fair. Thanks a lot, everyone, for the inputs.
Thank you. The next question is from the line of Mohit Jain from Anand Rathi. Please go ahead.
Hi. Sir, just one question on transportation. We were hoping for some growth in 4Q. So what happened here, and why this six months of flattishness in that particular vertical while we have one fuel ID?
Yeah. So sorry. Mohit, I'll answer that. And I think this is again, we still have not hit the bottom on rail. I think that is still a challenge that we are dealing with when we talk about transport. And we do continue to see momentum as far as aerospace is concerned. And also, add to what Prabhakar mentioned, we have seen seven consecutive quarters of growth in aerospace, and there is definitely a breather. And we do hope to start getting back to the growth trajectory in the later part of the year.
So now, for transportation, we are building in Q4, Q1, Q2 more or less range-bound and then look at it from a third-quarter standpoint?
We are not saying specific on how the Q1, Q2 will pan out. We do see there could be continuous growth. There are 2, 3 issues that I want to highlight where the aerospace industry is. What we have seen from 2019, I think the demand for air travel has come back, and the customer's ability to cope up with in terms of manufactured components and products as well as their ability to service, I think there is a huge demand that is piling up. The supply chain issues have not been fully rationalized, while maybe, I would say, 85%-90% of the issues have settled. But there are still issues on supply chain, and constraints on them produced is more than the demand side, which is definitely a good news. We do expect the growth to be led by manufacturing, engineering, and aftermarket.
We have talked about one of the large deals, which is one on the digital aftermarket side. We do expect the aftermarket MRO growth is robust for a few more years, and the manufacturing has to pop up and go to most of the aerospace customers today. The biggest challenge is they have more orders than what we can fulfill. We still look for solutions to improve the productivity, their ability to digitize their existing process, and the ability to get better visibility on supply chain. I think those issues are still hitting them, and they need help in all those areas.
4Q decline is purely on the rail side?
Yeah.
Okay. Last is on order backlog. We had this YoY decline despite signing these two orders. So why would we have a YoY decline in order intake?
Yeah. The order intake is the confirmed purchase orders. And when we talk about large deals, they have total contract potential. All of them may not have got converted into purchase orders. They will get converted in the due course of the year and.
Yeah. I was referring to the like-for-like YoY number that is given -6 for 4Q2024 on order intake.
Yeah. So I think Q4, like what Prabhakar said, interestingly, when we looked at Q4 of fiscal 2023, we saw at least about 5 deals of about INR 40 million, which may be beyond 12 months, 18 months, 24 months TPV. The customers are willing to give the purchase order. And the customers are cutting short in terms of the POs in Q4 of fiscal 2024, which is an interesting observation that we saw. And we hope this is only an aberration and things do get corrected as we move into the Q4.
The two deals that you have announced, that TPV is already included in 4Q number?
Yeah. Let me put it this way. The order intake of INR 224 million we are talking about, they do not include the TCP of INR 197 million we have reported as part of the large deal. Some part of this INR 197 million of large deal, which would have come as a purchase order, could be included in that.
Okay. Thank you, sir.
Look at it as a change in portfolio, right, because the growth is coming in varying locations. So we also have to look at it in the conjunction that there is a change in our portfolio, I think, like-to-like we gave so we can because some of the acquisitions are going quite well, and it was sort of a deliberate choice to go down the path of acquiring because those were the growth areas that will make up for some of the softness that we're seeing in other areas like rail or communication. So I think you have to see it in that conjunction. And the fact that it's gone up, I think, 7.1% year-on-year is a good sign for us.
Okay, sir. Thank you.
Thank you. The next question is from the line of Vibhor Singhal from Nuvama Equity. Please go ahead.
Yeah. Hi. Thanks for taking my question. Sir, just a couple of clarifications on my side. I mean, I couldn't really get the math of this deal flow that you mentioned. So in the quarterly deal flow, you're saying part of the 197 is included and part is not included?
Sir, about this $197 million, it's the total contract potential that we signed as large deals for Q4 fiscal 2024. Out of that, part of the purchase orders that we would have received is included in the order intake number.
Okay. And this would be a recurring thing? I mean, in the sense, you would include it in the purchase order and include the deal flow for this number?
Sorry. Maybe about, I would say, roughly about $30 million would have been included in the order intake, and the remaining $160 million would be delivered as part of the purchase order into the order.
Oh, next. What is the period of delivery?
Yeah.
Got that. Got that. So thank you so much. And also on the aero, just, I mean, to a little bit drill a bit more on the transport division, both aero and transport aero and rail. In aero, you mentioned that you were expecting a good demand from air travel coming back and supply chain issues also not having rationalized. So in a nutshell, do we expect aero to be a growth vertical in FY25? I'm not looking for a number, but just a direction. And similarly, in terms of rail, has the issue with the top clients been sorted, or when do we expect that rail-based vertical could actually bottom out, and we could see that going into the green again?
Yeah. We continue to hold the view that aerospace should be a growth engine for us even in fiscal 2025. We also expect, hopefully, the rail bottoms out sometime in this year. A lot of order book that is burdened by the customers has definitely been taken into account. We also see it's a matter of time that they start engaging with executing on them. I also want to call out one of the aspects that we have heard from many of our customers over the last two years, especially with the geopolitical uncertainty. A lot of money that is getting moved towards defense to ensure that the security is being the priority as compared to the infrastructure. I think some of them should probably ease out maybe later part of this year, and hopefully, that should start getting us some growth.
But having said that, we have also seen most of the rail degrowth is also led by what we have seen as offshoring, and most of the onsite work has moved to offshore. That is one of the reasons where we have seen the drop in the revenue volume.
Got it. Got it. That was the input. Just maybe one bit more on the rail segment. Again, I mean, excluding the top two clients which I mean, which work together and which are basically being a large part of the responsible large part of the degrowth, the remaining vertical, is that growing, or is that also seeing challenges from the onsite to offshore transfer that you are seeing?
Yeah. There is definitely a significant money that needs to be spent in terms of upgraded signaling in Europe. I think that's going to be a massive investment that is coming up. Only issue is it is not clearly defined yet when is it likely to start, when is it likely to end. And some of the infrastructure that we heard from customers are 30-40+ years old, and they definitely need modernization and maintaining uptime and making sure they're able to deliver on-time performance has taken a hit. And this probably should get fixed in the next few years for sure. And we will see some of this growth coming back maybe in the next few quarters as we anticipate.
Got it. Okay. Thank you, sir. Thank you so much for taking my questions, and wish you all the best.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Priyank Subramanian from Zaaba Capital. Please go ahead.
Yeah. Hi. Thanks for taking my question. So I think our constant guidance has previously been 10%-20%, and I think recently, you confidently even said that it wouldn't be below 10% for the next few years. So I'm just trying to understand, what has really changed here in four weeks, and which segment has led to this change in view?
Well, I think we've talked about we have seen maybe 20, 25 customers in the last 3, 4 months that we have engaged have kept moving things around in terms of how they really want to prioritize certain projects compared to the list of projects we are supporting them and moving some of the projects to the right or canceling a few of them. And I think this is part of the portfolio that we are trying to prioritize. We can understand where they come from. And some of our customers, the top-tier customers that we work with, we have seen that they reduce their guidance for the next 12 months given the macro uncertainties they are likely to face. So that is a leading indicator which users would use to take that while they do see growth coming probably in the next financial year.
With some of the issues around the uncertainties around the elections and plus some of the interest rate reduction that is expected this time, this year, I think they were trying to really time it maybe later part of this year on some of the investment plan. I think those are the indications that we have from our customers, and that's the basis on which we are trying to look at. I think the same question was asked by Vibor and Krishna. How do you make sure that we still keep our medium to long-term growth intact? We still hope that we should get back into that range. I think what we have seen in the last 3-6 months is definitely something that we have not seen in the last 2, 2.5 years, so which is definitely a surprise for us.
We do hope things get better as we start getting into this.
Let me also add to that, Mr. Subramanian. Thank you for the question. I just said three things. If we dial back to the commentary we've been making about our business to reduce our view was that and demands that the four themes that we have picked up, transportation, sustainability, connectivity, and usual areas of themes, have the potential to grow double-digit over a period of three to five years. That still remains very strong in terms of the potential that we see and the indicators that we see. The second thing we also said is that an annual number to extract from this multiple themes, an annual number gives a contexture to the area in which we operate, which is where we currently are.
The third thing I will say, at the expense of repeating what I mentioned in the call earlier, my apologies for that, is that order book for us is very strong for FY24. At the same time, we are leveling to FY24 in terms of the degree of macro uncertainty, and we also have to watch aerospace and communications for Q1. Therefore, we're taking a cautious and pragmatic approach as we currently guide revenue for FY25. As we execute through Q1 and Q2, we will come back at the end of Q2 and make an update as we see it appropriate contextually for the current year.
In summary, your first question, we are extremely bullish on the four themes that we have picked up in the medium term in terms of what we see around us and what we hear and what we are also seeing in the order book.
Understood. Just to follow up on that, I think the two large deals which you mentioned, is that included in the guidance?
Yeah. Part of it is included in that. And how it ramps up, we will probably evolve as the program ramps up. Yeah. So the degree where we had the order intake available, it's baked in, Subramanian. So the degree where the order still not in as part of the TCP, that is not changing. To cut it, we'll need clarification. We want to ramp up large deals in Q4. Some of them have also come with purchase orders. So the degree we have a PO, we have baked it into the order. Where we don't have a PO, we haven't baked it yet.
Understood. Understood. Given this kind of macro uncertainty, I don't really understand why are we even guiding for something in the range of like 20% and so on, right? I mean, I think 10% was supposed to be a floor that we had previously guided to the street, right? And now it seems like the floor is out of the picture, right? So just to add to that, the last question I have is, if you have done 2% this quarter, what gives you the confidence of even achieving high single-digit here?
So I'll take that, Subramanian. I think you were referring to the guidance that was provided in April of 2023, which was updated at the end of the calendar year. That's the first thing. The second thing is, our confidence comes from two things, I'd say. So the degree that we can have a confidence in the world we live in today, our confidence comes from two things. One is a strong order book, especially with key wins we had in Q4 for aerospace, which is a growing sector for us. And the second thing is, we're also presenting all the right segments which are poised for growth in the medium and long term. The four segments I spoke about before. These two are the elements on which our current view of the FY25 O2C is based on.
And I think if I also may add to that, the outlook is really based on what we see at a point in time, right? Because we also have had a lot of debates around do you give guidance or not. And again, we're trying to give you a view, I'd say, more than a guidance. It's the view of how we see the world right now. I mean, we're happy to be transparent to that degree to say, "That's what we see in the world right now," or, "That's what we see in our customer world right now." So again, if you look at the medium to long term that Prabhakar talked about, we're just as confident in our business as we were 12 months ago or 24 months ago.
But the realities of how the purchase orders come, when it comes, how it comes, changes. So if I again, it might not help with the immediate case, but I'd say if I were to venture a guess and say, "Over a five-year period, would we deliver that double-digit number?" Absolutely. There's no doubt in my mind that we will. We will obviously always have these it is just the nature of the business where you are going to have ups and downs. So we're just trying to give you a view of what we see at a point in time. And of course, we expect that you will use your judgment on top of it because this is what we see at this point in time.
Understood. Understood. No, thanks a lot for answering my questions. But just to add here, I think I wanted to add that.
Maybe the question.
Okay. Yeah. Sorry. I'm back in the queue. Thank you.
Thank you, sir. The next question is from the line of Abhishek Shindharkar from InCred Capital. Please go ahead.
Hi. Thanks for the opportunity. Just one clarification and question. Sir, can you just quantify or break the growth between organic and inorganic for 2024 as a whole? That is first. And second to Prabhakar, when you mentioned that we'll revisit investments, are we referring to M&A at this point in time? Thank you for taking my question.
Abhishek, to your second question first, no, we're not referring to investments in M&A. We're talking about organic investments we make in technology that will accelerate the revenue and the margin project you've assigned. So this is all organic, the first thing. And please answer. Your second question was?
My first question was regarding the growth, if you can break that between organic and the inorganic company.
So in this case, I have to say, very fortunately, the integration of all the entities that we acquired is completely complete. They're well-integrated part of the same ecosystem. Even for FY24, a number of things that we won were together, both in terms of order intake and revenue. So we don't have nor we should actually have any separate view of organic versus inorganic companies. Integration is complete. And if we have them, I personally believe, as a finance person, we won't achieve the objective of the acquisition. So I would like to see that also as much as anybody else. But fortunately for us, it is all well-integrated, and we're operating as one machine right now.
Got it. Thank you for taking my question, and best wishes for 2025.
Thank you very much.
Thank you. The next question is from the line of Nitin Sharma from MC Pro Research. Please go ahead.
Yeah. Hi. Thanks for taking my question. First of all, there seems to be some client loss since 3Q in the $1 million and $5 million buckets. Which vertical do you belong to?
Yeah. Nitin, I'll just clarify that. I think we have looked at this data. I think there are about. It's more of a seasonal variation we look at from last 12 months. And there are a few customers who fell to 900,000+ buckets, and that's the reason why you are seeing them as a drop in million dollars. And some of the other buckets have moved from one to another, so that's a shift that you see there.
Understood. Secondly, can you please explain what led to decline in the headcount in Q4 and how should one see it in terms of headcount addition?
Sorry to interrupt, sir. Your audio is slightly muffled. Can I request you to please use your answer, please?
Yeah. Is it better?
It's too loud, sir. Could you keep it a bit lower?
Yeah. Yeah. So can you please explain what led to decline in the headcount in Q4 and how one should see it in FY25 in terms of headcount addition?
Yeah. So I think we also looked at based on where the demand is, and we are trying to bring in as close to the agile ramp-up as possible. And also some of the attrition that we did not replace in Q4 and is the reason why you see a headcount reduction. And also, we have completed our performance management process as of January, and we also have taken some action on core performance. I think all this added up to what you see as a negative headcount. We do expect that this should start really getting into the growth trajectory during 2025.
Okay. Thank you.
Thank you. The next question is from the line of Bhavik Mehta from J.P. Morgan. Please go ahead.
Hey. Thank you. Just one question going back to the guidance. I think, Prabhakar, you said that you're taking a cautious view on the high single-digit guidance that you're provided right now. But I just want to understand, what are the risks that this high single-digit goes to, let's say, mid-single-digit over the next 3-6 months? So what are the verticals that you see things don't play out as per your expectations currently?
So Bhavik, thank you for this question. Yes, you're right. We are being very cautious and pragmatic with the learnings we had in FY2024 as we provide the outlook for FY2025. We would like to watch out for Q1 in terms of how the two segments we have, basically aerospace, in terms of the supply catching up with demand and connectivity in terms of translating orders we had in Q4 into revenue in Q1. I think then we will be able to look at a much more clearer picture for the full year. Those are the valuables, Bhavik, that we are tracking right now. The two important valuables, so to speak.
Okay. Got it. Thank you.
Thank you. The next question is from the line of Suraj Malu from Catamaran. Please go ahead.
Sir, I just wanted to understand when you mentioned like-for-like degrowth in the order intake. Can you just help me understand what do you mean by like-for-like? Because there were no revisions, so I just wanted to understand.
Yeah. Suraj, I think when we looked at Q4 of fiscal 2023, we have not established a clear system of the order intake from the acquired entity, and that was still coming in based on revenue equal to order intake was some of the assumptions that were made. So when we were to really neutralize for it, I think that's where we kind of came up with this like-to-like model. It is still an estimate, but we do feel that as we start rolling through these years, we'll have a better view of a single number which is integrated with the acquisitions as well as the organic part.
Got it. Okay. Thank you.
Thank you. Ladies and gentlemen, that was the last question for the question-and-answer session today. I would now like to hand the conference over to Mr. Krishna Bodanapu for closing comments.
Thank you very much. Thank you, everyone, for your time and being on the call. While Q4 was a tad bit lower than what we expected, as we explained, we're quite confident on what the financial year holds for us. We take your feedback on the ask ahead of us and how we also provide the view going forward, which, of course, we will be incorporating that. But thank you very much for the support. Thank you very much for the questions. Of course, if there's anything else, then please do reach out to Mayur or Vish, and we can provide an answer. But with that, thank you very much. Have a good day, and thank you for the support.
Thank you. Ladies and gentlemen, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.