Ladies and gentlemen, good day, and welcome to the Q2 FY 2024 earnings conference call of Cyient Limited. 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 1 on your touchtone phone. To remove yourself from the queue, please enter star and 2.
Should you need assistance during the conference call, please signal an operator by pressing star, then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Krishna Bodanapu, Executive Vice Chairman and Managing Director of Cyient Limited. Thank you, and over to you, sir.
Thank you very much, and good evening, ladies and gentlemen. Welcome to Cyient Limited's earnings call for the second quarter of financial year 2024. I am Krishna Bodanapu, Executive Vice Chairman and Managing Director. Present with me on this call are Mr. Karthik Natarajan, CEO and Executive Director, and Mr. Prabhakar Atla, President and Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties.
A detailed statement in this regard is available on our investor update, which is been emailed to you and also posted on our website. This call will be accompanied with a earnings call presentation, the details of which have been already shared with you. Coming to the quarter, some of the highlights.
One, firstly, I'm excited that Nitin Prasad has joined our board as an independent director, and we look forward to benefiting from his experience. Nitin is a dynamic and accomplished business leader, who has over 25 years of experience and has developed and launched and operated new business verticals in semiconductors, chemicals, energy, and clean energy across geographies.
As you know, sustainability and the associated industries of energy, Utilities mining are very important focus areas for our business. And we believe that Nitin will provide a unique perspective on solving sustainability challenges in these industries, having worked with some very large corporates. So we are excited to have Nitin join our board and he's joined me, and welcome Nitin to our board.
I'm also proud to announce that we won two prestigious awards with the Master of Design and Engineering. One was in the area of enabling the blue economy by our last mile solution, fuel delivery for marine and automotive application. And the second was for designing and engineering the world's most fuel-efficient aircraft engine.
Again, these are areas that we take a lot of pride in, and we put a lot of effort in, because sustainability and the related industries are a big focus area for many of our customers and for all of us as well. And I'm very proud that we have been recognized as leaders and for having done some projects in these areas. In addition to these awards, we also received a Modern Network Management Award at the 35th Esri Infrastructure Management and GIS Conference.
Esri or Esri is a global leader in local intelligence, and this recognition is an acknowledgment of our capability and powers in this space. Before I hand it over, before I hand over the call, I just want to highlight that, the last quarter, we've seen the aerospace business grow 37.5% year-over-year.
As many of you know, and as many of you have followed us for a long time, aerospace is a key part of our business, and it is a business that has gone through a significant challenge, especially in 2019 because of some industry-specific issues, which of course, in 2021, 2020, 2020-2021, 2021, and parts of 2022, because of the impact COVID has had on travel.
So I'm very proud now to report that not only has the business grown 37.5% compared to the same quarter last year, it has also grown 6 consecutive quarters. That gives me immense confidence that we're in a very strong position in one of the most important, if not the most important vertical, that has a huge bearing on our growth, and we're clearly the acknowledged leader.
Having said that, as you would have followed some of our competitors, the communications industry is going through a bit of a lull. In our case also, there was about 11% degrowth in communications for the quarter under discussion, but we're quite confident that this is a short-term blip.
So in summary, I would say that we I feel very, very confident about the strategic fit that we've got on the portfolio and where things stand. This confidence will now translate to some very good visibility for the rest of the year, which I will allow Prabhakar Atla and Karthik Natarajan to take you through the more details. With that, I would like to hand over the call to Prabhakar, who will take you through the financials. Prabhakar?
Thank you, Krishna. Hello, everyone. I hope you're all doing well, and I hope you're all having a good day. Management team of Cyient is joining this call today from our offices in Hyderabad, India. I would like to first update you that we're having a pleasant day in Hyderabad. Temperature is a moderate 27 degrees Celsius. Humidity is about 38%.
Wind speed is 10 kilometers per hour, and visibility is a clear 25 kilometers. All of these, I guess, can be considered as healthy operating conditions for a pleasant day, especially in Hyderabad. And are even perhaps, they're typically termed as key indicators for a pleasant evening as well.
Digression, so we can seek your pardon. Please allow me to present the financial details of Q2 of FY 2024. Before we start, this is a small recap from our previous earnings call, the Q1 FY 2024 earnings call. Cyient business has been reclassified since Q1 FY 2024 segment, which you can see on the screen. Presentation now, presentation now is for Cyient DET segment only.
All numbers, unless mentioned otherwise, as group are for Cyient DET only. Some of the previous period numbers have not been reclassified, given the impact on the DET segment. Just quick recap, let us move on to the next chart, which is in the dashboard format of Cyient DET performance.
Before I walk you through the commentary, let me just summarize that we believe that our Q2 FY 2024 is a balanced and difficult performance, which is broadly in line with our expectation and is also matching to the evolving industry scenario and dynamic macroeconomic scenario. In terms of revenue, Q2 FY 2024 US dollar revenue for DET stood at $128.4 million, a growth of 1.6% quarter-over-quarter in constant currency and 17.1% year-over-year in constant currency.
In rupee term, the revenue stood at INR 1,466 crore, which is a growth of 1.6% quarter-over-quarter and 22.6% year-over-year. We have two key growth drivers behind this performance. Firstly, our growth segment continues to see a strong growth QOQ and YOY, especially in the key segments of data center, automotive, and sustainability. On the key client, software and connectivity, contributed with a strong QOQ and YOY growth.
At the same time, as Krishna mentioned earlier, we do see softness in communication space in the short term and also the macroeconomic dynamic. This is softness showed up in this quarter for connectivity segment. Mr. Karthik Natarajan will provide a detailed commentary on this topic later in the call today. In terms of profit margin, Q2 FY 2024 DET normalized profit margin stood at 16.5%, highest in the last seven years, improved by 27 basis points quarter-on-quarter and a healthy 466 year-on-year.
I'd also like to mention that the QOQ expansion of 37 basis points behind in Q2 is on the top of the 96 QOQ expansion we have seen in the previous quarter. In rupee terms, Q2 FY 2024 DET normalized EPS is highest ever, at INR 244 crore, a growth of 4.5% quarter-on-quarter and 62% year-on-year.
The continued margin expansion, despite the impact of wage hike, is driven by improvements in our operational performance, along with the cumulative benefit coming in from the optimization and CFO initiatives taken in the previous quarter, which we have addressed in the previous earnings call as well.
In terms of Q2 FY 2024 PAT, the Q2 FY 2024 normalized PAT to DET stands at INR 61-63 crores, translating into a normalized PAT growth of 1.5% quarter-on-quarter and a healthy 74% year-on-year. This translates to a normalized EBIT of INR 15.75 for Cyient DET. In terms of free cash flow, Q2 FY 2024 DET free cash flow stood at INR 64 crores, a growth of 166% year-on-year, and this translates into conversion of 89% on normalized PAT of Q2. As I close this chart, I would like to also draw your attention to the balance distribution among the several metrics.
The revenue growth of about 17% year-on-year in constant currency term, and EBIT expansion of INR 400 crore, normalized PAT growth of 70% year-on-year, while retaining focus on FCF improvement, it also grew by 166%. Hence, my opening comment on balanced and difficult performance at the beginning of this presentation.
In terms of group numbers, group numbers are a combination of all three segments I spoke about earlier, and I'll just call out a few comments. At $214.9 million, group revenue for Q2 FY 2024 grew by 22.6% year-on-year in constant currency. The Q2 FY 2024 normalized profit margin is at 14.8%, up by 272% year-on-year.
Q2 FY 2024 PAT stands at INR 124 million, up by 56% year-on-year, while the EBIT has declined year-on-year by 37.7%, due to planned cash compensation payout given in DLM business, which we will recover in H2 of the FY 2024. I'm also very pleased to inform you that we announced the maiden commitment phase of digital project as well.
On behalf of the Cyient board, the management team, and all those clients who continue to grow, I'd like to thank all registered and your system for the valuable counsel, and very, very, very importantly, your abiding trust. But we are indeed very grateful. With this, I would like to thank you all for your time, for your attention, for your questions, and I will now hand over the call to Mr. Karthik Natarajan for an update on the business performance also.
Thank you, Prabhakar. Good day, everyone. Hope all of you are having a fantastic season in India. I'm pleased to share few details of the company performance as described by Prabhakar and Krishna. I'm happy to say that this is the eleventh successive quarter of growth out of 13 quarters that we have been reporting for the last 13 quarters from Q1 of 2021.
We had 2 quarters of flattish revenue and growth as we have seen, which has been a steady performance for many quarters. Having said that, I'll just pick up two of the key columns here and the first one is next, and from the, which are essentially the constant currency push for four of the business engines. I think we have talked about creating a balanced portfolio.
I think this is really starting to pay off well. And if you look at transportation, which is showing 2.1% quarter-on-quarter constant currency growth and about 22.1% constant currency growth year-on-year. And as Krishna mentioned, aerospace continues to see a steady, successive quarterly growth.
And, for this quarter, it stands at 27.5% growth year-on-year. Connectivity, this is a process in Q2, has grown by 8.1% and, year-on-year at 4.8%. Sustainability, this is starting to pay off well based on some of the investments that we made over the last 18 months, and growth rate of 9% quarter-on-quarter and 21.6% in constant currency year-on-year.
If we were to normalize this on an apples-to-apples comparison, which is close to about 20%, we are seeing the growth under the sustainability business. New growth areas, which is consisting of, medical devices, automotive, and others, has shown a growth of 6.1% quarter-on-quarter and 5.1% year-on-year in constant currency. And taking into overall DE, it equals to 1% in quarter-on-quarter and 17.1% year-on-year. We also have seen robust growth in our order intake, and this has grown 40% year-on-year and, seasonally Q3 and Q4 are better than what we have seen in Q1 and Q2.
It gives us confidence that there is definitely a stability that is coming back for most of our businesses, except for some parts of the communication business, which we'll talk about in the next few minutes. Our offshore revenue mix stands at 44.2%.
We closed 20 in terms of large deals at $2.4 million total contract potential, and three of them from sustainability, which is coming with digital factory and content delivery as a testament around the sustainability vertical. One deal on patient health monitoring system care and health center, and one deal for an air conditioning unit for certification support that we are extending today.
So go to the next slide of business segment, and we continue to see growth across the board and led by three pivotal areas that we started working on for the last two years, and digital engineering, autonomous growth, and sustainable planet. These are the three pivotal areas that we are working on as we have continued to phase off plan.
And while we continue to see some macro challenges, the geopolitical issues and conflicts arising from Israel and Hamas, and what we have seen for the last two years from Ukraine, Russia, I think we continue to face challenges, but we are still confident about what we see the future, which is looking bright, and we are confident about how we will create sustainable growth for many years.
Trends we're driving, transportation, as air travel keeps growing, the aerospace industry continues to embrace more of digitalization. They need to deliver more aircraft and vehicles, and the global demand for air traffic is likely to double in the next few years. It took 23 years in the previous doubling process, and now it may happen in the next 14-15 years.
Just some of the growth that is happening in the geopolitical conflict that is happening globally from the different sides, and these two are essentially driving the growth as far as transportation is concerned. Rail would be moderate, and we still see growth based on software and digital areas from rail.
Connectivity, and, this is, has been, challenging, year for many of our tier one customers, which is led by some of the 5G investments still not paying off, and also their own investment towards, fiber investment has been slowed down. While we expect the government spending around our broadband programs will continue to drive the growth.
So I will later discuss about early next quarter. And we are expanding on our, positions that we made from, possible in North America and Australia markets. I think that is paying off with an MP into, Australia operator, in the last quarter. Sustainability, I think this continues to really build the momentum as we expected, and led by energy transition and, some of the, new age minerals like lithium, nickel, zinc.
I think that continues to drive in the potential and led by the transition, which is happening across global segments. And we also see the utility market, which is getting transformed towards the grid plus centralization, digitization, and this will be a big growth engine for the next 3-5 years. Support from hydrogen, ammonia-based clean energy and carbon capture utilization and storage will continue to lead the growth, and we'll talk about some of the key wins in many of the segments in the next few slides.
New growth areas, I think this is still led by automotive. We have seen a robust, steady growth in the automotive business, and we continue to see growth around electrification, autonomous, and connected vehicles. And we have seen momentum in some of the areas.
Where we have seen a pattern over the last, I think, due to the macro issues, and we expect that the demand should start coming back by later part of this year. This is going to be led by microcontrollers, computing, industry solutions, and other segments which drives the growth from there. We just want to give a few examples of wins that we won last quarter, and an autonomous drive solution for industrial vehicles in construction equipment.
This is an interesting project where we are trying to build an autonomous construction equipment for a customer. Thirdly, we are really engaged on working on a full-blown program for an industrial customer. Also, moving on to technology enhancements for the in-car navigation system and using embedded services, including Android Auto and connectivity.
Enhancing the customer and fleet management experience through technology and analysis from launch management solution and through software and cyber network and capital solution, balance of plants, hydrogen-based ammonia production. Please move on to the next slide. The data platform that enables customers to stream their team on board in terms of their batch data from multiple sources to provide insight and solution.
Digital Engineering, we also partnered with Microsoft that we announced in the last quarter, and this is paying off with generative AI-based programs that we are taking to our customers, and this is one solution that we have to the from the last quarter. This is platform customer experience, and we are building an asset managenment solution integrated to a PLM system for a mining customer.
And we also have won a project from AI for software testing, giving the solution which is called CyFAST. And this is for a set of coordinated system and software testing, and this is a power. So with that, I would just conclude from my side of updates, and we are confident about what we see the business shape for rest of the year. And I'll come back for Q&A. So thank you very much.
For fiscal 2024 guidance, and we are keeping our 15%-20% guidance that we have given earlier. In the commentary, that we expect it to be around the lower end of the range. And with margins, we have guided about 150-50 basis point improvement compared to fiscal 2023, and we are holding on to the same numbers here. With that, we'll go open for question and answers.
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 their 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. We'll take our first question from the line of Ruchi Burde Mukija from Elara Capital. Please go ahead.
Thank you. Hey, congratulations for the resilient performance. I have two questions. First, what has led to the margin expansion? And the second one, could you please share what you see as the outlook for your communication vertical as we move ahead?
Ruchi, thank you very much for the question. Thank you for joining the call. Our quarter margin improvement has three drivers. The first is that we have an improvement in the operating performance across margin, improved quarter on quarter, and this is largely from improvement in utilization, continuous in the last three previous quarters.
The second is we continue to have benefits from indirect cost optimization, which we have done previously. These two are the key drivers for the quarter on quarter continued margin expansion. I hand over to Rakesh to address the question on communication. Yeah.
So Ruchi, I think we have talked about last quarter, and we said we do expect softness from the communication segment, driven by broader capital cycle, as has happened over the last 2-3 years, and it's taking a break with the higher interest rates and obviously some time before we start recovering.
I think, and specific to the fiber business, we do have significant exposure to and are starting to see in Q4, and there was a slowdown that we did not anticipate earlier. Some of those targets which have been put on hold, we do expect that they should really jump back sometime early Q4. We also view at this point of time, H1 to H2 will be flat in terms of communication business.
We will start seeing some of the growth by early next year and early next year for this financial year. Yeah. I just also add that within this framework, our largest customer in communication continues to grow quarter-on-quarter in New York.
Thank you.
Thank you. We have our next question from the line of Sulabh Goila from Morgan Stanley. Please go ahead.
Yeah, hi. Thanks for the opportunity. So first question is more of a clarification from one of the remarks you made. So, is there any sort of an impact on the, from the geopolitical issues that we are facing in the Middle East on the sector or client anyways, and just want some clarification on that?
Yeah, absolutely. On the Cyient DET business, we do not have very much business in... Of course, DLM, we do have business in Israel, and about 20% of our revenue and 20% of our supply chain is from companies in Israel. So, there is a bigger percentage. Of course, the concern that you had was the testing of our employees.
Not that we have many, but we have a few in Israel DLM business with our suppliers and customers. So firstly, that was the first concern, and I'm glad to say that everybody is safe. Though, of course, everybody has been impacted family than the core and impacted colleague.
Having said that, we don't believe that there is going to be significant impact on the business in any way, is it? Similarly, on the DLM business, but we're also quite confident that Israel is essentially a very resilient country. Of course, there is going to be some definitely some concern that said that this is really what we do in Israel, but the focus of making sure that our employees and their families are really safe.
Understood. My second question is with respect to guidance that we have, in which we've tended to guide towards the lower end. So, for us to do the bottom end of the guide, the aspect is, if I'm wrong, you know, upwards of 3% in the next two quarters. Just trying to understand how confident are we in terms of you know, delivering that sort of a growth rate in the environment we are in? And whether would you expect you know, that to gradually pick up, or it could mean that quarterly would be better than 3%? Just to understand that.
What extent our order intake has grown to 40% year-on-year, and this is led by from aerospace and sustainability, and we do expect that this will continue to grow for both this year. That's the confidence on which we are trying to hold guidance to the lower end.
Understood. And then would you expect it to gradually pick up, both, in Q3 versus Q4?
We hope so.
Okay. Then my last question on the margin split. We are already at 250 basis points higher than last financial year. So just trying to understand, given that we are expecting strong growth in QH, are there any margin headwinds that you are facing, due to which we're keeping the margins flat from here on?
We're still holding on to the previous margin guidance. There is still some work to do for the rest of the year. I just want to hold on to the previous guidance, and we work through various things we have to work through for the current two quarters.
Sure. Thanks for taking my question.
Thank you. We have our next question from the line of Kawaljeet Saluja from Kotak Securities. Please go ahead.
Hi, I have a couple of questions for Karthik. I think the first question is that we have seen the recent announcement of Ericsson, for the comments of Ericsson, where they expect the network spending to remain muted in calendar 2024 as well. We came up with, I think we do have an exposure to that market. Now, assuming that market remains muted, you know, do you think the impact will be true to your communication performance or are there offsets available?
Sure, thanks for the question, Kawaljeet, and I'll answer this in two parts. One is we have made a conclusion from Celfinet and about three months ago, and we do have behind the head of the business, and some part of the business is what impacted in Q2. We expect that part to recover in Q3 and Q4, as we see things today. And because of some of the key spends that is required from customers in UK and Europe, and then by the platform that continues to be able to build over the last few years, and has been definitely successful with so many other customers, which helps in reducing their cost of operation.
Then two, they're also supported by the energy savings platform, which we've been into for the last few years, which is more relevant today than ever before because of the energy prices that we've seen in the U.K. and Europe. So those two things would lead us to see a kind of growth in Q3 and Q4.
Also, the fiber side of the business and funds that have been allocated by the government about 18 months ago, and it is being distributed to all the states, I'm talking about in the U.S. And that is likely to start getting into contract awards later in Q3 or early Q4. And we also expect that funding will drive at least a significant growth for the next 6-12 months on the fiber spending. And we are betting on that.
Any customers who are spending on their own, I think that is going to be curtailed, in the near term, and we do expect that government-sponsored or government-supported, initiatives will help them to spend their money over the next twelve months.
That's helpful, Karthik. The second question is, do you have any line of visibility on the refresh of the narrow body platform? And let's say if you don't have visibility, then you know, what's the kind of runway and longevity of growth that you can have in airflow?
Yeah. So I think we don't have any clear visibility of when the narrow body refresh will happen. And it's really new, and at the same time, if you have the OEM situation, one is doing very well. Unless there is a compelling reason why the company to really get into a new airframe. So that should probably happen over the next two to three years.
We are still waiting for a firm decision from one of them soon. I think that will force everyone also to follow through. And meantime, what is actually to happen is that with different, like, OEM issue, and this is aftermarket, MRO, all of them like to see... Do you expect the different pricing will continue to rise over the next two to three years, given the conflict situation we are seeing across many geographies worldwide?
Do you expect that this will probably change the growth for a while? Having said that, the commercial side of the business have not really fully recovered, and challenges still remain, and that will last for the next 12-24 months. We hope developers will start converging into some of the new update programs in the next 2-3 years and continue the growth journey.
Okay, got it. Thanks a lot, Karthik, and thank you.
Thank you. We have our next question from the line of Mohit Jain from Anand Rathi. Please go ahead.
Yes, sir. First is on the pricing benefits that you spoke about. So is it complete as of Q2, or we should expect some benefit into Q4 as well? And the related thing is, should we assume pricing benefits are largely narrow or is it broadly spread across? And then I have a follow-up.
So there is still some more work that is there for us. Thank you for the question. There is still some more work that for us to do to see that we continue to receive the benefits we continue working on. The second question, we're not able to share only broadly, but across a few things.
Okay. The second was related to Q3 furlough. I think you spoke about months put on in Q3 and then pick up in Q4, or do you expect growth to be more evenly spread, given we are anticipating telecom recovery?
So now, I think we still don't have a clear view on how the furlough would play out, and given the demand situation on the aerospace side, continue to be robust, and we don't expect it to be any different compared to what we have seen last year. The supply chain issue remains the same.
I'm sorry to interrupt, sir. You're not clearly audible. Can you come closer to the microphone?
So this is the-
Yes. Yes, sir.
Okay. So what I was saying is, Mohit, we don't have a clear view on the furlough yet, and the aerospace industry has a robust demand, and they continue to see, as all of us are experiencing on a daily basis, I think most of the flights are running, and so capacity is still not available to meet the demand that is rising on the aerospace.
So that would really require some additional work to be supported. So we still hope that some of the projects we still can get will help with the people. And we should have a clear view. We will kind of give you update. Just to share additional information, we do expect Q4 to be better than Q3, and I think it will probably skew towards Q4 more than Q three.
We don't expect any other impact on the furloughs from our check.
You're also anticipating some recovery communication vertical on Q3. Is that what you said earlier in one of the remarks?
I would say we recover by Q4 and Q4 on the communication.
Perfect, sir.
Thank you. We have our next question from the line of Sandeep Shah from Equirus Securities. Please go ahead.
Yeah, thanks. Thanks for the opportunity. Sorry to again ask question on the guidance. Why... How confident are we even for the lower end of the guidance? Because one of your peer has actually downgraded, the closest peer has downgraded its guidance for FY 2024 with expectation of macro impacting the client spending in the last few weeks, which may impact the growth in the Q3, Q4.
My question is, what are the assumptions in terms of attrition rate of 3.3% compounded Q1, Q2, even grow at 16%? What are the assumptions baked in? Are you because one of the statements on communication, you said that 2Q for communication would be flat versus 1Q. So are you baking in almost a flattish Q-on-Q growth in the communication?
Yeah, I don't have specific numbers to offer on the communication for Q over Q, something. But as Mohit said earlier, and we have seen our revenue growing by 40% year-on-year. This is essentially led by transport and sustainability. Within sustainability, we've seen that mining and energy both are looking good.
And mining customers have difficult periods in terms of the pricing issue, but that is also beginning to drive some costs out, and that would help us for the next two, three quarters. And from the energy side, some of the programs that we already won and we are going to be delivering Q3, would help us to see the growth for both Q3 and Q4. So that's where our confidence comes from.
We have not assumed any disproportionate furloughs from the aerospace for Q3, because of the domain, because of the demand situation that we've seen and how our customers are asking us to provide additional help during this quarter.
Okay. Okay. And, Karthik, just wanted to understand, do you believe CY 2024 could be the year where new engine for aerospace design phase could be launched, or it may be in CY 2025 rather than CY 2024? And will it further elevate the growth prospects of aerospace starting from next year?
I'm not sure whether there is any new program that is going to be announced unless OEM is going to lead the way. There are multiple concepts that are being worked upon, and there is no firmness in terms of specific program launch that is planned.
I would also add on to, on top of that, there will continuously be various programs as the need to reduce emissions and increase the efficiency of the engines and some form of electric supported engine, which will reduce the capacity of the engine that is needed. I think the sustainability is going to drive significant changes to the aircraft and engine programs.
That is where we've seen this market earlier, so. As well as the MRO and aftermarket support, and with most of the aircraft coming over time and needing to be maintained and supported. And, this will be the second largest industry for the near term.
Okay. And the last question to Prabhakar. Just wanted to understand, what are the hedges and wins which would be there in the, especially on the wage hike, any wage hikes will be enough, and, the, one of the participants has already asked, I think, first half, we are at 16.3 versus upside of the guidance at 16.2 and the EBIT margin. Is it fair to assume directionally still there's an upward bias in Q3, Q4 versus first half only?
As I told you in the previous call, the wage hikes is still on annualized. So we can expect to see some more wage hikes to be coming in the next two quarters, next two quarters. There is some more work to do on the pricing agreements to bring it up, and other operational levers we're still working on. Therefore, I'm saying a number of moving parts out there. We are very confident with the guidance we've given in the previous call, and I think one more time, with your permission, we will stay with that guidance range.
Okay, fair enough. Wonderful. Thank you.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. We take the next question from the line of Nilesh Jotani from BOI Mutual Fund. Please go ahead.
Yes, hi. Thank you for the opportunity. My first question was from a little longer term perspective, you know, two or three year perspective, considering sort of demand for MRO, et cetera, what can be the revenue assumptions directionally, not specific, or specific to time, but directionally, what can be expected beyond 2024? Or you believe the MRO requirement is just an interim period and could see some declining trend?
So, Nilesh, I would just say that we don't have any view for fiscal 2023 yet. So as we start building up, we'll share the details with you. But we do expect that the package will last 2 more quarters before it really flattens out. And because of what is shared both on commercial as well as the programs.
And one of the large aircraft, which has been put into service about 7-8 years ago, is coming up for service, and they will get the first engine being serviced in this quarter. And they said in the next 5 years, they need to service about thousands of engines. So which essentially means there could be short-term demand that will continue, and we do see that we are able to grow at double digits.
We don't have any specific view of whether it will be mid-teens or early teens or late teens. We are not able to make that yet.
Got it. Very helpful. Second question was on the transportation piece. So there were earlier comments that, Europe, et cetera, rail department or works toward that is seeing some basically bottoming out. We wanted to understand, after bottoming out, are we seeing any trend of growth or number of players there itself?
What is happening is for many of the governments, they have a fixed budget, and they need to really prioritize where they need to spend on. With some of the challenges that are seen over the past few years, I think the homeland security are different, getting prioritized for other public infrastructure.
And that is a broad view that we saw, and there are many programs that are being won by our customers. They're waiting for clearances or to be approved for them to jumpstart the program. So there could be some instability in the near term, and because of what we are seeing on a lot of geopolitical issues globally.
Got it. And one last question would be on the order wins and revenue conversion. A lot of peers in the IT services commented that there has been some delay in uptake of those recent deal wins. From a client perspective, recent order wins, wanted to understand how is it converting into the revenues?
Yeah, I think while they do take time to make decisions, and they get moved to the right, and there could be deferrals, delays, but once they take a decision, they want to execute them faster. So we have seen both sides of the coin, where they said some of the programs are shifting to the right, but once they take a decision, they want to make sure that the timelines don't change for the same day.
So they really want to execute them faster. So which is definitely what we see, and there could be uncertainty around this based on higher interest rates and with inflation being high, and everybody's trying to prioritize certain investments for the near term as compared to the long term.
Those decisions are on a regular basis, and we don't see any significant change in that, over the last two or three months that we have seen, but we never know how things would pan out. Q3 and Q4. And, we don't know whether the Fed would increase interest rates again, and so would really create a soft landing or hard landing. There is a lot of discussion that are happening around the world. So we don't know how things will pan out for Q3 and Q4. And based on our current confidence, and we do see that once the project is awarded, they want to get them on a faster execution time.
Got it. Got it. Thank you so much for getting through all questions and all the best to future quarters.
Thank you. We have our next question from the line of Shradha from AMSEC . Please go ahead.
Yeah, hi. On the consulting in one of the large-scale consulting clients, we were seeing higher offshoring, which was impacting revenue for us. So, have we got driven towards stable revenue in that account, or are we still seeing the impact of the higher offshoring in that particular account?
So, Shradha, we don't want to respond on specific customer-related issues, and I would just say broader commentary that I get for rail is still valid. And we do see some unpredictability because of the project start from their customers, and that's one of the issues that is facing the segment.
And so there are some specific customer issues and some of them getting merged and integrated, and some of them have gotten approval to get integrated. So that could be causing cost to the regular routine large task. And we don't expect any significant change in the near term as well as the rail businesses.
Okay. And on the new growth area of this segment, how big could auto be in new growth area? And how do we see the visibility of growth rates in auto going into next year?
I think we do have an aspiration of getting this to be at least about double-digit % to the revenue over the next few quarters. I think that definitely is our aspiration, and we have seen growth as we announced in last quarter.
And we have talked about one of the consumption systems we are building for an industry that we've done this quarter, and we continue to see several embedded digital services, cybersecurity, cloud. I think those areas are continuing to see interest with the automotive customers, which will form the same category for a few more quarters.
All right. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Krishna Bodanapu for closing comments. Over to you, sir.
Thank you. And, thank you very much for your support, ladies and gentlemen, and taking the time out to be here, this evening. As you know, we're facing some very uncertain times in the world, with some of the geopolitical issues that are going on. But I want to assure you that, we've built a very robust portfolio, and also we've built a very de-risked portfolio.
As many of you know, when we had some challenges in aerospace previously, there were other businesses like comms that picked up the slack. And now that there are challenges in communication, aerospace is really picking up the slack. So I just want to also highlight that, we feel quite confident that we've built a de-risked portfolio.
As Karthik has said, there is a very good visibility towards the guidance that we are providing. Thank you very much for all the support that you have provided. I also understand that it's been a very busy couple of days with a lot of other calls. But may I just take a moment to invite you to our Investor Day, which will now be held on 8 December 2023.
It will be an all-day session for those of you who attended our previous Investor Days. You will recall that this is a great platform to understand our evolution, performance, aspiration and execution plan. On behalf of the entire Cyient team, may I extend our warm invitation to all of you to join this event. It will be our pleasure to host you at the event and hear your perspective and feedback. Our team will be in touch with you to coordinate the logistics.