ONWARDTECNSEQ4FY2218 May 2022

Onward Technologies Limited

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13analyst exchanges

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Management on call

Jigar Mehta

Managing Director. And we also have with us Mr. Devanand Ramandasani - Chief

Key numbers — 40 extracted

28%

lients, and sales funnel that has been built up over the last two years. We have delivered record 28% annual revenue growth, a first time for our team and 225% PAT growth from the previous financial

225%

last two years. We have delivered record 28% annual revenue growth, a first time for our team and 225% PAT growth from the previous financial year. We have actually surpassed all our internal projecti

27%

n offices, three in U.S., three in Europe and one in Toronto, Canada. Both of them averaged about 27% to 28% annual growth last year. And the pipeline again, it's looking very healthy. In terms of

Rs. 87.5 crore

again, it's looking very healthy. In terms of Q4 the company recorded its highest ever revenue of Rs. 87.5 crores from business operations. It was a 32% YoY growth and 13% QoQ growth, again the best this amazin

32%

e company recorded its highest ever revenue of Rs. 87.5 crores from business operations. It was a 32% YoY growth and 13% QoQ growth, again the best this amazing team has delivered till date. Our gr

13%

its highest ever revenue of Rs. 87.5 crores from business operations. It was a 32% YoY growth and 13% QoQ growth, again the best this amazing team has delivered till date. Our growth has come from

rs,

a strategic call & have started sowing the seeds and investing big in Chennai over the last 5 years, In Bangalore from last 2 years and now third in Hyderabad recently where we gave set up the digita

0 in the last quarter. We have shared with you guys earlier that our goal is to take this program 5x or 10x larger, based on the visibility that we are seeing, and the demand that we are seeing from

10x

he last quarter. We have shared with you guys earlier that our goal is to take this program 5x or 10x larger, based on the visibility that we are seeing, and the demand that we are seeing from all th

Rs. 6.3 crore

s. 87.5 crore which has increased about approximately 32% year-on-year basis. EBITDA has reported Rs. 6.3 crore for this quarter, which grew by 66% year-on-year basis. EBITDA margin is reported 7.2% and net pr

66%

imately 32% year-on-year basis. EBITDA has reported Rs. 6.3 crore for this quarter, which grew by 66% year-on-year basis. EBITDA margin is reported 7.2% and net profit after tax reported Rs. 3.2 cror

7.2%

d Rs. 6.3 crore for this quarter, which grew by 66% year-on-year basis. EBITDA margin is reported 7.2% and net profit after tax reported Rs. 3.2 crore which is up by 52% year-on-year. Our operating

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Guidance — 20 items

Jigar Mehta

opening

“And we remain extremely positive about the opportunities in front of us going forward, from all our existing clients, and sales funnel that has been built up over the last two years.”

Devanand Ramandasani

“And in DSO, while the calculated the DSO, the sales will be calculated average per days sales on that.”

Jigar Mehta

“Our client’s partner with us in new advanced technologies where we hire experience SME’s with strong domain experience to provide the leadership, project management and overall understanding of the client requirement.”

Jigar Mehta

“Under them, we staff the projects with our internal experts, project leaders, team leaders, etc.”

Jigar Mehta

“And once the project is in full execution mode, our young engineers from the talent acceleration program staff the project.”

Jigar Mehta

“But instead of getting let's say, if you are starting a project with 100 engineers and all 100 coming from lateral hires, which was the case for our company two years ago, today, we are only hiring 10 people at the top and 90 people is going to come from our internal talent pool.”

Jigar Mehta

“It is expensive every quarter or year to lease, though it provides the flexibility linked to project only.”

Devanand Ramandasani

“4 crore to Rs 5 crore for the computers and the software will be minimum requirements for every year, we believe so.”

Sriram Rajan

“See given the chip shortage and the supply chain headwinds we expect because of the war, had you expect some kind of impact on our revenue, at least on the automotive side of the business?”

Jigar Mehta

“We see this could become a huge avenue for growth for us going forward.”

Risks & concerns — 2 flagged

So I personally believe that there is no challenge in the collection for me.

— Devanand Ramandasani

Now, in this particular space, we don't see that big a challenge today than it was six months ago.

— Jigar Mehta

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Q&A — 13 exchanges

I actually wanted to ask about your receivables. I mean, if you could just give some sense of how, if you are having issues with that or if clients are asking for longer payment pay sort of better payment terms from their end.

Devanand Ramandasani

Okay, let me take you through this rationale behind that. If you see our revenue quarter-on- quarter particularly last two quarter has been growing significantly. And in DSO, while the calculated the DSO, the sales will be calculated average per days sales on that. So when your amount uncollected as on the 31st March where the DSO has been calculated, your sales has been shoot up, but your average sales has been not increased in that fashion. Therefore, if you see that arithmetically your DSO has increased, but when a growing company, this is a common thing for the average. And there is no iss

Just few questions, one is the EBITDA margins have grown actually year-on-year, but sequentially there is a bit of a drop, any reasons for that?

Jigar Mehta

HI Sriram, We are focusing on building the company today & laying a strong foundation for the long term. And all our investments are based on that. For example, over the last six months, travel has finally opened. Our seven international offices have been completely understaffed to meet customer requirements, especially last two years when everybody was remote. So a large number of people are getting added in all these seven offices, both local hires that we are bringing onboard from Tier 1 companies, and number two is, my top performers from India offices, are all getting transferred to these

I just wanted to understand, so what is the target that you are actually looking for in FY23 as we build upon our $100 million target for FY23. So what is it that you would want to kind of achieve in FY23, if you can shed some lights on that?

Jigar Mehta

Hi Nikhil – I have shared earlier, our goal and the team that I believe I have built here, the single focus for everybody is to beat the previous quarter’s numbers. So, we are starting with a small revenue base today of Rs 300 crores+ and don’t like to get caught up in percentages. I want to build the right foundation --. That's where all of the energies are going.

I just was curious to know if there is any kind of EBITDA margin that you are looking at which would be like a stable EBITDA margin once the company is, more stable once it stands with this high etc. Is there any kind of a limit of EBITDA margin that we are looking at?

Jigar Mehta

Hi Pawan, operationally our margins, we should be at a double-digit number for last quarter. Our focus is on building the foundation on the long term. One of the reasons why we raise private equity and brought Convergent in last was to build, invest in the foundation for the long term. So if you see the investment that the company is doing on the sales side in our international business, on the client engagement side and entering new areas like digital, electronics, hopefully EV, AR/VR, etc tomorrow; will all mature. So we are at that stage right now. And we do believe right now the priority i

I have just one question. So like we didn't see a good amount of offshoring come up in the last few years, offshoring has been hovering at 30% of revenues. So two, three years down the line, how do you see this offshoring, mix change?

Jigar Mehta

Hi Sachit – Our offshore revenues will keep growing as our teams get back to office and we get more maturity in our client engagements. Since becoming Debt free in Nov 2019, is when we started investing very significantly with focused approach on the international market. Today, we are at an early stage with lot of our new customer engagements which initially start with onsite and then as the knowledge transition gets matured, the project moves offshore. We clearly see visibility increasing in the overall HC for offshore projects increasing quarter on quarter. And hence on the offshore capacit

So, I just wanted to check in our business, roughly around 70% of the projects are on the time and material and the fixed time and fixed price are only around 25% to 27%. Generally it’s a reverse in the industry so any specific reason for us preferring this time and material work compared to the fixed time and fixed price. Because I understand that probably the margins might be a little better in fix time and fixed price?

Jigar Mehta

hi Nikhil, When you compare industry, I think you are comparing with some of the larger peers who have been there for the last few decades. We are very new in this space. We are a young service provider as I said, we have just crossed the Rs. 300 crores of revenue. For us if you look at our client profiles, majority of our biggest customers whether it's in U.S., Germany, UK, we have won has been in the last five years, and large number of them in the last two years in particular. Now coming back to your point, Nikhil, when we start an engagement with a new customer, customers are also trying t

I just wanted to ask about your sort of cash management and treasury operations, how do you generally park your money do you tend to prefer leaving it as cash do you invest it in say short term funds or something like that? Devanand Ramandasani: We follow the investment policy approved by the Board and our Board does not allow to invest in any equity, directly equity or equity related investments. So, we park the funds in different instrument bases on our needs of the fund of incoming days. So, we park the funds in FDs, we parks the funds in the liquid and overnight mutual funds, and majority

Krish Kothari

And my other question is actually related to the private equity investment that was made about roughly a year back. Just want to get a sense of how the years been and how you see that relationship evolving. So the Convergent deal came in last July. And it's been amazing. They've been super partners, since they have come on board. We work very closely with Harsha, who's on the board and his entire team as well. And so far, we have been working on a number of strategic initiatives. So one is, internal organic growth, where they have been getting involved & available to our team realtime. It coul

I just wanted to know that we are hiring more and more subject matter experts. So could you please maybe clarify in which verticals in which areas you are looking to add more subject matter experts across our verticals? And are we adding any of them in healthcare because I believe you said its not domain based?

Jigar Mehta

So we are adding in all the two primary verticals. So our first largest vertical is industrial equipment & heavy machinery. And so that's a very broad-based industry, because it covers off-highway vehicles, agricultural equipment, mining equipment, heavy machinery, it covers engine manufacturers & other off-road vehicles, etc. And in each of those areas, we have LOBs so there is digital, embedded & mechanical. These product specialists or SMEs across these 3 LOBs we have been hiring to build our internal capabilities. A significant number of our recent hires over the last few years have joined

I am assuming you mean more from an M&A perspective or?

Vineeth Kumar Anchalia

Anyway be it in hiring side or be in acquisition? So again, absolutely right. So that's what we have been doing over the last several quarters, we have been investing, if you see we almost have now more than 25 crores additional which is blocked in account receivable based on the growth that we delivered last year. So every day, every month more and more, we keep growing more money is going to stuck which is required for organic growth. Second is we are investing much more aggressively for the future or for the long term, whether it's setting up these offshore design centers and Centers of Exc

My question was on this EBITDA margin side. So I get that we are focusing on growth at this moment. But in the coming future, do we expect that these margins of roughly around 7% odd can be moving down more towards I mean, if we are focusing on growth, or this can be a stable margin we can expect.

Jigar Mehta

Our focus continues to be is to grow the business and to make sure that we capture the opportunities in front of us. So we are definitely long term focused to build a strong foundation. We do believe, we do run a very operationally healthy business from a gross margin perspective. So it's more about how quickly can we grow and meet the demand that is in front of us. Because we have not seen this amazing demand environment from the global manufacturing industry. So we don't want to let go of the opportunities, we want to make sure that we are investing behind that. Next is that what is the attr

Actually, I have one more question on deal size. Are we looking to crack any deal worth Rs.70 to Rs. 80 crores odd in near future from a single customer?

Jigar Mehta

Yes just to keep it simple, we are always looking for large contracts, we are looking to bid for larger deals, but please keep in mind, in our industry today, it's not about signing big deals, I think there are a lot of large contracts out there. It's more about having the ready delivery capabilities in-house. So when you do win you can deliver the projects. So my recommendation and advice to my team all the time, a clear direction to them as well as, is don't pick up deals that you cannot deliver, because one bad deal can actually spoil a lot of the hard work that we put in. So focus on the d

Just a small question so are there any updates on your acquisition of NV Pune, the technology park that you had acquired, I think around December, because the presentation mentions Bangalore and Chennai in terms of workforce, so just trying to understand what is happening there.

Jigar Mehta

Yes, I don't know if I got the question right, but again, it's an office space. It's a 5th floor of a building, which we were renting for the last seven years is what we acquired. And now it's 100% subsidiary of the company. We have changed the name from NV Technology Park to OT PARK. So this was just the one floor that we have acquired. There's nothing additional over and above that. Yeah, approximately 26,000 square feet.

Thank you all again for participating in our Q4 Earnings Call today. I hope we have been able to answer your question satisfactorily. If you have any further questions or would like to know more about the company, please reach out to our Investor Relations Managers at Bandroom Advisors. Thank you again, stay safe and healthy and see you all soon. Thanks.

Management

Speaking time

Jigar Mehta

Moderator

Krish Kothari

Sriram Rajan

Vineeth Kumar Anchalia

Devanand Ramandasani

Nikhil

Sachit Motwani

Pratap Maliwal

Sanjay Awatramani

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Opening remarks

Anuj Sonpal

Good morning, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Onboard Technologies Limited. On behalf of the company I would like to thank you all for participating in the company's Earnings Conference Calls for the 4th Quarter and Financial Year ended 2022. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's con-call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements and making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundam

Jigar Mehta

Good morning, it's a pleasure to welcome you all, to the Earnings Conference Call for the 4th Quarter of Financial Year FY21-22. I hope everybody is well. Now coming going back to the operations and the business of the company, I am pleased to inform you that last year has been a historic year for our team on all core parameters. And we remain extremely positive about the opportunities in front of us going forward, from all our existing clients, and sales funnel that has been built up over the last two years. We have delivered record 28% annual revenue growth, a first time for our team and 225% PAT growth from the previous financial year. We have actually surpassed all our internal projections as well. And I know our team could have done much better as well based on the amazing visibility that we saw at the start of the quarter. Coming back again to business operations, we now operate into two business units. One is the India Business Unit where we sell to all the large MNC captive cen

Devanand Ramandasani

Good morning, everyone. And I will come to you on this earnings call. Let me take you through the 4th Quarters financial performance of our company on consolidated basis. Our operating income as stated above is Rs. 87.5 crore which has increased about approximately 32% year-on-year basis. EBITDA has reported Rs. 6.3 crore for this quarter, which grew by 66% year-on-year basis. EBITDA margin is reported 7.2% and net profit after tax reported Rs. 3.2 crore which is up by 52% year-on-year. Our operating income for the financial year ended 2022 Rs. 307 crore which is increased year- on-year basis is 28%. EBITDA as reported is Rs. 21.4 crore which has increased approximate 24% year-on-year basis. Net Profit After Tax which has been reported Rs. 23.7 crore which is more than 3x from previous year. Lastly I am happy to inform you that we have a healthy cash flow in the books. We have approximate Rs. 60 crores in the books as on 31st March. Apart from that we have receivable from the various t

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