Tata elxsi

(Kumar Saurabh) #82

However the other impact of margins is retention rate of employees once they cross 2-3 years of experience from freshers. Attracting best of talent n retaining high performing talent needs lot of margin advantage . That’s how product companies retain best of talent . Don’t see that happening in this in near future but may be slowly if structurally they evolve. Disc : 4 % of portfolio

(s) #83

Agreed but Tata gets business and talent for what they are and not for the Star performers. If there is a star he will get to rise in the group , the rise of Ramadorai and Chandrasekaran are example of it so I believe the company is on a stron footing in terms of Order flow and employee retention.

(Kumar Saurabh) #84

Good set of numbers:

(nil_71) #85

Another important observation, top line not growing, 11-12%, Cost is nearly constant, Emp benefit cost constant, that means no layoff, but Margin expanding in a muted quarter, that means- Annuity business started rolling in

Among the midcap IT- I think it has the highest OPM this qtr…if I am not wrong.

Also as I observed Incremental Y-o-Y PAT nos are increasing for the last 3 Qtrs …

(nil_71) #86

Elxsi Q3 Concall Summary

My take

1st of all this cos is for those investors, who have patience to see paint getting dried :slight_smile:

Management mentioned, they will maintain margin at 25%. While wish is 20% in terms of topline, but this year, one should not expect overall growth more than 14-15% ( my interpretation as I asked one Q in this regard)

A lot of their initiatives have gradually paying off. They are in a unique position as combination of Design thinking and Embedded Products

Attrition is 12%, Geo USA 40/EU 44/Rest 15. Revenue breakup, T&M/FIxed- 60/40 ( means my interpretation we may say better top line next qtr)

This Qtr margin is one off surprise but they will maintain at 25% overall.

One of the stuffs they are doing to improve the margin is encourging clients to buy products/materials directly from Vendors , rather than through Elxsi, boosting its margin

I am attending their concall for that last 6 Qtrs, I see some good knows PMS voices in the Elxsi call which is very positive (Please donot ask names :slightly_smiling_face:

Management always very conservative. It seems ELxsi started attracting good talents from market at lower cost ( = Emp cost down).

(s) #87

Any update on order win and response to CES 2018

(nil_71) #88

Elxsi does not share Order Win etc. I am tracking for last 3 years. Data being shared limited

(Kumar Saurabh) #89

I think order book details is important for companies working on multi year contracts . The nature of projects elxsi deals with is 6-10 months ,so, even if one has order book details, not much value it is going to create in terms of tracking health due to shoetter project lifecycle tenure

(Kumar Saurabh) #90

By the way as @nil_71 highlighted, some new PMS funds attending calls. Don’t remember having Manish Bhandari in previous concalls .Hope my memory is not poor :wink:

(s) #91

Right but getting new account shows companies traction, improves visibility and diversifies risk profile of concentrated in account. R&D outsourcing is not a new trend bus seems to be catching fancy of western world and competition alike. Tata elxsi is better positioned but attrition rate shows others are gearing up.

(Kumar Saurabh) #92

That way they update on most of new activities. In case not gone through concall, would encourage. Also ,they ve a transcript of annual investor day which is a very interesting read. I think that gives lot of visibility into direction.

(nil_71) #93

Yes- I heard his voice 1st time as an active participant in Elxsi call

(rohansurana123) #94


(Rajesh) #95


Tata Elxsi says that there is no event regarding merger with TCS so no need to report to BSE.
Disclosure - Invested from lower levels.

(Roy) #96

The way they’ve drafted their response makes me curious.
Instead of just saying “there have been no discussions regarding a merger with TCS"
they’ve mentioned
"there are no events that have taken place requiring disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.”

(rohansurana123) #97


(Mridul) #98

Only thing keeping me away from Tata Elxsi is the merger talk. This company has its own niche (not a traditional IT company). Merger, if materializes, will not be good for them. TCS is huge, Elxis is not even 100th of TCSs’ size. They need focus, which will go missing if this is merged in the behemoth.

@suru27 - I saw you have been tracking this. What are your thoughts?

(amil) #99

During an investor meet held in Bandra Mumbai, this was again discussed whether there is any merger on the cards… (apart from the actual business domains and the presentation was really very good; im not a tech guy so I could not make out much though)…

Mgt mentioned the same thing @Mridul - they are 3000 people co and TCS is 3L people. They can never “be TCS” (i think they meant by size) because they need small teams, focused talent, etc…

I think even tatas might be having the same view. Yes, the new head (N.Chandra) at the top is sorting a lot of things and he may ‘cluster’ similar businesses together, but that might be from strategy pt of view rather than M&A in strict sense…

I think merger with TCS doesn’t look like a very probable risk. A minor probability can be assigned to it, but one should not miss the compounding opportunity till then…

Disc: invested

(Kumar Saurabh) #100

Invested since last 2 years when it corrected to attractive levels , holding everything I have accumulated as I believe in long term story . Aware of merger thing but don’t want to take decision based on things I can’t forecast and not in my hand and can’t even tag a high probability of occurance . What if it turns out just a monitoring layer by reorganizing companies rather than full scale merger. I think if N Chandra is doing this all with a mindset to increase shareholder value , he would consider pros n cons. So, frankly, m not giving any pain to my mind thinking over all this. Let it happen n then will take a call. May lead to few % fall in share but clarity ll b there to take decision based on specifics of arrangement . That’s my status as of now

(Abhishek Basumallick) #102

Highlights of the Q4 concall (source: capital market)

The quarter was very good as it achieved number of milestones. All key sector delivered good growth during the quarter.

FY 2018 was interesting and challenging. New engagement compensated for some engagement which went away.

On sequential basis, Tata Elxsi registered 9% rise in sales to Rs 375.38 crore for the quarter ended March 2018. OPM fell 170 basis points from to 25.3% which took OP up 2% to Rs 95.09 crore.

PBT grew 15% to Rs 108.58 crore. PAT rose 12% to Rs 70.29 crore.

On y-o-y basis, sales were up 15% and OPM jumped 220 basis points to 27.1%. OP was up 26%. PBT grew 65% and PAT jumped 62%.

For FY 2018, Tata Elxsi registered a 12% rise in sales to Rs 1386.30 crore. OPM improved 100 basis points to 25.0% which took OP up 17% to Rs 346.01 crore

PBT grew 38% to Rs 363.91 crore. PAT rose 37% to Rs 240.04 crore.

Embedded product design segment accounted for 83.6% during the quarter. For FY 2018 it accounted for 83.7%.

Industrial design and Visualization segment accounted for 12.3% during the quarter. For FY 2018 it accounted for 12.2%.

System integration segment accounted for 4.13% during the quarter. For FY 2018 it accounted for 4.1%.

During the FY 2018 other income had some restatement of asset and currencies to the tune of Rs 15 crore. For the quarter it would be around Rs 5 crore.

The management is not looking to expand the OPM at all. It will be happy to maintain the same.

Dependence on Jaguar Land Rover is about 22% of revenues which comes from engineering and design business. The company has nothing to do with marketing of these cars. Engineering for cars are made for about 3-4 years. So stagnant sales of these cars will not impact much.

Employee strength was 5500 same as last year.

CC growth rate in Q4 and FY 2018 was 5% qoq and 15% respectively. It grew 12% on yoy basis.

Automotive segment (60% of sales) is the largest business and is in growth mode and it had been growing in past few years. Second is Broadcast and the business is stable. The management is very optimistic of business from medical industry but accounts for small portion currently.

Utilization was same at 82%.

Offshore revenue is 60% and onsite is 40%.

In FY 2018 the company added 42 new clients. Around 20 or so are from auto.

About 5% of revenues come from IP led business.

Medical is a very large business world wide.

The company would benefit from acquisition in niche areas like design. The management is looking at such acquisition.