AXISCADES Technologies Limited (532395) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Axiscades Technologies Limited Q4 FY '23 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shishir Gahoi, Investor Relations head from Axiscades Technologies. Thank you, and over to you, sir.

Thank you very much. Good evening, everyone, and I am delighted to welcome you all to this earnings call for the fourth quarter and year ended March 2023. I hope you all had an opportunity to review our press release and the investor presentation, which are available under the Investors section of our website and the same are accessible in the BSE and NSE website. To discuss our results, we have with us our CEO and Managing Director, Mr. Arun Krishnamurthy; and our Group CFO, Mr. Shashidhar S.K. They will take you through our results and business performance. After which, we will proceed for the question-and-answer session. Before we begin the conference call, I would like to mention that this conference call may contain some forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the management as on date of this call. The actual results may differ materially. These statements are not guarantee, the future performance of the company and involve risks and uncertainties that are difficult to predict. I now hand over the call to our CEO and MD, Mr. Arun Krishnamurthy. Over to you, Arun.

Thank you very much, Shishir. Good evening, everybody, and good morning to those of you who are calling in from North America. Welcome to our Q4 and FY '23 earnings call. I also have Shashi, who is our CFO, and I'll hand it over to him after I finish my introductory comments. To begin with, I'm very happy to report that our performance in FY '23 closed on a high note with the highest ever revenue and profitability recorded in the history of the company. This is my first full financial year in Axiscades, and it has been around strengthening the core of the organization. Since the new team took over the company, we have been able to strengthen this by creating a new organizational structure with emphasis on positive culture, profitable growth, cash flow generation and diversification of our customer base. The incentive structure of the top management revolves around these principles. The company in FY '23 posted consolidated revenue of INR 813.6 crores, growing by 33.7% from INR 608.4 crores in FY '22. In USD terms, the company reported revenues of $101.8 million, growing by 24.3% from $81.9 million recorded last year. The company has grown sequentially in every single quarter from Q1 FY '23. Axiscades gained new heights on the back of several operational and financial performance milestones achieved this year. I draw your attention to a few strategic updates. As has been elaborated in our previous earnings calls, the company has made considerable progress this year in derisking the business with a 3-pronged approach of vertical diversification, customer diversification and embedded and digital first. During the quarter in the review, we signed a strategic partnership with Mangal Industries Limited, a part of the Amara Raja Group, who was most famously known for the Amaron batteries. This strategy collaboration with Mangal Industries will leverage Axiscades proven capabilities in engineering services and take it to the next level with cartilage product design, manufacturing, engineering and industry 4.0 solutions for our clientele. One of our major plans in the automotive sector, which is Bosch recently held a maiden Enrico partner day and exclusive event held for Bosch's strategic partners. Axiscades was conferred with as The Rising Star Award in the embedded electronics category, a testament to a quick scale and credible progress made in this segment. Our integration with Mistral is progressing as per plan, and we continue to synergize our offerings to our current and potential customer base across the globe. I'm happy to report that Mistral continues to expand its business and has reported excellent performance this year, with revenues growing by 40.2% from INR 196.4 crores to INR 275.3 crores, with improved profitability. It's heartening to report that our recent foray in the Automotive and Energy segment is scaling up well. Both segments have delivered robust growth north of 50% in this fiscal year. Going forward, both these segments will grow substantially and will form a significant portion of our revenues. Our growth in the aerospace business, which is an area that we're very strong in, gathered pace in FY '23 and has grown by 44.3% over the previous year. We are working towards gaining more wallet share from our existing clients in aerospace by leveraging our competencies from Mistral. As mentioned in our previous call, we have now begun to execute on an enhanced long-term contract with Airbus and have recently established a new delivery center in Broughton in the United Kingdom. While our heavy engineering business remained flat during the year due to macroeconomic factors, we are hopeful that FY '24 will be a growth year for the company in this vertical, considering the many new initiatives that are planned in this segment. Our product and engineering services business under Mistral grew by 33.5%, and we are focused on maintaining this growth trajectory with the opportunities available in this sector. We have cross-leveraging competencies available across the group and are deploying them with our combined customer base of group companies. Our Products & Solutions business, which is the defense business, representing a defense vertical grew by more than 50% over the previous year, and we are bullish on the opportunities and order pipeline that we have built. In our previous earnings call, I was happy to report that Q3 was a historic quarter for us, recording our highest ever quarterly revenue in the history of the company. It gives me even more satisfaction to inform you that in Q4, we have surpassed the Q3 numbers and have recorded consolidated revenues of INR 223.2 crores, clocking a growth of 4.6% quarter-on-quarter and 16.3% year-on-year. While pursuing revenue growth, we have also maintained our profitability with our reported operating profits for Q4 FY '23 and for the full year FY '23, significantly higher than the previous period with our margin profile continuing its upward trajectory. To conclude, in FY '23, we embarked on a journey of business transformation, and we have made considerable progress in derisking the business. In FY '24, our focus will be to further consolidate our business to make it more sustainable and profitable. We will -- we are constantly raising the bar with our diversification and digital first strategy, and continue to engage deeply with our customers. We continue to build on our order book and long-term contracts with the aim and objective of delivering better than industry growth rates. Let me take this opportunity to congratulate each and every member in the Axiscades group for their contribution in achieving this path-breaking year for the company. We also thank our promoters, investors, bankers, partners and all stakeholders for their support in the year gone by and continue to seek a blessing in this journey. I would now like to invite Shashi to take over and give a brief overview of the financials. Thanks.

Thank you, Arun. Good evening to everyone, and I once again welcome you all to this earnings call. I'm indeed delighted to report that in Q4 and FY '23, we have registered the best of our quarter and fiscal year in the history of the company. As reported by Arun, the company has grown sequentially in every single quarter from Q1 of FY '23 and in Q4, FY '23, the company recorded consolidated revenue of INR 223.2 crores and grew sequentially by 4.6% and year-on-year by 16.3%. The full year FY '23 consolidated revenue INR 813.6 crores, growing by 33.7% in INR terms and 34.3% in dollar terms. As elaborated by Arun, all verticals, sale except for heavy engineering, which has gone up flattish, recorded robust growth with positive visibility in FY '24. So the reported EBITDA and revenue excludes other income for Q4 of FY '23. Is at INR 44 crores at an EBITDA margin of 19.7% as compared to INR 29.6 crores at an EBITDA margin of 13.9% recorded in Q3 of FY '23. The EBITDA for Q4 same period last year was INR 28.1 crores or 14.6%. The reported EBITDA and revenue, which again excludes other income for the full year FY '23 doubled at INR 137.5 crores at an EBITDA margin of 16.9% as compared to INR 68.7 crores and an EBITDA margin of 11.3% recorded in FY '22. During Q4 FY '23, I want to draw attention of the forum that the company received INR 21.1 crores, almost about $2.5 million in our newest entity from the U.S. government as a payroll subsidiary for COVID, it was long [Indiscernible], and the company also took an additional charge in the P&L of INR 5.6 crores on share warrants to be issued to be -- issued by Mistral Solutions and INR 2.1 crores as additional ESOP charge, result in a net onetime benefit of INR 13.3 crores, which forms part of reported EBITDA. Adjusting for the onetime benefit of INR 13.3 crores in the P&L., the normalized EBITDA for Q4 FY '23 stands at INR 30.7 crores at an EBITDA margin of 13.7%, similar to that of Q3 of FY '23, where it was INR 29.6 crores at 13.9%. Same period last year, Q4 of FY '22, the EBITDA was INR 28.1 crores at 14.6%. And normalized EBITDA for the full year FY '23 stands at an at INR 124.2 crores at an EBITDA margin of 15.3% as against FY '22, INR 68.7 crores at 11.3%. As such, the nominal EBITDA for the year FY '23 has improved by -- in absolute terms by about 80% and by 397 basis points value of EBITDA margin. Please note that the EBITDA margin does not include other income of INR 3.8 crores in Q4 of FY '23 and INR 14 crores in the full year of FY '23. The PBC FY '23 before exceptional items stands at INR 89.1 crores as compared to INR 38.5 crores in FY '22. As we have reported in the previous earnings call, the company has taken an exceptional charge of INR 58 crores in the consolidated financial business, which is solely related to the Mistral acquisition and pertains to the additional consideration and interest cost with respect to Mistral on fully convertible debentures, which is not part of the original consideration of Mistral. With the closing of Mistral acquisition in FY '23, all of this is behind us and more than exceptional charges are expected in FY '24. The company's provision for tax for FY '23 INR 25.8 crores, while the reported tax loss by FY '23 is at a negative point of INR 4.7 crores and adjusted for these exceptional charge, the PAT for FY '23 stands at INR 63.2 crores as against INR 24.4 crores recorded in FY '22. I would like to draw your attention to our previous earnings call, where the company authorized the investors that you took an incremental debt of around INR 215 crores at very high rates of interest due to the tight timelines imposed with arbitration tribunal for the acquisition of Mistral Solutions. We are happy to inform you that the company has now refinanced this entire debt, which will result in reducing the interest cost significantly. You will see this impact of the lesser interest cost kicking in from FY '24. [Indiscernible] with refinancing is expected in the next couple of weeks, the [Indiscernible] comes with [Indiscernible] repayment tribune get them into 4 years. And the company also, in March 2023, fully repaid the foreign currency term loan, which are taken from HDFC Bank. All of these actions will free up additional cash flows for the company and also the incremental EBITDA is what would come in from the growth as what we expected in FY '24, which will go out to fund the company's growth and expansion. Taking this into consideration, the company has consciously delivered its plan for [indiscernible]. To conclude, in FY '23, the company has been largely successful in setting up on the path of sustainable growth and profitability and strengthening the balance sheet, and we are confident of building all this momentum in FY '24 and beyond. Thank you. We'll now open the floor for questions.

[Operator Instructions] The first question is from the line of Jyoti Singh from Arihant Capital Markets.

Sir, my question is on the segment side. So as HEG, the trend was flat, so what kind of new strategy that we are following to make it in growth? And second, if you can guide us on the margin front for going forward FY '24, '25, and apart from that, if you can throw some light on the growth guidance on the top line.

I'll start by answering your question firstly. Jyoti, nice to speak to you again. So as far as heavy engineering is concerned, the slowdown was primarily because some of our customers sell the impact of the macroeconomic prices. We are now seeing some of that ease up. So we are hopeful that FY '24 will be better. In addition to that, as you know, as a company, we have been primarily in the mechanical engineering space, but some of our customers in this space are increasing their investment in both embedded and digital. And I'm glad to say that we have made some small inroads in digital where we are starting some projects in data analytics and other areas of digital. And we are also putting together a campaign where we are taking the embedded capabilities in Mistral into some of these customers. So our 2-pronged approach, one is the, first, the economic climate will hopefully improve and that will give us a filler. But more importantly, we will be increasing the exposure of our revenues in the embedded and the digital space. And we have already made inroads. We have also hired a sales person in the U.S. who comes from one of our competitor companies, who's got many years of selling into embedded, and of course, now that Mistral has been completed as an acquisition, and it's a 100% owned subsidy, we will be looking at leveraging them to take our capabilities there. So with this, we are looking at changing the profile of our revenues and therefore, looking at some growth coming into FY '24. The second and third part, Shashi, maybe you can talk about the margin profile as well as the growth for FY '24.

Well. So basically, talking about the growth, as Arun was explaining, all of the new verticals or what we have gotten into, whether it is energy or automotive or now the payment solutions, we are expecting that it will gather pace. And what we -- we do not want to give specific guidance, we are wanting to improve upon what we have achieved in FY '23, not across the 33% of what I'm talking about. And I'm talking about the industry growth rate, which is in the range of around 11% to 15%. We are hopeful that we will -- we'll be growing in terms of revenue anywhere between 18% to 20% in FY '24. And...

Just for this -- just to add is that, of course, like Shashi said we don't want to give specific guidance. But what I can tell you is that the plan that we have taken for FY '24 is quite aggressive. And like Shashi said, we will be looking at growing beyond industry growth rates. So if we're able to achieve that, it will give a good outlook.

Yes. So talking about the margin profile, as you would have seen, we are at a normalized EBITDA of 15.3%. And our -- of course, in FY '23, there were -- the Covid revenues came back and quite a lot of, I would say, positive developments were there in terms of the of the vertical that you service. especially the Aerospace business came back. So our objective is to kind of reach the metrics is what the industry best [Indiscernible], which is in the range of 18% to 19% in the next couple of years. So we'll continue to look at the margin profile at each vertical level at each customer level. And our objective, I would say, this is gap between the industry-based EBITDA margin around 18%, 19%, from where we are at 15.3% in the next couple of years.

The next question is from the line of Pradyumna Choudhary from JM Financial.

So I have the following question. First one, we are seeing some very good traction in the auto space, right? So could you provide some more details on which country, particularly which geography we are serving in, and what kind of services, where I'm coming from is because earlier, we were hoping to grow very well in Europe through our acquisition, which came through and you explained the reasons lasting. So I'm just trying to understand the kind of traction we are seeing, where is it coming from? Second is regarding the degrowth, sharp Q-on-Q, degrowth we've seen in Europe and U.S. So if you could explain that further and also the fact that we've grown very, very sharply in APAC. So with geographies within APAC would be contributing to that kind of growth? And Thirdly, the product engineering and product solution space, I think these are mainly defense-related words, right? So would it be like are these the kind of verticals where there might be some bulkiness in revenues, and so it's better to look at by year-on-year rather than Q-on-Q. And just my last question would be on the digital capability side. I think like you've been trying to develop digital capabilities on our own organically. So could you provide further details regarding how that's coming up? And what exactly are you doing working towards there? These are my questions.

Sure. Pradyumna, thanks for your questions. So firstly, the automotive space is a big focus area for us. And we've been consciously investing in this, and this year has been good success, I would say, from a hunting perspective, that we have added 3, 4 very prominent logos the areas that we are looking at predominantly, of course, we have a lot of mechanical heritage, so we will do some amount of mechanical work. But we're predominantly looking at areas like software development, software testing, ADAS, Autosar, Bootloader software, Infotainment. So these are the areas that we're looking at and some of the big clients or the big logos that we have signed up, this is the area in which our services are coming in. I would say that we have good traction in Europe. So as far as our current automotive base is concerned, we have a couple of big brand names from Europe. So that is definitely working well. But having said that, this year, we are looking at expanding the automotive landscape in the U.S. as well because clearly, there's a lot of opportunities there, and there are some big names out there. So this year, we will hope to make some good sales and hunting traction into the U.S. So I would say current state of so far, it's been predominantly Europe-based and some in India, but a lot of the work has been in the software testing, software development, AUTOSAR, et cetera. And as far as inorganic growth is concerned, we are still looking for a partner. That is something we're serious about. So we're looking to somebody in Europe or in North America, who can give us some good capabilities in the automotive space. So as and when we sort of are able to find a good target, do the due diligence, we will sort of look at completing that. So in terms of APAC, your third question and the degrowth part, I will first answer the rest of it and hand it to Shashi on the second part, which is degrowth in Europe, U.S. It's really more growth, which is happening in other areas, but [Indiscernible] represented. But as far as APAC is concerned, it's predominantly India for us. So most of the business that we are seeing and what's happening in engineering services is that a lot of global clients are ramping up their captive centers. So whilst on one hand, we have established relationships in Europe and North America, the captive centers in India are also becoming quite prominent and quite sizable. So it is not a market that we want to ignore. And we have made some very good progress with some captives of global companies in India. So I would say most of the APAC growth has come from that category of customers. There are a few Indian customers with whom we have started the relationship as well, but I would predominantly large engineering centers and captives of global companies is the focus. There are some small opportunities in the Middle East that we're looking at. And of course, with the focus that we have on the energy business, you will see that there will be more business coming in from the Middle East because clearly, if you want to be prominent in energy, it has to be Middle East, it has to be Houston. And to some extent, it has to be Aberdeen in Scotland. So we will look at some growth happening from the Middle East with energy as well. The third question was on the product services. So clearly, for us, the defense business is critical, and it's on the growth part as well. One is because the opportunities are expanding there's more make in India. The development minister has said that they will look at more indigenization. So that's clearly an opportunity for us. But we -- as you know, and we have spoken in the past, we have very strong differentiation when it comes to the electronics part of the defense. So if you look at radars, if you look at solar, if you look at telemetry devices, if you look at drones as well as anti drones, these are areas in which we are very strong. So we will continue to push into these electronic components in defense, and that's where we are seeing significant growth. And I would say that we already have a big design win pipeline over the next 10 years. And in the last financial year, we've been able to add on other 4 or 5 projects to the design win pipeline, which means that the production will happen over the next 10 years. So we will see very good growth and very good quality of revenues coming in from the defense business. So we are very well differentiated here. We have extremely strong relationships with the labs, the likes of DRDO, LRDE, NPO, et cetera. and also with production partners like BEL and HAL. So this is something that will grow for us. Digital has been a super focus area for us for 2 reasons. So one is, of course, the market facing, the use cases that the industry provides whether it is automotive, aerospace or heavy engineering. So like I said, we have started some relationships with clients, some small projects have started. So we will look at expanding this. But the second aspect of this is what we're doing to ourselves in terms of bringing in automation initiatives, in terms of being smarter. And some of the profitability growth that you are seeing, the EBITDA improvement that you're seeing is because of the fact that we are putting a lot of intelligence, automation we implemented some AI/ML, and we will be doing more of this going into FY '24 because a lot of the engineering work that we do is actually amenable to some of the new AI and technologies that are available. So we feel that there is a significant opportunity for us to change the business model by which we deliver. So it will be -- of course, there will still be a lot of people [indiscernible] but we hope to increase the use of tools, the use of platforms and the use of digital in order to deliver services to our clients. Shashi, maybe you can talk about the second part of the question.

You see, basically, I think Arun you have answered all the big questions. In terms of growth in APAC, as what we have reported, we have grown by 56%. And most of it is defined by our Product & Solutions business, which has defense -- or defense vertical, which has grown from INR 157 crores in FY '22 to INR 238 crores. So that's what defines our growth in the APAC region.

And so -- okay. And that regarding the Q-o-Q degrowth in U.S. and Europe?

So that's mainly coming from our Heavy Engineering Business as what we kind of explained, where Canada -- in Canada, our business kind of degrow, that's mainly because of the Bombardier business which went into a bit of a lull. And on the America -- on the U.S. business, it's mainly because of the Caterpillar business, which represents our Heavy Engineering Business. And all of this, we hope is going to come into shape from FY '24 onwards.

Like just a follow-up. The heavy engineering, the degrowth was 3.7% Q-on-Q. Europe declined by 13% Q-on-Q and U.S. declined by 10% Q-on-Q. So that's where like that's where I'm coming from. Why are we seeing such sharp numbers in Europe and U.S.

No. The Europe actually year-on-year has grown by 43%, right? And U.S. has grown by 17.1%. Canada, course, as I told you, has de-grown by 1% as a result of the Bombardier business and APAC have grown by 56%. Where are you seeing de-growth in Q4, let me just go back to the numbers. Even in Q4, APAC grew by 38.5%.

APAC and Canada grew Q-on-Q, whereas Europe and U.S. declined. And on Slide 10 of your presentation.

Yes, Europe is essentially from our Products & Solutions business, which degrow the by 13.4% as result of the revenues, which came from a defense business in our I would say different subsidiaries. Was more in Q1 and Q2 as a result of which the Europe business came down. And U.S. is 10.3% degrowth slightly because of the Caterpillar business.

I think in the past also, we have said that it's difficult to measure this defense business on a quarter-on-quarter basis. It is probably a better yard stick to look at it as year-on-year because there is some lumpiness which happens. So we look at defense more as a long-term business. And the quarter-on-quarter fluctuation that you see is something that is part for [indiscernible] the course as far as defense is concerned. But I can tell you that and of course, in Q4 also, you have a slow start because of the new year. So a lot of the Western world, especially Europe and North America, the first 2 weeks is practically closed for most manufacturing companies so because of that also, there is a little bit of that and most of the billing happens in the number of days that we work. But from the core of the business and from the health of the business, there is nothing to be concerned about. We are actually seeing quarter-on-quarter demand growing.

[Operator Instructions] The next question is from the line of Inder Soni from Ruane Cunniff.

Congratulations on a great set of results. Now that Mistral is 100% part of your company, what are your long-term plans for Mistral? And then separately, you talked about anti-drone. What are you doing in that area and the drones, anti-drone, and can you talk about that as well?

Sure, Inder. Thanks a lot for your question, and good to speak to you again. So yes, Mistral is now completely 100% subsidiary of Axiscades. So the plans that we have are, as you know, that we have defense both as a subsidiary within Axiscades. And obviously, it's a significant part of Mistral. So the short-term initiative that we have is that we are looking at synergizing the defense business between the 2 subsidiaries because we actually have complementary strengths. So if you look at Mistral, they do a lot of work with the labs, and they do a lot of product development in the solar in the radar as well as the telemetry space. Whereas with the Axiscades subsidiary, we work with the offsite partners, so we work with companies like Thales and MBDA, and we also work with the Ministry of Defense. So the good part is that both of these could come together, and they could be complementary. And we will be looking at how we can cross leverage this. And given that defenses on such a role, we are confident that with the combined capabilities, we can do much more. The second part is that Mistral is very strong in the PES product engineering space, which is the semiconductor industry. And this we are seeing as a very strategic differentiator because if you look at it, every single industry vertical that we have presented, there is growth of embedded, there is growth of digital. And silicon is -- the capabilities in silicon is something that most of our customers, both existing and new customers are looking for from these verticals. So we will be looking at taking the PES capabilities to all our customers. And in an earlier question, I had said that we're looking at how we can synergize Mistral embedded capabilities. This is exactly what I meant. So the semiconductor capabilities that we have with the silicon companies, we can take it to help us, we can take it to Caterpillar, we can take it to Bosch because all of these guys need a lot of invented skills. So that's the second part that we will be looking at with Mistral. And we are, I would say, in a very unique position. If you look at it, most companies in the defense space are purely defense. We are in the unique position where we have a good mix of defense as well as commercial, which I think is a great spread for us. because we can also cross-leverage defense capabilities into commercial. As far as drones and anti-drones are concerned, so we have developed an anti-drones system for the Indian Army, which is a portable carriable anti-drone system. We have delivered, we had an order for 100 units out of which 40 have been delivered, 60 more are being delivered in the next couple of months or so. And there are some repeat orders which will come in for anti-drones, so that is a very good capability that we have. And these are basically electronic systems, which can jam communications of hostile drones. So that's why we're sort of focusing on from anti-drones perspective. From a drones perspective, there are a couple of areas that is a focus area for us, and this again concern. So the anti-drone comes from Axiscades and the drone comes from Mistral. So we're looking at something called a tethered drone and they're also looking at something all the heavy payload drugs. So these are basically drones that in the tethered drone, it is sort of connected to a cable. It can be quickly used in a disaster, for example, if there's an earthquake -- if there's a situation which escalates on the border area, you could sort of have a tethered drone which could go up and which could provide surveillance, it could provide video footage. It could provide information about either hostile territories or about any situations which are developing. And this is because of the fact that it's connected, it has unlimited power storage. It can work for hours on end. And it can be a waluable, it's like a lighthouse in the sky, I would call it. So this is one area where we are sort of focusing on developing our capability. The second thing is what I call heavy payload drones where we have done this can take up to 30 to 40 kgs of load. Because if you look at India, the unique thing is most of our borders are on the mountain. And even now a lot of goods and a lot of ammunition, et cetera, is carried through on the road or through the -- or on [indiscernible]. So there is a huge use case for actually carrying 30 to 40 kgs and there are not many of these drones available. which can carry equipment and all of that. So that's the other area that we're looking at. And there's a very good discussion we are having with the armies with the armed forces for some of this. So this is the combined focus area that we have on drones as well as anti-drones.

The next question is from the line of [ Samar Choksey ] from Indus Equity.

Am I audible?

Yes, you are.

Sir, my congratulations to you and the rest of the team for a very good quarter. So just to understand a few things. With regards to the planned equity raise, I think last time in the analyst meets investor remembering guidance, you are looking to raise INR 150 crores. As I understand, is this deferred as of today or what are our plans for it?

Yes. So I can answer that. So basically -- Shashi you want to go ahead?

Arun, you go ahead.

I can just answer some of these then you can add in some details. So Samar, basically, I think the primary reason for equity raise was that we had a body of [indiscernible] on our books. We have had very good discussions, and we are in the final stages, like Shashi said of refinancing this. And we are able to do this at much better interest rates. So that burning platform for raising equity is not there. Secondly, we also want to know now that we have a business which -- that the EBITDA is increasing, they're generating more cash, the profitability is going up. We feel that we are self-sustainable and we are on the path of that. So we would want to wait for better valuations before we go and issue shares and raise primary. So the reason that we were in the market was that obviously, at that point, there was a need for it. But now that we have sort of made some progress in terms of refinancing in terms of improving the health of our business, which actually is the best thing to do and we are becoming more self-sustaining, more cash generative, more profitable. So we don't -- the urgent need is not there anymore. We will wait for a better valuation and then we will do it at that point in time. Shashi, you can add if you want.

I think you said it all, Arun that's what exactly I wanted to say.

Understood, sir. So as a follow-up to this, in the last interaction, you had mentioned that our foray into Europe particularly on the automotive side, given we needed to potentially tap into, say, the German market where you've got the big boys like Daimler and BMW as well as you were mentioning a few more planned acquisitions, say, in the energy space, like the deal with the Aramco oil. All of these, do we have sufficient ammunition, are we still planning to go ahead with these plan acquisitions? Or how are we looking at this strategically? Because I think at least on the auto side, consolidating and further expanding in the European market seemed like a focus. Is that still the priority?

No, absolutely, it is. And like I answered in one of the previous questions, we are still in the market for an acquisition in automotive in Europe. So that is a focus area for us. Of course, having said that, we want to make sure we do the due diligence because as you're aware, when you acquire an entity in Europe, depending on which country it is, the labor laws are very strict. So you've got to be 100% sure that is not going to be margin diluted. It is not going to be a drag on the business. And that truly, there is synergy, and there is a fill-up to the business. But having said that, there are many good companies out there, and this is something which is a strategic priority for us. And for sure, this year, we will look at -- so whatever we talked about so far was about organic growth, but inorganic growth in -- especially in sectors like automatic is a huge focus for us. So we are definitely on that road. So you will -- hopefully, if things go well, we will come back to you and announce that we have been able to go ahead with somebody.

Understood, sir. And my final question is...

[Operator Instructions] The next question is from the line of [ Pankit Shah ] from Dinero Wealth.

Actually, if I go back to last quarter, where we guided some $30 million to $35 million of execution this quarter. And we probably are some short of it. And if I exclude onetime income, so there was a degrowth quarter-on-quarter. So is it the right way to look at it? And what went wrong probably where you're thinking like $30 million to $35 million?

Yes. Thanks for your question, Pankit. Actually, I probably do not understand here how you are computing these numbers. Maybe, Shashi, if you can -- because as far as we are concern [Indiscernible] clearly growth in the business, you might want to explain to us how you are seeing the digital.

So this onetime income, which came in from U.S. government, should we include it? Is it included in the revenues or...

That is not part of revenue. That has been netted off from the payroll cost of our U.S. entity. That's not part of revenue. The revenue is pure growth. As we have reported, we have grown 5% quarter-on-quarter, and we have grown 15% year-on-year as to Q4 revenues are concerned.