Onward Technologies Limited (517536) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Onward Technologies Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. With this, I now hand the conference over to Ms. Asha Gupta, Investor Relations from Ernst & Young LLP. Thank you, and over to you, ma'am.

Thank you, Kamiya. Good day, and welcome to Q1 FY '26 Earnings Call of Onward Technologies Limited. The results and presentation have already been mailed to you, and you can also view them on our website, www.onwardgroup.com. To take us through the results today and to answer your questions, we have with us Mr. Jigar Mehta, Managing Director of Onward Technologies Limited. He will start the call with a business update and financial performance for the quarter gone by, which will be then followed by a Q&A session. As usual, I would like to remind you that anything mentioned on the call that reflects any outlook for the future or which can be construed as forward-looking statements must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties are included, but not limited to, what we have mentioned in the prospectus filed with SEBI and subsequent annual report that you can find on our website. Having said that, I will now hand over the call to Mr. Jigar Mehta. Over to you, Jigar.

Thank you, Asha. Good afternoon, good evening, everybody, and a warm welcome to everyone who has joined us today for our Q1 FY '26 earnings call. It's always a pleasure to speak to you and share live updates about the progress that we are making in Onward Technologies. I hope you've got a chance to go through the earnings deck and the press release that we released earlier today post the Board meeting. I will go to the financials for Q1. We spoke very recently in May after our Q4. So I'll quickly update over the progress that we made in last 90 days and last 60 days in particular. Overall, Q1, we made decent progress and our revenues consolidated was at INR 135.6 crores and our EBITDA margin was at 12.9%. Again, both the highest that we have ever done in our history. This is something we've been discussing for quite some time. And this is a result of both seamless execution and operational efficiencies that we are trying to bring in through automation in our entire business. We continue to invest heavily in both our target verticals, our focused large verticals, which is Industrial Equipment & Heavy Machinery and the Transportation & Mobility vertical. And we're also investing in our newly created Healthcare vertical. So there is no cutting costs there. It's more about improving efficiencies and the execution model that we spoke about earlier from our availability of visa program, availability of better design centers, better capacity that we can ramp up, and we are seeing a result of that. We continue to focus only on our live customers. And most of our customers, I would say majority of our, 95% of our customers have shown progress in this last quarter. And there were a few customers which got impacted due to tariffs and some of the external macro or micro environment. And these are results post that. So obviously, our internal projections show us much better visibility, and it's all about majority of our customers moving in that direction. From a headcount perspective, we continue to remain very steady. We are at about 2,570 full-time employees and our attrition rates are manageable. LTM is at 16.5%. And we continue to believe both the numbers. Our headcount will continue to increase over the next couple of quarters as we get into more and more mature engagement and our global delivery model engagement takes full cycle. In terms of geography, we continue to have only 2 geographies as our focus primary areas. One is North America and second is Europe. And our invoicing model continues to remain the same. Everything that we invoice outside India is considered on-site. Everything that we invoice in the GCC business for these global companies is in INR. As we look forward, I am quite optimistic. We have good visibility going into this year from our existing order book and with the visibility that we have with the new projects coming up from our existing clientele that all the 3 verticals should continue to build on the momentum as we continue to invest behind these verticals in U.S. and Europe, and as we keep building up more and more capability, which our new design centers and the new space that we have added allows us to do. Last, a quick update on the infrastructure. We have finally moved back into our main office in Pune, which is in Almonte IT Park in Kharadi, completely upgraded and beautiful state-of-the-art office, and we would love to welcome all our investors here. And we are looking forward to our new office in Chennai. This will be our largest office in the history of Onward, our biggest design center, which is opening in this quarter in Q2. So again, very excited with the new capacity and capability that allows us to continue to invest more behind our existing clientele, more behind growth, as we continue to chart a journey towards double-digit revenue and double-digit EBITDA. Thank you again, and I look forward to your questions and any clarifications that you may have. Over to you, Asha.

[Operator Instructions] The first question is from the line of [ Parth Damani from Damani Family Office ].

Great set of numbers. Congratulations.

Thank you.

I wanted to know about your revenue growth target in FY '26. And if you would like to highlight any -- you have mentioned on LinkedIn that you have hired 700 people in Chennai campus. Is this anticipation of some new business that... And second question is regarding the EBITDA margin. Is this sustainable considering wage hike in Q2? What should we assume for the full year?

Thanks for the questions. To clarify, I'll go to the second question first, and then I'll go to the other 2 because they are both related. On LinkedIn, we are -- as I shared in my opening remarks, we are opening a new design center, which is what we have mentioned and what we are very excited about. It gives us a capacity to hire a few hundred people more in Chennai, which we did not have because our current design center is completely 100% occupied. So it's anticipation for the next 3 years -- 2 to 3 years that we will build up a much bigger capacity and capability, taking our Chennai headcount to 2,000 people going forward. Now coming back to your first question, our business model is about execution, and it's about seamless delivery. We've been trying that for the last 2 years. And a lot of times it's worked, a lot of times it's not worked. Now I believe we are in a good momentum, and I think we can keep building on this. So to answer your question, as we shared last quarter, what we are aiming to do is deliver double-digit revenue and double-digit EBITDA on an annual basis and not get focused on the quarterly numbers. But we have a very good visibility, and I'm looking forward to that. In terms of wage hikes, there will be an impact in Q2, but I think there's still a huge opportunity for Onward based on the funnel that we see as of today, based on what we see in front of us to continue to maintain and grow from here as well.

And just last, just to add on to that. What differently we are doing that the growth and margins both have picked up in this quarter? What different we are doing?

What are we doing differently? We are very focused on our existing customers. That's what we started doing for the last several quarters. There was work in progress. We had to bring in a new leadership team. We had to ensure the right customer balance. We had to ensure the right vertical balance. And most importantly, which I spoke about last year as well, one of the challenges Onward had going into last year is when our customers outside are asking us to build local capabilities and capacity in U.S. and Europe, which we did not have. Now we have that. So we are able to take on projects much more confidently. So for example, if Onward wins a project today, we can start on Monday. It could be in Germany, it could be in U.K., it can be in the U.S. Same time, maybe about 90 or 100 days back, we couldn't do it, right? We didn't have the ready bench pool of resources of high-quality subject matter experts who could fly for projects for project management outside India. Now we have that. So we are able to take on, our sales team is able to win projects much more efficiently, and we believe that momentum will sustain. We can sustain that and we can grow from here as well.

The next question is from the line of [ Nitin Jain from Fairview Investment Private Limited ].

Congratulations on a stellar quarter. So I'm a new investor to the company, and I would like a few clarifications on the last year's performance of the company. So as we can see, even the P&L has been a little volatile. So FY '22 was a stellar year, but again, FY '23 saw a big impact on profitability. Again, FY '24, we did quite well, and then '25, the PAT has gone down again. So is it possible to clarify what were the reasons behind this volatility and how we are mitigating it?

Sure. There are multiple factors. But I'll focus more on the last year. Other numbers, I think, a lot of the data is out there. And Nitin, what we could do is share you a copy of our latest annual report. A lot of the data you will find readily. But to answer last year's point, last year we got impacted because of 2 things predominantly. One was our ability to execute projects outside Europe -- outside India, which is in North America. Europe was not there. Now we are slowly building on that. And we've invested very heavily in that in the last 18 months. Second was the external factors linked to the automotive sector supply chain, where our automotive unit also got affected. So those are the 2 main factors for last year. And because the revenue did not grow very fast, or at least at 15%, 20%, that impact came straight to the bottom line as well. I think a lot of those things have been corrected, at least the point number one. And I believe that will help us build on the momentum for the next 3 years as well, as we continue to invest big behind our existing clients.

So that's quite helpful. And my last question is, so our dependence on one vertical, which is the Industrial Equipment vertical is quite high. So how are we planning to hedge our bet, so that any slowdown in this vertical does not impact us too much?

So great question. We have 2 verticals, Industrial Equipment, and Transportation & Mobility. We don't need to hedge as per where I come from. In those 2 verticals, we have a combined of 75-plus customers, 75 unique customers who are spread across the breadth and depth of North America and Europe. So even if it does impact a few companies, few regions, I think there are enough for the customers to go forward. I'm a big believer of having a very small number of customers, and we are building entire organization around that, where you mean something to the customer, you can scale with the existing customer and you can scale with them in all the markets the customer operates in. And that's where we are channelizing all Onward resources. And I think we believe we are well hedged and well balanced in terms of number of customers. Going forward, as I clarified before as well, I think 75 also is a very large number for my management team, for our execution team to build capacity, capability for 75 unique products and projects. And I think 50 is a good balanced number going into the next 3 years. So that's where I would like to be. That will be a nice sweet spot for Onward as we hope to aim to double up in the next few years.

Sure. And if I can just ask a follow-up to that. Would it be possible to clarify your order book as of 30th of June?

So at this stage, we don't share our order book, but it's very mature and at a very solid number.

So what kind of revenue visibility does it give you internally?

As we shared last quarter and earlier as well, we believe we will deliver -- our goal is to deliver consistently double-digit revenue growth and EBITDA growth. And that's what we're aiming to do.

The next question is from the line of Aditya from Sowilo Investment Managers LLP.

Congratulations on a good set of numbers. So I mean, building on our earlier conversations, one point which would keep coming up is like you would mention that the tail is long and you would like to chop off and focus more on your top clients, especially the top 10 clients. But if I look at the presentation, the contribution has fallen off sequentially both on a Q-o-Q and a Y-o-Y basis, especially if you look at the contribution from top 10 clients. So any reason why?

So interesting question. I don't think I've ever said the tail is very long. What I have always said was we have been privileged to work with unique amazing world leaders or 80 customers. And it's not necessary or it's hard for Onward to win all 80 battles every day in global markets. So the objective is to simplify our execution model with a few customers, because each customer also has 25, 30 products, and we have to build capacity and capability for that. So what I've always been mentioning is objective is to simplify our execution model, so our delivery leadership can be focused and they can build up amazing business model for our existing customers. I don't have a specific answer about the top 10 customers. It could be some customers up and down could have happened over the quarter based on some projects up and down. But overall, majority of our customers have seen very good momentum in the last 90 days or in Q1 of this quarter. And that's what we are seeing visibility-wise as well, at least going into the next few quarters.

Got it. So in terms of guidance, I mean, you just mentioned double-digit revenue and EBITDA growth, right, nothing beyond that?

That's correct. We want to be able to deliver sustainable numbers every quarter, yes.

So then my follow-on to that would be, so what exactly has led to this margin expansion on a sequential basis? Is it like a product mix change or something else which is playing out?

It's much more simpler. I think it's just the execution, right? A lot of the projects, as I always said, we used to win projects. It used to take us 3 months, 6 months to kick off the projects, because we did not have the visas, we did not have the capabilities to build up the on-site presence. And we were constantly going in the market to hire very specialized project managers and architects and everything else. Today, all that rest within Onward, majority of it. We are able to win projects. When customer sees the confidence about us able to execute projects, we get opportunity to bid for more projects, and the whole cycle suddenly changes, because we are talking about existing clients where we have relationship for 3 years, 5 years, in most cases, 10-plus years, right? So we're able to hopefully build on that. It's only 1 quarter so far. I want to be able to deliver this for several more quarters. Then it becomes a beautiful engine for us where our customers are also extremely proud of us.

Okay. So I mean, just basis your last point, what would be then a sustainable margin which we can expect in terms of EBITDA?

So we've always maintained double-digit or mid-teens is where we want to be. That's where majority of our industry is who are without the manufacturing backbone. And I think that's something Onward can easily achieve if we can keep on this momentum and execute high-quality projects.

Got it. So that means the trajectory is only upwards from now on, right?

The focus continues to be on growth, right? Margin is an important indicator, I understand that. But for us, it's about growing, right? If you don't grow, you die in our business. So we want to keep growing, and that's where all our investments in energy is going. At no point in time, Onward is going to be cost conscious. We're going to be highly working efficiently. But our goal is to grow, and I think still there's a huge opportunity for us from where we look at the business today.

Got it. And just one follow-up on the previous participant's...

Sorry to interrupt Mr. Aditya. May I request you to join the question queue?

Fine, I'll join back in the queue.

The next question is from the line of Hitaindra Pradhan from Maximal Capital.

So my question is related to like -- in this space, hiring personnel and subject matter experts has been a challenge both in U.S. and India. So how do you tackle that? And do you think that you have teams in place going forward to execute the projects that you currently have?

Again, great question. This is Onward Technologies' biggest strength. Even when I took over the business from my father, our ability to attract and retain people was very high, and it continues to be. And we have not seen any challenge in terms of attracting talent. As I said, our challenge more was we, post the pandemic, had built up an entire engine to grow in India or in offshore, and then the model changed. We had to start building the model for global capacity and capability. We have started to do that over the last 18 months, putting huge money behind that. Now we're investing very heavily in training. So it's all about -- we already have 2,500-plus employees, right? We don't need thousands more. We just need a few more to hopefully double up. And we have the customers. It's all about execution, execution, execution. So Onward's main goal today is continuously making sure we are investing for the future, investing with very strong governance, investing based on where our customers want us to be. So we are in a good spot from that perspective. And it's all about now, as I said, execution and seamless delivery.

Okay, sir. And my second question is related to the Transportation vertical. So you have like -- you support the GCC clients in the auto space and also domestic railway contracts, I suppose. So there has been some commentary that the automotive space, there has been some slowdown in that. So how do you see that in your case that doesn't impact you that much? So any commentary on the automotive client side ramp-ups?

So just a clarification there. We don't support any automotive company in India. We have 0 customers in India in any vertical. We support global automotive GCCs in India, whether they are OEMs and Tier 1s. There has been some slowdown in some customers, which have been affected or impacted due to tariffs or some supply chain or some external factors. But there are several others who are actually ramping up and doing well. So overall, we have seen good momentum in Q1. Let's see how Q2 and Q3 is. Everything is very real these days. It doesn't take a few quarters for things to realize. Impact is immediate. But so far, we have not seen anything which we think will affect the projections that we have shared with you at least as of this morning.

The next question is from the line of Pratap Maliwal from Mount Intra Finance.

Congrats on a good set of numbers. So my question is actually related to the previous participant's question. I just wanted to understand how is our demand environment looking in our 2 largest verticals? Because last quarter, I think we pointed out that there's been some -- we've seen some substantial slowdown in some of our clients, particularly in the automotive Tier 1 space. So any color going ahead how we are seeing the demand environment shape out for us?

Sure. Again, a very interesting question. Let me simplify our business model more for everybody. We have 80-plus customers. They are all unique customers not linked or interrelated with each other. These are 80 companies headquartered across the breadth and depth of Europe and U.S. So last quarter, there was -- last 1 year and last quarter, in particular, there was a slowdown in some customers, but enough other customers were doing well. Same thing in this quarter. I think the good part is when you have 80 customers, we need about 41 to do well for us to keep making progress, right? And if the 41 are in the top 25 clients of Onward, you'll make much faster progress in terms of revenue. And that's what has happened this quarter. There will always be some companies which will have slowdowns. There will always be some quarters where there are customer projects getting delayed, or we might lose some projects, but we have 80 customers. And for Onward to win, if we have a few customers which continue to grow and do well, I think we are in a very good shape to meet the projections and pipeline that we have shared with all of you. And that's what we are continuously betting on as we go into for the next 3 years, which is all about execution, execution, execution. I hope I've clarified your point.

Okay. Sure. Yes. And just another question is, as I understand what you've been pointing out that in the past, we had maybe some execution issues with not having the visas in place and everything, but now those are reasonably figured out. So going ahead, do we expect an increase in our on-site revenues from U.S. and Europe now that we've been able to build up teams in our kind of global delivery model? And should that actually change going ahead?

That's where we would like to be. I think 1 year from now, I would like to see our U.S. and Europe revenue substantially higher at the on-site portion, because that gives us a visibility to increase our offshore revenue substantially more in the next few quarters, right? So any project for us being a services company starts with on-site, then moves to offshore. Very unlikely that a project starts 100% offshore. So it's Onward Technologies' ability, for a company of our size and the projects that we bid for, is to win the projects, build the on-site presence and then move offshore. And then after a couple of months or quarters, weeks, months or quarters, based on the size of the project, the workload will move offshore. That's where your margin expansion will happen. So it's an investment initially then going to margin expansion.

Understood, sir. And just to confirm, you are not seeing any major concerns from any of the top clients which can materially affect our projections or at least our internal projections for the year. Is that correct?

Correct. Yes.

Congrats on a good set of numbers.

The next question is from the line of [ Ankur Kumar from Alpha Capital ].

Congrats for a good set of numbers. Sir, my first question is I wanted to understand how much of wage hike we have taken on the 1st of July. Can you comment, please?

That process has just started. So we would know by end of the month, end of July, most likely. But we have already announced that Onward Technologies will be doing increment. We are not delaying or stalling it as we have seen with some of other peers, and we will be doing increment because that's the right way forward for us.

And generally, it would be like -- any range you would like to comment, like high-single-digit or look at history or how should we think on that front, sir?

That's a good question again, and I'm very happy to clarify. So our increment cycle is very, again, linked to our customers. And we get good visibility from majority of our customers about what the increment cycle is. It's usually in par with what they give their own employees or maybe a percentage or 2 lower than what they are at. So based on how our global companies in U.S. and Europe are, ours is very heavily linked to that.

Sure, sir. And so given this wage hike -- you said Q2 will be a little impacted. So given that, can we still expect double-digit margins in Q2? Or we should look at overall year on that front, sir?

Again, I request everybody to look at Onward from an annual perspective, right? There will be quarterly ups and downs. Q1 was good. Q2 looks to be good. I think a lot of positive things can happen this year and next year. But Onward has to execute. So I don't want to overpromise right now. From an annual perspective, I think we are in a very good strong shape as what we committed last quarter with the projections that we have given.

Actually, sir, the projection was double-digit revenue growth for this year. But in this Q1 only, we have done like 4% Q-o-Q growth. So can we expect this 3% to 4% Q-o-Q growth to continue going into the coming quarters?

That's not the right way to look at it. I would look at Onward Technologies. You can't look at a cricket match from 5 overs, right? It's an annual thing. We look at Onward from an annual perspective, and I think that will give you a very good visibility of where we think we can deliver and where we will be.

Got it, sir. Last question would be, in the last call, you said that in this assumption of this double-digit growth, we are assuming auto to be flat. So are we seeing any positive turnarounds in auto? Or how should we look at that, sir?

I don't think I said automotive will be flat. I think we're taking very conservative projections for automotive. I think Q1 has surprised us. Some customers were slow, some customers actually ramped up much -- I shouldn't say ramped up. We were able to execute some of the projects which were stuck in Q4 and start the projects. So, so far, it looks pretty positive. But automotive is an industry which is completely shaken up right now. So let's hope that the positive news comes soon and actually we can build on from where we are, because we have very good capability and capacity as we speak today. It's all about a green light from our customers.

The next question is from the line of Ekta Mudra from Smart Sync.

Basically, in your last con call report, you mentioned that the revenue growth -- the long-term vision of your revenue growth is INR 500 crores to INR 1,000 crores. What's the estimated tenure for that? And what are the modes of the revenue generation? Can you please give color on that?

Sorry, can you please elaborate on the question?

My question is that in last con call report, you mentioned that the long-term vision of the revenue growth of your company is INR 500 crores to INR 1,000 crores. What is the tenure of this? And what are the modes of the revenue generation basically?

I hope I understood your question. I think you're asking us how we will double up from where we are today?

Yes. How many years estimated, numbers basically? And what are the modes of that?

Okay. Let's -- just from a time perspective, we believe we will grow double-digit revenue on an annual, both on a revenue basis. So in the next several years, I believe we can double up. It took Onward 3, 4 years to get to INR 500 crores. So I'm sure in the next couple of years, we can double up. So it will be a record for us. What is the mode, I'm assuming, you said for execution? It's -- again, our goal is to remain the same, focused on our existing customers, existing verticals and existing markets. We have a superb -- we are privileged to have an outstanding Board of Directors. We have great investors. We have an excellent partner in Convergent team. We have outstanding leadership team. And the delivery organization continues to keep getting better and better and better every day. So I think we have everything that we need -- and now world-class infrastructure. So now I think we have everything that we need to execute. I think it's all about just making sure that we continue to remain focused on what is our biggest strength today and not continuously trying to do new things. And I think Q1 was a demonstration of that. Now Onward Technologies and me and my team have to make sure that we can consistently deliver that.

The next question is from the line of [ Keyur Kumar Vidalia from Niveshaay ].

Congratulations on good set of numbers, sir. My first question is which vertical do you see right there in terms of growth for the next 2 to 3 years? And if you can provide the vertical-wise margin profile?

Sorry, we missed the first part. What is the first question?

I'm asking like which vertical -- like out of our 3 verticals, which vertical do you see more in terms of the growth, like which will grow more? And what is the vertical-wise margin profile?

Sure. So we don't have a preference, whether it's IE&HM or T&M. I think both the verticals have amazing -- again, for a INR 500 crore revenue, it's a very small number if you divide that by 75 customers for these 2 large verticals of ours. There's a huge room for us to grow in both the verticals. So where I am today, I don't have a preference. We love both the verticals. I think they will both grow. There will be some quarters, one vertical might grow; some other quarters, other vertical might grow. So it's a good balance from that perspective. But there will be a time, I think, in the next 1 to 3 years where both the verticals start firing all cylinders. And I think that will be fun times, real exciting times in Onward. So I'm looking forward to that, and that's what we are aiming to do. And the third vertical, Healthcare, I think that also is a beautiful vertical. It's a vertical that we have had, we have seen over the last 5 years, which continues -- our outsourcing budget continues to increase every year. And I think we just have to get our engine right. And I think we are learning well, we are developing, reflecting our mistakes. And I think we'll keep improving and growing there as well. So just to summarize, all the 3 verticals, it's a very small number, 2 large verticals and one young vertical. And I think all of them will hopefully continue to do well. The fun times is when all 3 start growing at the same base, in the same month, same quarter.

Also, if you can provide the margins for the vertical side?

So we don't provide that data yet, but I'm sure in the next few quarters, as we keep getting mature and as size increases, we will have the confidence to share that.

Sure. And my last question is, on the Transportation & Mobility side, like we are in the North America and Europe. So like in which level of automation we are targeting the customer?

We've shared the data. We have 75 customers in North America and Europe.

I'm asking like which level of automation, there is a classification of the levels in automation. So which customers are segregating based on that?

Automation?

Yes, level of automation, like fully automation customers we are targeting, which kind of customers we are providing our services?

So all our automotive customers are the largest automotive companies in the world. Onward Technologies does not work with standalone EV suppliers and/or any other start-ups, right? So we work with all the large traditional automotive companies in U.K., in Germany, and in U.S. We are a preferred supplier to few. Some customers we have worked for, for the last 5 years. We've only started this post the pandemic. Some customers we are working for the last 3 years, and there are several that we have just initially started the engagement in the last 12 months. So we're at a beautiful stage with all of them. Each of them has an EV arm, and we are obviously moving towards that every year as well.

[Operator Instructions] The next question is from the line of Amrish Kakkar, an investor.

Congratulations on a fantastic start. I wanted to first understand the stability of revenues going forward, and I understand we're not yet ready to share order book or ACV. Is it possible to share some color on what is the nature of our contracts? Are they normally call-off contracts, 3, 4 months? Are they longer-term projects? I understand there is a mix of all of these. Is this something you could provide? Is this the right way to think about it? Or am I looking at it incorrectly?

It's a long question, but -- long answer. How are our contracts structured? So we don't share -- we don't share ACV or TCV and neither are we allowed to share our customer names yet, right, because we are at a very early stage with these customer engagements. So we need to get approval from them even to put them in our earnings deck and our press releases. That's why we don't share them. We would love to share them, but that's just the agreement that we have with our customers. How are our customers structured? So I'll simplify it on what we understand very well. Our customer contracts that we like to bid for and we like to execute are time and material projects, right? So a substantial portion, I believe, 85% plus, of our revenues could be higher this quarter as well or last couple of quarters comes from time and material. So that's how we are structured. We continue to have fixed price projects. But what we like to do as a young company, because cash flows is very important to us, is to transition those fixed price projects into time and material invoicing and/or billing, right? Otherwise, what happens is you have a cash flow where you can execute a project for 18 months and there's no cash coming in. We prefer cash flows coming in every month. So if required, we do discount the invoicing, so a customer is happy and we are happy as well. So that's how we are structured with our customers. And that's how I see it going forward as well for the next 2, 3 years.

I think that's helpful. I'm trying to also get a sense of the team and the time and material projects that we work on, are these typically 2 months, 3 months commitments? Or can they be longer? So any color on this?

So the vision here is to be an extension of a client R&D department, right? So whether the client has a design center in U.S., let's say, in California, in Europe or GCC in India. Onward will -- we are happy staffing the client centers. When the customer needs them on-site, we're very happy to get them on-site. Customer needs them offshore, then we do it from our offices. And customer wants it from some third location, we do that as well, right? So all 3 are business models that we and I think every other engineering company does, right? So there's no differentiation from that perspective. And that's what we do as well. So all these projects, all these RFQs are Onward bids for and wins are all long-term rollover. Usually, it's every 6 months, every 12 months, or sometimes every 2 years as well. So there's no project 1, 2 months, 3 months, 6 months. That doesn't happen in our industry at least.

That's helpful. Second question is on headcount. We've had a slight reduction Q-o-Q, but still an increase in total revenue. Is this just a one-off? I mean, even if you look at it year-on-year, we can see revenue per headcount is increasing by nearly 10%. So you mentioned the efficiency and automation going into the business. Is this something we should see going forward? Or it's just a one-off this quarter that for some reason the headcount has dropped?

No, again, very good question, good observation. If you look at Onward 3 years ago or even 4 years ago when we were INR 250 crores, we had the same headcount. So objective, because majority of our business at that time was in India. Headcount continues to remain around the 2,500 number because we are focusing more and more on the U.S. and Europe market. So it's not a one-off. It's something that we are consciously working towards and improving. And I think there's still some headway left for us. For us to go from INR 500 crores to, let's say, INR 1,000 crores, Onward doesn't need to add 2,500 people. I think there's a lot of efficiency left in our current 2,500 headcount as well, where at least hopefully another 100, 200, 300 people can move on-site there, which will increase the offshore headcount substantially.

The next question is from the line of Ishan Daga from Dhanvesttor.

Congratulations on a very good set of numbers. Jigar, my first question is that since we have executed our strategy to mine existing clients and reducing the total number of clients, but that brings in a risk of client concentration with itself. So how we are catering to that risk? And how we are safeguarding our clients from the competition, Jigar?

So interesting question. Thanks for that. I don't think there's a risk factor there. If you look at the top 5 engineering companies, I think they have 3 customers or 4 or 5 max, which contributes 90% of their revenue. I don't think there's any company which is bigger than us, which has a much larger customer base. They might have a tail, but top 5 customers must be contributing 90% plus revenue. So I think Onward is, because we came from a very different environment in the last couple of earlier decades, our ability to get large number of customers or relationships that we had was very easy. I think we have a good balance now. So I think it's more about, as I said, building right capacity, capability for our customers. Customers have to see value in what we do. And they're seeing our ability to continuously invest ahead of what they want us to be. And I think that's where the real challenge and the real game changer for Onward will be for the next 3 years.

And my next question is on utilization rates. Since we are having same number of employees from last couple of years, and the revenues were stagnant for the last, say, couple of years also. So how the utilization rate has panned out?

Very positive. We have good momentum. I think Q4 was very good for us. We had a huge uptick in Q4, starting February, which I shared in the last call. And I think that momentum continues to getting built. And I think it's all about, as I said, us and our ability, which we are getting better at every day to execute for our customers.

Okay. Trend-wise, if you can explain in numbers, how the utilizations have moved out in the last couple of years? That would be helpful.

So we don't share that data yet, but I think the numbers are very easy for you to calculate.

Okay.

Knowing our headcount and revenue per person, as the earlier gentleman mentioned.

Yes. So I am tracking this company since last few years, and we have met in Mumbai also, Jigar, and very happy to see the progress which we have made. So how we are seeing Onward, say, after 3 or 5 years? What is the mission and what kind of revenues -- INR 1,000 crores you are saying in a couple of years, you will be targeting that kind of revenue. So where do we see in 3 years, say, Onward?

Three years -- again, I shared that last quarter, where I would be very happy we can deliver 3 years in a row double-digit revenue growth and double-digit EBITDA growth, right? As far as we do that, I think that will be definitely a dream. If somebody offers that today, I will take it.

Our next follow-up questions come from the line of [ Ankur Kumar from Alpha Capital ].

Sir, on this employee count, I wanted to understand what is our plan for this year? How much are we looking to add? How are we thinking on that front?

I think we have a very good headcount, very balanced headcount where we are today. We still have a lot of room, as I shared earlier, to still improve where, as I said, we've been investing a lot of things in the last 6, 7 quarters -- 6 quarters, I think. So there's still a lot of room there. But in our internal projections, I think by March 31, we should be approximately at 2,700 people. That's our internal projections.

2,700, sure.

Plus/minus based on which projects pick up when, right? It can be close to 3,000 as well. It can be close to where we are. So 2,700 is a good average of how we are budgeting internally.

Got it, sir. And sir, on client side, we see clients with annual billing greater than USD 1 million, that has increased this quarter. So are we looking at how things are moving on that front?

Again, it's been a nice positive progressive momentum. All 80 clients should be there. I don't think it's only that number. All clients have the potential and the pipeline. We have a lot of our $1 million clients becoming $3 million as well and $3 million becoming higher. But the objective is, yes, every client Onward has should have that kind of potential and/or should have that kind of revenues going forward, right? And that's what we are working towards. That's why simplifying the execution model, simplifying the market size that we focus on, which is from our existing clients, I think, is the right way forward for us.

The next question comes from the line of Pankaj Agarwal, an investor.

Congratulations on a good set of numbers. I would like to ask a question regarding more color that you can give on the product innovation with the point of view of artificial intelligence, whether it is coming as a facilitator or still we are in the process of developing some products around this?

Thanks for the question. Just to clarify again, Onward does not invest in product development. We are 100% pure-play services organization. So for us, even innovation starts after we win the client project. So very unlikely that we would start before. We would do POCs before, but that's, again, most likely highly -- majority of times paid by the client. So again, just to clarify, we do not do product development, and that's not the business we are in.

Okay. And just a follow-up question. Do we have any, let's say, 3 years, 5 years or 7 years down the line to get into AI-based product development to integrate with our services?

Again, very interesting point. It's too early for me to comment, but I'm not seeing that it's not something our customers are asking us to do yet. We are a highly customer-focused organization, and that's where we are trying to get to more and more every day. So if our customers ask us to get into that, that's something we will look at very seriously. And if it's economically viable, we would definitely do that. But that's not something we have heard of yet from our customers.

As there are no further questions, I would now like to hand the conference over to Mr. Jigar Mehta for closing comments.

Thank you. Thank you, everybody, for again joining this evening. It was a pleasure to address some of your questions and clarifications. If there's any additional data you have, please reach out to our IR managers at E&Y, and we'll be very happy to address them. Thank you again, and have a lovely evening.

On behalf of Onward Technologies Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.