Onward Technologies Limited ($517536)

Ladies and gentlemen, good day and welcome to the Onward Technologies Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pratik Chheda. Thank you and over to you, sir.

Good day to all of you. Welcome to the Q4 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 business update and financial performance for the quarter, which will be then followed by Q&A session. As usual, I would like to remind you that anything that is said on this call that reflects any outlook for the future or which can be construed as a forward-looking statement 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 prospectus filed with SEBI and subsequent annual reports that you can find in our website. Having said that, I'll now hand over the call to Mr. Jigar. Over to you, Jigar.

Thank you. Good evening, everyone, and thank you again for joining us. It's good to be back and share our performance for the fourth quarter and the full year for FY '25-'26. FY '26 has been -- as you must have seen from the press release and the numbers released earlier today post the Board meeting, FY '26 has been the strongest year in our history. We've delivered record revenue of INR 550-odd crores, which is a Y-o-Y growth of 10.5% and a record EBITDA of INR 71.9 crores with gross margin improving to highest in our history to 13.2%. In absolute terms, EBITDA grew 60.9% and PAT grew 72.3% Y-o-Y reflecting the strength of the execution and the quality of our earnings. Again the performance is driven by consistent delivery like I've been sharing for the last several quarters, better operating leverage, focusing on very few direct clients and disciplined cost control and steady progress across our 3x3 vertical strategy. This has also translated to strong cash flows. Operating cash flows with net cash now increasing to INR 127.3 crores, the highest in our history again. Our balance sheet strength continues to give us confidence and the flexibility as we continue to invest for higher revenue growth while continuously improving our EBITDA margins. Over the last 4 years since the pandemic and especially since the new strategy has evolved focusing on the U.S. and Europe market, we have delivered a revenue CAGR of 15.3% and an EBITDA CAGR of 35.4% in this period while keeping headcount largely stable close to 2,500 employees. Our final headcount end of March 31, 2026, was 2,485 employees who are based between India, Europe and North America, which is predominantly U.S. and Canada for us. This is a strong indicator of the operating leverage and productivity level growth that we are seeing, including our revenue per employee growing consistently over the next 4 years and we believe will consistently grow even higher close to industry benchmark in the next several years. In Q4, our revenue continued momentum. Again it was the highest at INR 139 crores delivering a 6.9% Y-o-Y growth while EBITDA margins were at 11.2%. Our growth continues to be anchored in deep and long-term client relationships, predominantly companies headquartered in North America and Europe. And our Top 25 customers continue to grow at a steady pace, which is now at 88% of our revenues, reflecting strong concentration around strategic clients and increasing relevance within their engineering and R&D programs. We're still very, very -- the best part about our business model and where we are today starting the new financial year FY '26, '27 is we still have a very small percentage of the clients' R&D budget or software outsourcing budget and which gives us a huge confidence in the next 3 to 5 years as we look forward and the growth runway that we have with our existing clients. Another very interesting development over the last couple of quarters is through our existing clients, we got 6 amazing client references as well. So in the last 12 months we added net 6 new clients that are still at a very nascent stage, but where we have signed the master services agreement and now started bidding for projects. We have started billing for them as well. And I think that is a very exciting stage for a young company like us, which shows the confidence our existing large clients have in us when they obviously give you references of other similar large companies especially in the industrial vertical that we are focused on. In terms of our vertical horizontal strategy, it continues to remain consistent. As we have shared earlier, it's 3x3, 3 verticals and 3 horizontals; IHM being the largest and the other 2 where we are investing and we hope to continue to make a lot of momentum over the next several quarters. In parallel, we have continued to invest in strengthening our horizontals especially in our digital and AI-led capabilities supported by dedicated budgets. We also are gearing up for setting up our digital AI lab in Chennai in the next couple of months. I would love to welcome all of you guys there to showcase some of the amazing work that our teams and delivery teams are doing for our clients. If I look forward several years from now, I think Onward will have a substantial portion of revenues coming from digital and AI projects and I believe that will give us both huge revenue growth as well and margin expansion consistently and in a very sustainable model. Simplification has also actually helped us in a very, very big way. I've shared that last quarter. We are now able to execute very, very focused trainings, very focused learning organizational developments, very focused people-based initiatives, which have helped reduce attrition to its lowest which is below 15%, again a record for us. We were at 14.85% for last financial year. And we continue to see lot of room for improvement in employee engagements and improving customer satisfaction, which will keep improving this percentage as we move forward over the next -- in FY '26-'27 and in the future as well. Looking at the overall perspective and looking at the overall amazing performance of the year and the bright future that we believe we have with what we have seen so far with the clients' budgets. We, the Board, has looked at a capital allocation budget as well and increased the dividend -- recommended to increase the dividend to INR 8 per share. This will be our 11th consecutive year of dividend and this INR 8 per share will be the highest that the Board has recommended, which shows the commitment that we have to return back to the shareholders. As we look forward, we are increasingly confident about the next phase of our growth as well. We have finalized our road map covering both revenue and EBITDA, which I've shared before. We would like -- we believe we have everything in front of us today to execute to deliver double-digit revenue growth and double-digit EBITDA. And our newly formed global GLT or global leadership team that we are setting -- have recently set up comprising of business leaders and corporate function leaders will drive the day-to-day operations and execution. While the external environment remains dynamic, the demand outlook for digital and engineering services especially new initiatives on AI projects continues to be very positive. With the right clients, stronger leadership, clear depth and a more focused business model; we remain comfortable reiterating again our guidance for sustained double-digit revenue and EBITDA. Overall, as a summary: FY '26 was a year of strong delivery and structural progress. As we move into FY '27, we are focusing on deepening our role as a trusted digital engineering partner. We continue to strengthen our teams in U.S. and Europe and we are very excited in terms of what we are seeing forward with our existing client engagements. With that, I'll hand it over back to the operator for questions. Thank you again.

[Operator Instructions] The first question is from the line of Gururam Shakti Suresh from Gururam Financial.

Sir, you told business model and your growth, you can present good, sir. But stock market side, price will be continually decrease. Generally investor side I am asking, so many years I'm a shareholder in Onward. Continue results will be good, but price will be every quarter will be decreased price, sir. Any aware of your stock price? Sir, I know little bit English, you can try to understand.

I appreciate the question. It's something we are working towards. While we don't control the stock market and what the reactions are, we want to make sure that as Onward Technologies management team, we at least articulate our story well. We share all the information transparently and we are extremely positive. As I said, last 4 years we have grown both revenue and EBITDA CAGR and I think next 3 to 4 years is going to be even more exciting. But on the IR side, something we have to do a much better job and that's the management team, including myself, is working on. We hope to show you improvement very soon.

Sir, actually Anthropic Claude tools and AI developments may affect the company's future business. This is the total industry problem. You can explain that Anthro Claude effect on Onward?

No, it does not affect us. It does not affect engineering companies not yet. But if it does in the next few quarters, we'll definitely share more information with you. The impact today with what has come out is more for BPO and IT companies. Again so to reiterate, Onward is an engineering services company not an IT company.

Actually Anthropic Claude product, Onward is a product company also. Anthropic Claude companies, any effect?

So again just to clarify, Onward Technologies is an engineering services company. We don't do any product development. We don't sell products in the market. We are a pure-play services company focused on U.S. and Europe clients.

Anthropic Claude disturb the product companies also, sir?

I would not know. Onward Technologies is not a product company. It doesn't affect us yet. As I said, we will definitely share with you and all our investors if we see any impact from Anthropic Claude and/or from other AI platforms or tools in the world. But currently so far, we have not seen any impact on us as on the services business, only engineering services business.

The next question is from the line of Madhur Rathi from Counter Cyclical Investments.

So taking from the previous speaker's question. So I definitely appreciate that you have increased the dividend and the recent growth is also pretty encouraging. Sir, but then if we see our stock price, 21 years back in 2005 the stock was at INR 120 and today it's at INR 240. So basically shareholders have not really made any wealth. But this is opportunity because now we have over INR 125 crore of net cash and our market cap is around INR 550 crore so which means that almost 1/4 or 1/5 of our market cap we have in cash. So why aren't we doing a big share buyback so that the equity base can reduce and whatever growth comes in future will get divided on a smaller equity base. So basically the earnings per share will increase disproportionately. And recently in the recent budgets, the taxation on the share buyback has also become pretty attractive. Since the promoter shareholding is in corporate structure, then only 22% taxation is there. And if the promoters choose not to participate in the buyback, then the shareholding of the promoters can increase. So any thoughts on that?

Thank you for the suggestion and recommendation. It's something the Board has been actively considering and definitely the price is very attractive both for the company and for all the investors. Yes, it's an exciting time and we hope to make the right decision, which will create a lot of value for all our shareholders.

Right, sir. And sir, again now that especially for layman investors like us who don't have a technological background, if you could just give some comments on reassuring us that what exactly -- I mean are we user of AI or AI can substitute our business? And maybe the products, Claude, et cetera, that are present in the market right now maybe they are not impacting us. But the direction that things are moving, what makes you think that we will be net beneficiaries instead of the business going redundant?

So great question. This is something that we are actively always monitoring. Today, it is AI. Tomorrow, it could be some other technology disruption. So far I can share with you from our customer perspective, AI especially the new version of Claude and some of the latest version of ChatGPT, we have not seen any disruption that our customers have brought to us. We have not seen our pipeline decrease and neither have we seen any impact where our customers are actually asking us to use AI tools, right? So to address your point more directly, we are not using AI tools today to deliver client-based projects which are billable. We are not -- so far customers have not brought to us or asked us to use any particular AI tool. But what we are doing -- I hope I addressed the first point. So so far it's affecting what we understand from the same news that you are reading, IT companies and BPO companies. It's not affecting engineering companies because engineering companies is not about hiring freshers and just doing some basic application maintenance work, right? We are doing new product development work, we're doing robotics work, we're doing model-based development. It's a very high-end work, which needs deep domain experience, it needs industry experience, it needs factory experience, shop floor experience, right? So you cannot overnight replace that. We all hope it's coming and I think we will create a lot of value with it once it starts coming. Now on the Onward Technologies side, what we are doing is we have bought a lot of licenses where our delivery teams and R&D teams are studying how we can create value for our customers using the AI tools where we can bring down the number of hours or we can improve the productivity and that R&D is going on as we speak. We hope to go to the market in the next several quarters with more and more value-added solutions. When I say market, it's again to our existing customers, which I think will create lot more value and eventually much higher revenue for us in the future. So I hope I clarified where we are as an engineering company today.

Understood, sir. Since you made the point that we are not any run of the mill IT company and so if you could just give us some peers on the listed side, which are relatively comparable like-to-like from us since you made the point that the TCSes and Infosyses of the world are not exactly the same business that we have?

So I didn't say IT companies are run of the mill. IT companies are amazing companies, amazing success stories, the best in India I think. They have put India on the global map. So they're the best companies out there and I think they'll all do fabulously well with the resources and the amazing teams they have running India businesses. Coming back to Onward Technologies and who are the other companies in our space that have done a fabulous job. Obviously you guys know L&T Technologies, you guys know KC IT, you guys know Cyient. These are all multibillion-dollar companies created amazing engineering services companies, which have done amazing work for their clients. The best part about us and all of them is we all don't compete with the same clients. We all have our niche clients that we focus on and we are growing with them, right? So we are an engineering services company. A recent company is Tata Technologies, which is Pune-based, which is owned by Tata Motors. These are all engineering services companies.

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

Sir, my first question is with regards to the transportation, the auto segment. So if the calculations are correct, then it is kind of degrown in this year. So if you can give some commentary on that segment and when are we expecting the turnaround?

So yes, our transportation vertical which comprises of both automotive and rail, we had a revenue or we had a degrowth of 1%. This was due to 2 main factors. First factor was we exited -- if you remember we had shared with you if you look at our earnings call about a year, 1.5 years back, where we exited all the Tier 1s and Tier 2s across India, Europe and U.S. And so that revenue growth, but we were hoping to increase the revenue from our OEM customers enough that this will get us to 10%, 20%, 30% revenue top line growth. That did not happen at the speed that we would have liked for the overall slowdown in the automotive sector and several other factors. But we are seeing the momentum now. We are continuously working on improving the vertical growth. And I think the automotive and the rail vertical have enough growth for us to grow 5x to 10x from where we are right now. It's about getting the strategy right, making sure that we're investing in the future and we have the client engagements already, but we just have to do a much better job in terms of execution.

And sir, most of our clients in the auto segment are U.S.-based and EU-based OEMs or you catering to the Indian clients as well?

So we as Onward Technologies are 100% focused only on U.S. and Europe. So if you look at our revenues, 70% comes from North America and 30% comes from Europe, right? That percentage can change every quarter. I'm giving you on an annual basis perspective. We have 0 clients in India. And it's across all the verticals.

Right. And sir, when the auto segment the SLAs, is it fair to expect that the margins improvement will be faster I mean or that depends on the kind of projects we are doing and the value chain are supporting? I mean if you can give us some kind of guidance as to the margins and the detail across the segments.

Absolutely. Your point is very valid. When all the 3 verticals grow at the speed, let's say, at 20%, 30%, 40% year-on-year; the overall gross margins, overall direct margins, operating margins will expand as well, right? So today we have 1 vertical growing, 1 vertical we're investing in, 1 vertical which we did not do a great job. We didn't execute as well as we should have. So it's still at the highest of 13.2%, which I'm still very pleased at. At the start of the year, when we started the year, we assumed that we will be at 11% EBITDA margins for the financial year. We had couple of good quarters. Q3 will be a slowdown because of the furloughs and the world slowing down. But Q3 was a record quarter for us because a lot of positive things happened. And overall, we balance things out and I think it became a 13% plus year for us. So very excited and pleased with that performance by the entire team. The day all the 3 verticals will start delivering as per the potential, I think the margins will keep expanding and expand even faster from where we are today.

Got it, sir. And sir, any comment on the Q4 margins? I mean they kind of came down so anything to call out there?

Nothing in particular. I think it was a good quarter as I said for us. We're looking at an annual number. We will have some quarters where there will be some peaks from existing clients, some quarters where we are investing a bit faster. But overall, very pleased with where we are at. So you will look at Onwards from an annual perspective and you will see that next year as well, right? Like we have amazing visibility. We have a very strong visibility for delivering much better than what we did this year on an annual basis both on top line and bottom line and we expect that to be resulting in our cash reserves as well.

The next question is from the line of Mehul Panjwani from 40 Cents.

Sir, FY '26 margins have expanded to 13.2%. How sustainable is this level and what are the key levers that will drive our margins in FY '27?

Yes, yes, absolutely. So from a revenue, from a gross margin perspective and an EBITDA margin perspective; I think again it was a superb year for us much better than we expected. Q2 and Q3 was outstanding. And we do believe that these numbers are sustainable and not only sustainable, I think we can grow much -- we can do much better job as well. There's lot of operating leverage that we have with revenue growth coming in. And as I said, revenue growth from all the 3 verticals, which we think we are going to be able to deliver this year. And keep in mind, our G&A costs and other costs usually remains the same because we have invested that much in automation, we've invested that much in internal systems and tools. So we are able to scale much faster. So we do believe there's lot of room for improvement both in the gross margin and at the EBITDA level.

Right. Sir, my second question is how much is the current deal pipeline and what kind of visibility do we have for conversion in FY '27 especially in our Top 5 accounts?

Very positive and that's why we are comfortable in sharing. We see that visibility from last 1 year. We saw that last year as well. We see that this year and we see that in the year coming and the next 2 years going forward because when we sign agreements with our customers, they're usually long term in nature. They are not transactional. So we definitely see double-digit revenue opportunity across all the 3 verticals and we definitely see margin expansion with more offshore delivery, more better utilization and bench discipline and absolutely like any other offshore company focusing on a pyramid organization or optimization so we can deliver value to our clients.

Great, sir. Sir, how much of FY '27 revenue can you say that it is already committed or in advanced stages?

Majority. I don't have the exact percentage, but I mean if I just have to give you a number how many will come from existing clients, I would say 95% to 98% will come from existing clients as per the budget from the existing 75 live clients that we have. We are still not commenting on the deal pipeline.

Okay. Great. And sir, out of our Top 5 clients, how many have we worked with them for more than a decade?

Our Top 5 clients, I would like to say 2 or 3 at least 10 years if not a decade. 2 or 3 for the last 10 years and there are the 2 which have really grown has come post the pandemic so last 4 to 5 years.

Okay. So sir, now I'm new to this company so I'm just trying to understand little bit more from whatever commentary I've been hearing with the various interactions. So what is it that -- did we have a couple of rough years over the last 2 decades or so because I heard that we are doing quite well. So what was it which has helped us that time also?

Not much. I mean last 4 years has been the best years in our history as I shared earlier. Our revenue CAGR is 15% plus and our EBITDA CAGR for the last 4 years is 35% plus. So it's been extremely positive last 4 years for us as an organization.

Okay, sir. I'll come back in the queue because I have a couple of industry questions for especially the engineering services industry.

The next question is from the line of Ranjay Popli from Banyan Capital.

Just a few basic questions. So how do we talk in revenue? Is it based on the hours that we put in or it's more based on outcomes?

It's based on number of hours that we put in. That's almost 90% plus or 88%, 90% of our revenues. And the balance is based on fixed price contracts, which is based on outcome. That's why we are able to predict our revenues much comfortably. That's why we're confident in giving our visibility as well for last year and for the next 2 years.

With the introduction of AI where it is able to reduce hours so do you think you will be pushing on some of the benefits to your clients?

Again I clarified earlier, we are an engineering services company. So far we have not seen any impact of AI on engineering services. Please keep in mind in Onward as a business or in engineering services as a business, none of us are hiring freshers straight from college and just putting people out there and just we are billing for hours. Majority of our engineers are 8 years, 10 years, 15 years, 20 years. They have worked in the factories. They all have come from manufacturing experience. They have deep domain experience, of course a lot of certifications. So so far there's no impact on the overall engineering business globally is what I understand. At least that's what we understand from our customers. There could have been an impact in the IT business and the services business and BPO business that people talk about. But so far no impact on the engineering business. Now coming on the second part of your question about benefit to the customer, that definitely Onward Technologies is doing proactively. We have bought a lot of licenses and invested last year which I shared. We hired a new CIO who's doing a fabulous job. We've hired a new delivery leader who's doing a fabulous job. And we are trying to create and innovate in a way that to see where we can add more value to our customers, where we can potentially bring down the number of hours or speed to market for the customer. So I think that's still several quarters down the line because it has to be tested. It has to be validated and I think it happens at a global level. So it's not going to be an overnight thing. We definitely see huge value going forward in the next couple of years, which will have a huge positive impact on the revenue and the gross margins of the company.

Just a basic question. Since this is a company that uses IoT that is Internet of Things. So it takes all the data from the sensors and then process it and then analyze it and gives a solution to the client. Am I right in understanding this?

The process of what Onward does. So that's not what -- yes, your understanding is right to a certain extent, yes.

So then really the question that comes up is that if the information is being extracted out of the sensors so don't you think that AI would be able to process it much better of course with the help of all the industry-leading people that you have today with 10 years of experience. So don't you think in that particular space, it will reduce the billable hours?

Sure. So in situations like these, which you are clarifying, the customer also is aware that this can happen. So there will be no RFQ, there will be no outsourcing, right? Keep a different view about Onward Technologies. Onward Technologies is focused on the same customers like we spoke about 1 IoT project. Customers' IoT, let's say, outsourcing budget is anywhere from $100 million to $1 billion. So everywhere AI can be used or the AI benefits can be leveraged today, customers already removed that from their outsourcing budget when they started the budget this year and they'll continue to reduce that number of hours from those projects and they will start doing that in-house or they will start doing it directly with Microsoft or Anthropic or whoever ChatGPT. Onward is focused on the other side of the business where the customer is actively outsourcing the number of RFPs, RFQs and the demand is at an all-time high, right? So customers channelizing or rechannelizing the budget, which potentially where they can leverage AI for normal tasks and moving into more and more domain-based tasks. And that's what Onward is focusing on, right? So we would not even bid for those projects that you are talking about.

Okay. Got it. So would you say that AI brings operating leverage to you rather than replacing you?

Absolutely and that's our job. That's where we have to make sure that we build the best delivery organizations, best domain experts, deep domain experts. We have a lot of people front ending across U.S. and Europe. We have almost 125 employees now outside India. We'll take that up to 200 to 300 in the next few years. So it's a very exciting time in what AI can do and how it can benefit our customers, how it can create more stickiness and how we can add more value to the customers. Absolutely.

The next question is from the line of Abhijit from Pi Asset.

So has AI significantly considered the time required for development and coding. So are you seeing any renegotiation of contracts and has there been any such instances?

No, I clarified earlier we have not seen any of that so far. We are actually only seeing our customer engagements, which were -- again let me clarify or let me sort of reinforce what Onward does. So we had several engagements prepandemic where we were supporting the customers for more than 10 years. These were all customers that we used to support on the mechanical engineering side, right? That's the Onward bread and butter, that's our DNA, that's what our history is. All those customers now are more on the digital side and we're continuously doing more and more quality work for them there. It's still at a very, very nascent stage. The moment that expands with the customers outsourcing budget, I think they all have potential to get to $10 million per year. That's why for me, that number is very exciting when you mean something to the customers. Coming back on renegotiating of contracts, the new customers that we have signed since the pandemic are already on the digital side. That's on data analytics, that's on just data engineering and we are trying to make more sense of that and see how we can build more and more capabilities because that's not Onward's expertise for more than 4, 5 years. But the good part there is everybody -- all other tech companies much bigger than us as well, the engineering companies have similar capabilities. So Onward has to -- we have to keep investing further. We have to keep making sure we are front-ending that to our customers in U.S. and Europe and that's where we will see lot of leverage. So the opportunity or the discussion of renegotiating contracts does not exist. We don't have those $50 million, $100 million maintenance contracts where customers are saying okay, come now let's reduce the cost or reduce the number of hours. We've not even reached that stage and that's what excites me the most. Our journey from INR 550 crores, let's say, next 3 years is going to be very exciting.

Understood. And you mentioned about operating leverage previously. So can we generate a higher revenue from the same set of employees by leveraging the AI?

That's our hope. We have not seen that yet. For us, it's constantly about -- we definitely spend a lot of time in the last 2 years in training, reskilling our employees so we can move up the value chain, increase the revenue per person. So if you see the revenue per person is now almost close to INR 22 lakhs for us, it was INR 8 lakhs, INR 9 lakhs 4 years ago. So it's been a beautiful journey in terms of what our HR team has done, engineering team has done, our delivery organizations have done. Now we have to go to INR 30 lakhs, INR 40 lakhs revenue per person and that's what we will keep investing in. Will AI help us there? That's the hope. That's the goal. But as I've shared earlier, we have not seen it on the engineering business side yet, but we hope to see that as we keep evolving and keep investing in this area.

And regarding the employee expansion in this quarter Q4 FY '26, there was slight Increase that we have noticed and if we look at the last fiscal same quarter, it was kind of stagnant. So this increase, was it because of the high cost hiring or any year-end bonus?

Just to clarify again just the quarterly numbers. For us 13% plus EBITDA has been is what we have said. We were hoping to get 11%, we are at 13%. So some quarters the teams and the vertical heads might invest more. Sometimes the onboarding happens in [indiscernible] quarters. It's not something as we have shared consistently in the last 4 quarters that we are sort of micromanaging quarterly gain, right? We're trying to invest, we're trying to grow faster. Like while the revenue grew 10%, I would like the revenues to grow 20%, 30% every year. And we have the potential, we have the clients, we have the teams, we have all the right investments in place. It's all about making sure that we execute better. That's the real goal, right? On the second part of your question on year-end bonuses, we don't have year-end bonuses. Our everything; our commission plans, our variable pay structures, our year-end bonuses are all quarterly divided and it's strictly based on the KRAs and KPIs that we have. So we don't have cyclical payouts for our employees.

The next question is from the line of Aditya Jhawar from AK Investment.

Great set of numbers. I'm following this company for the last 5 to 6 years I think. We have done a good job in transforming and focusing on couple of verticals even though we had taken a hit in the revenues and margins, which I truly understand. But now going forward next 3 to 5 years, I mean we are at a juncture where the AI is there, there can be a chance where lot of businesses can get impacted, but right now there is no such visibility. But I just wanted to ask the management should we be aggressive in getting more capabilities and become a truly AI engineering services company or to scale a bit more high level, have some growth ambitions? Rather than -- I know we are sticking to 10% to 12% of guidance, but why not acquire some of the capabilities and use market to get funds and whatever is required, but truly go out there and build some capabilities and build some AI engineering service in the company. What is the vision I would ask you for you? If shareholders want to stay for a long run here, what is that we are here for? This is my longer-term question.

Thank you for the question and I appreciate the suggestion. That's exactly what we would like to do as well. And I want to assure you that we and the entire GLT and the entire leadership team as well of Onward is very focused on it, right? This is where we spent a number of hours discussing this morning as well at the Board meeting. And we are not shying away from investments. It's more about making sure we invest in the right opportunity, which is in front of us and we are doing that already. We're onboarding a lot of good people not to add new clients, but to go deeper into our client engagements. And we are trying more and more and more as you have seen in our positioning or repositioning in the last couple of quarters and years is to move from a mechanical engineering company to a digital engineering company. So digital engineering company means exactly what you said and we want to become an AI-ready company for our customers and we have to find the right people, invest in the right processes and culture so we can expand more and more towards that. And while 10% is a great start because the previous year was single low digit, but we want to grow much faster and there's absolute visibility and interest for everybody to grow faster. Projection is what we have shared with you what we believe will happen. But as I said, we are all working towards improving that and growing much faster.

So can we expect this year to clock high teens margin as well as numbers? Is that the visibility we can have with the customers? Because lot of customers are going through lot of CapExes because they are in the tailwinds. So can that benefit us this year?

Absolutely. That's what we are hoping for. That's what we have seen in the month of April as of now, yes.

So we can expect this high teens margin and high teens revenue?

We are committing, as I said, what we committed a year ago. I'm just consistently going to follow that. We want to underpromise and overdeliver. We want to make sure that we deliver for you guys, we deliver for everybody. We have 2,500 employees working very hard every day. So what we have shared is double-digit revenue and double-digit EBITDA. We will keep focusing on that and improving that. And as I said, this year 11% became 13% plus EBITDA. Next year we hope to make it much, much better. There's a clear visibility, there's a clear demand as we stand today.

The next question is from the line of Arjun Jawar, an individual investor.

Sir, I want to know on a constant currency basis, how much have we grown year-on-year because there is lot of rupee depreciation which happened in last 6 months.

I don't have the number in front of me. But please reach out to E&Y, who is our IR managers, and they can share with you all the numbers, all the breakups and numbers.

We must have a lot of benefit in the revenue growth, which you are currently showing. So I think you must have some number or you don't have any idea.

Absolutely. That's why I said all the breakups that you would need, our IR managers E&Y can share that with you. You can e-mail it to them and they can get back to you right away.

Sir, there was post conference notes arranged by Arihant Capital during March. I don't know some management team had attended that particular conference call and they have given a guidance of 10% to 12% revenue growth for FY '26. But constantly when we are attending the post earnings conference calls, you people are shying away from giving any specific guidances and you are just giving the investors double-digit EBITDA and revenue growth. But you are saying -- you are actually giving this price sensitive information in the other conferences. I just want to know why we are lacking transparency because this is the prime call which are -- actually which is followed by all investors and you're giving specific growth guidance numbers only in the conference calls of some other investor community.

That's not accurate. Double-digit means 10% plus. So I don't believe anybody from my team would say any other number. We've been very consistent throughout and we have our IR managers absolutely. So they must have extrapolated some number. We have consistently maintained double-digit revenue and double-digit EBITDA. We would never share any other information neither me nor the Board nor any other employee of Onward to anybody outside any other forum, right? We are the most transparent company out there with the highest level of governance.

The conference was attended by your management, sir.

Sure. That's why I said double digit means 10% plus. So I would not have the exact thing. But again you can -- if you think there's something which is out there, please write to me and our IR managers at EY. We'll definitely have a look and make sure we take corrective steps. But I don't believe it is accurate.

The next question is from the line of Madhur Rathi from Counter Cyclical Investment.

If I look at our main segment of industrial equipment and heavy machinery, between the past 4 years our revenue has grown at 9% CAGR and there has been some rupee depreciation so I would expect that constant currency this number would be much lower. And the end segment, all 3; I think industrial, energy, as well as off-highway; every one of the major players have grown or shown some kind of thought on either doing predictive maintenance or new ER&D projects. So where is the growth lacking for Onward because it's not reflecting in our revenue as our customers are seeing. So if you could just help us understand on that front?

Sure. You said last 4 years or you said last 2 years?

Last 4 years between FY '23 and '26.

Sure. So all the constant currency numbers, every micro detail E&Y can share that with you or my CFO can share that with you. To answer your question more so giving you a perspective. Over the last 4 years, Onward Technologies has gone from 250 customers to 75 customers, right? So we've reduced a huge -- Onward's DNA being a 30-old trust company is we have an amazing team, brand, goodwill out there to win customers and our teams are able to get customers build the confidence very easily. But we realize we are not an IT company, we are not a product company, we're not a services company. We are an engineering company. An engineering company is better to be something to someone than be everything to everybody, right? It's impossible to do that because the domains are different, capabilities are different, product development requirements are different, skills are very different, right? You cannot cross-sell, upsell using the same, let's say, SAP person here and put them in some other client, other domain. So we realize we have to be something to someone. So in an ideal perspective, we should have only few customers. And if you see the best companies that I pointed out before and over the last 3 years as well in our space have all become multibillion-dollar companies by only focusing on maybe 2 to 10 customers. So any company with more than $1 billion market cap up to $10 billion has 2 customers to 10 customers, which give them 90% or 95% of their profits and probably 80% revenue. And you guys can study these companies. So from an Onward perspective, we have followed that strategy and we have gone from 250 customers down to 75, which potentially will go down to 50 in the next couple of quarters as I've shared before. I think 50 is a sweet spot for a company of our size till we grow 2x, 3x, 4x of where we are today. And our customers that we select have to be and customers who select us have to be customers which have huge outsourcing budgets. So while you are seeing a 15% CAGR or in constant currency some other number, we are seeing much, much higher internally because the exits of the clients has happened. Now the exit part is over last year that we shared, right? So there's no more exits. Now it's all about transitioning. There will be continuous growth from the top clients while the tail accounts will keep playing out based on where we can win and where the customers love us. So that's the exciting stage for us. Now the second point of your question about how some other companies have grown much faster. That's amazing. They have built much bigger teams or bigger budgets. I am not competing necessarily with them. But there's definitely an opportunity for us and I think the next few years looks even better than the last 3 years.

Right. Sir, I understand that. So based on this customer pruning strategy that we have done, how do we see our wallet share increasing with customer or how do we ensure that the customer stickiness with Onward becomes much more than what it earlier was? Because sir, I understand the strategy, but as a nontechnical person, I would like to understand where is the company heading with these few customers? Can we expect a wallet share increase with them? Have we created some capabilities because of which we might get more orders going forward? So just a basic idea would be very helpful.

Sure. That's an excellent question. Absolutely, our customer wallet share is continuously improving. If you see our revenue when we are INR 250 crore revenue, our Top 25 clients contributed 80% of our revenue. Today, we are at INR 500-plus crore revenue, INR 550 crores; Top 25 clients contribute 88% of our revenue. If I look forward 3 to 5 years from now, I think again our Top 25 clients will contribute 70%, 80%, 90% of our revenue. So our market share is increasing, improving. Our gross margins are increasing, improving. That's how we have gone from low-digit EBITDA to double-digit EBITDA this year, 13% plus to be more precise. So absolutely, all those numbers are in front of you for you to understand how our wallet share is improving. We have not lost any customers in the last few years. It's always been progressive. Now to answer your second question, how do we add more value and how do we get more orders or get more access to more RFQs, that's a much better way to look at it. Onward was a pure-play mechanical engineering company till about a couple of years ago. More forward today, mechanical engineering is only about 50% of our revenues. The balance 50% is software. And I think Onward has done -- I think our team has done a decent job of investing in new capabilities on the software side. But I think we can do much, much, much better. And now with AI coming our way, I think with more and more investments in AI, we can reduce or bring speed to market for customers' products, reduce their R&D budgets or reduce the number of hours. There's so much opportunity that can evolve in the next 3 years. I think we all are very excited towards that and that's what will remain and create the stickiness. So investing in new capabilities, investing in new markets, investing being present with leadership teams in U.S. and Europe not just being an India-based player. So making sure all the right investments happen. And I think all those are behind us. We have done that very well in the last 4 years. Now it's all about scaling in the next 3 years where all of us on this call will see lot of value in.

Right. Sir, just a final question from me, sir. What I understood was there is this trend towards software-defined vehicles as well as predictive maintenance in this heavy engineering where due to using the same asset for a longer period of time, you are more inclined towards making your tech more efficient. So if you could help us understand does Onward operate projects in this area or provide engineering services to the customers in these areas or this is something that is maybe not higher for us or this is where we are, if you could help us understand?

Sorry, can you please clarify that last point?

Yes. Sir, so I'm trying to understand the software-defined vehicle and the predictive maintenance. These 2 trends keep popping up for heavy equipment and engineering due to the longer replacement cycle of assets. So does Onward provide any services in these areas or this is a technical notch higher than where we are present currently and we would like to move towards this area or this is not a focus area for us, if you could help us understand?

Excellent question again. So SDVs is an area which is for the automotive vertical not for industrial and that's today Onward Technologies is not present in. It's absolutely where we would like to go. We are very late again, we want to play catch up. It's I think about 2 or 3 years late, but we are going to play catch-up there. So that's more on the embedded side. And hence, I'm trying to transition Onward more and more straight to the digital AI side, right? While we keep investing in embedded and I think embedded will contribute about between 18% to 30% of our revenues in the next couple of years. But I would like to transition Onward more and more towards the latest disruption where everybody around us, including our larger peers and larger amazing successful companies in engineering space, everybody has a level playing field, right? So that's where we would like to go. On preventive maintenance and some other projects, we have won some. We have capabilities and I think our teams are doing a good job and I think that will keep expanding as we move forward.

Got it. And sir, what kind of investments will be doing in manpower and CapEx over maybe next 1 or 2 years?

So on the CapEx side, we would be doing in the next 2 years close to just for existing clients and this is more for just setting up the labs, close to about INR 25 crores. We are looking for bigger opportunities to do that and we hope to do a lot of exciting things as we move forward there. Keep in mind we've already done a huge investment in the last few years. So this is just more about strengthening. This does not include any new large deal that will potentially win that might need more and for that we will go to the Board.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you so much, everyone, for joining today. Great questions. I hope I was able to clarify or articulate where Onward is today. In quick summary, Onward is an engineering services company where 50% of our revenue comes from mechanical engineering, 50% from the software side. We are trying to transition the company more and more towards -- while mechanical engineering business will continue to grow and is core to our success, we are investing very heavily on the software side, digital side. And more and more we hope in the next couple of years, the entire company will transition towards AI. We had a lot of questions today about AI and how it's affecting Onward Technologies today. Again to reiterate or reinforce, it's not affecting Onward Technologies today. We are not an IT services company. We are not a product company. We are not a BPO company. We are engineering services. So so far we have not seen our customers getting affected. In fact our customers have recorded the best results and the best profits in their history. Number two, there were lot of questions about India-based customers and what we do. Again to reinforce, Onward Technologies has majority or 70% of our revenues coming from North America, which is U.S. and Canada for us and 30% coming from Europe. We have no customers or revenues coming from India. The INR billing Onward Technologies does is strictly based on the GCCs, all these global companies or American and European companies in India. And third, in terms of the future outlook, we definitely see very, very exciting demand. We see very positive demand from our customers where we do believe our Top 25 clients will keep growing and there'll be a lot of other clients from the other 50 customers, which will surprise us and move up the value chain and grow much faster. We have an amazing team in place. We have put a very strong GLT in place as well with 6 leaders who have taken over the day-to-day operations from me. They are learning, they are growing and I think they'll only get stronger and better every day. Our last year was tremendous and hence, the Board has recommended increase in dividend to INR 8 per share and we hope to sustain that and grow that for you guys, for everybody in the next couple of years as well. Company is sitting on very positive cash reserves of INR 127 crores and we do believe that will keep growing as well. And we're very excited about how the next 1 to 3 years look and we hope to create lot more value for everybody on this call and the whole Onward Technologies ecosystem. So thank you again and have a lovely day and evening.

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