Tata Elxsi Limited (500408) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tata Elxsi Q1 Earnings Conference Call. [Operator Instruction]. Please note that this conference is being recorded. I now hand the conference over to Mr. Vaidyanathan. Thank you, and over to you, sir.

Yes. Good afternoon to you all. Thank you, Stanford. So welcome to the Q1 earnings call of Tata Elxsi. In Bangalore, we have -- with us we have Mr. Manoj Raghavan, CEO and MD; Nitin Pai, CMO and CSO. Request to the participants to restrict to 1 question. If we have time, you can join with queue for further questions. The agenda goes like this. Mr. Manoj Raghavan will give a brief of the Q1 performance and Nitin will talk about the market and strategy. Later on, you can pose your questions for the clarification and answer of the same. Now I request Mr. Manoj Raghavan to take it over.

Thank you, GV. Good afternoon to all the investors. Thank you for joining us today. And I hope you and your families are safe in this crazy COVID situation. Considering the uncertainties that we saw across all the verticals at the end of the last quarter, and beginning of this quarter, I would say that performance for the quarter gone by has been quite satisfactory, both in terms of top line and bottom line. As you guys would have seen our revenues for the quarter grew by 10.7% year-on-year, and our PBT also grew 33.9% year-on-year. Of course, quarter-on-quarter, we have seen a dip. But I think you should see the dip in the context of the difficult situation that we had in the industry due to COVID. The company's largest division, Embedded Product Design division, EPD, grew by 13.2% year-on-year. Within EPD, I'm happy to let you know that both the media and communications business unit and the medical and health care business unit recovered sharply during the quarter and posted sequential growth as well as a very healthy 20% and upwards year-on-year growth. The media and communication vertical grew 23.3% year-on-year and 3.3% quarter-on-quarter. And the medical and health care vertical grew by 26.5% year-on-year and 5.3% quarter-on-quarter. However, the transportation vertical continues to be muted. This has an impact both on our Embedded Product Design business as well as on our IDV business -- the design business, because a significant part of the IDV business is from the transportation segment. However, when we see that transportation segment is muted, it is -- while we say that it is muted, we continue to win both new deals as well as add new customers in the segment. But just that the deal closure cycles have definitely become longer due to deal deferrals, higher scrutiny. And of course, an evidently slowdown in the decision making across the value chain. Lastly, I'm really happy with how we have successfully managed to institutionalize remote working. And continue to serve our customers across the world seamlessly. We -- in a matter of couple of weeks, we were able to move more than 95% of our workforce to work from home with the right infrastructure, the right security practices and so on and so forth. During the quarter, we've managed to have maybe about 15% of our employees come to office and 85% working from remote. However, the last couple of weeks, we've once again moved back to 95% working from home because in many places, we have had these additional lockdowns, which necessitated our employees to work from home, right? I would really want to thank all our employees for embracing this change so quickly and continue to deliver and contribute to our success. And of course, to all our customers who have stood with us in these very challenging times. So with that, I would hand it over to GV for the Q&A session. Thank you. Thank you so much and look forward to your questions.

Stanford? Stanford? Can you start the queue where the participants would come in one by one?

[Operator Instructions] The first question is from the line of Vimal Gohil from Union Mutual Fund.

Yes, sir. Congratulations on good execution this quarter. Sir, my question is on your gross margins. On a sequential basis, there is a 375-odd basis point dip in your gross margins this quarter. What would you attribute this to? Would it be more to do with your probable non-fungibility of employees in the -- especially in the on-site projects and pricing pressure? That is my question #1. And the second -- the second one is a related one on your operating costs. So you have managed to keep your costs down extremely well. How sustainable is this? As and when revenue growth improves, what portion of your cost savings would come back?

Sure. So I'm not sure where you saw the 375 basis point reduction. But however, our top line has de-grown, right? By about 8% -- 8.7% quarter-on-quarter. And that has a direct impact on our bottom line as well. Whatever you talked about including the fact that fungibility of resources are concerned and of course we've had additional expenses because we've had a number of our employees that were stuck in overseas locations, because of COVID, they could not come back. We had to bear all those additional expenses. So I think that explains the sequential dip in our profitability, right? I think about 14% or so. Regarding operating costs, yes, we have been able to control our operating costs, we were able to -- we have had very, very strict controls in hiring and any expenses. We've also not added any new office space. No travels happened during the quarter. So a number of things also helped us to manage the operating costs. Of course, we have not given a hike in the salaries this financial year. So all of that has actually helped us to manage our operating costs better.

And sir, what portion of it is sustainable? I mean what portion of your costs could come back once the growth comes back?

See, as long as COVID is there, a lot of those big-ticket items like travel, office space and so on will continue to be muted. See this is a new normal. The industry is going through a lot of changes. So I would say, at this point in time, it's very difficult to say when things will get to normal and how much of that cost addition will come in. As of now, I don't think in the coming quarter at least -- Q2, at least, we see any additional cost pressures coming on us.

And then lastly, could you just comment on the demand environment, especially on the auto, what has changed incrementally over the last quarter?

Yes. Auto demand is still muted, I would say. We are winning deals, but at the same time, some of the large deals that we have been chasing with some of our key customers, those are getting slowed down or those are getting pushed by a quarter or so. So we continue to be cautiously optimistic about the auto segment. We're not writing it off. But we are placing our bets correctly, so that we don't depend overly on that particular segment for our growth.

The next question is from the line of Madhu Babu from Centrum Broking.

Yes. Congrats on the strong execution, sir, despite the COVID challenges. Sir, on broadcast and communication now -- which is now the biggest vertical. So how do we see the subsegments there? And could you talk about the top account there, how it is growing?

Sure. The top account is a large multi-services operator based out of the U.S. So our business with this particular customer has been growing pretty well, I would say, over the last -- I mean we have been engaged with this customer over the last 12 years. So it's not a new customer. It's been with us for more than 12 years now. And over these 12 years, we have won significant deals, significant consultation opportunities. A lot of high technology, especially in the new broadband space as well as OTT space. So a number of things that we are doing for this particular customer. What was the first question about broadcast?

The other subsegments within broadcast and communications, what are the new opportunities we are chasing?

Yes. So basically, if you look at it, one is the operator segment, which I talked about, apart from the large operators in the U.S., we have a large operator business in Europe. We have in India. We have in South Africa. We are looking at Middle East as the next opportunity where we have a number of deal pursuits that are happening. So this is a globally spread sort of a business that we have. We also work with the broadcasting companies, with broadcasters, so that is another segment that we have, the OTT -- OTT players and so on. The third segment is the devices segment, the device -- the companies that provide devices into this place, set top boxes and other devices. So these are 3 main segments in this particular industry.

Okay. Okay, Sir. And just on the work from home, can it be the new normal even post-COVID because engineering design is a bit different from IT services. So how do you see the post COVID CapEx, OpEx and the work from home? That's it from my side.

No, there is a set of opportunities for which there is no hardware dependencies or there is no very strict customer confidentiality sort of requirements. Those requirements can still work from home as possible. But a lot of our requirements also mean that we need access to special labs, special hardware and so on. So those -- it will be difficult for us to have a complete 100% work from home. We may have a mixture of it. So far, we have always been 100% work from office only. We not had a work-from-home policy till COVID happened. But maybe there is an opportunity based on the learnings that we have to dilute this a little bit so that we have -- we give options to our employees who can have partly work from home and partly well from office. So this is something that we are working on right now. There is no straightforward answer here. It is based on deal to deal, customer to customer and so on. So we cannot -- like IT companies, we cannot give you a blanket sort of a statement here. But we would definitely encourage a lot more work from home now that our employees have seen advantages of work from home.

The next question is from the line of Ritesh Bhagwati from Rockstud Capital.

Congratulations on a good set of numbers. I have a question on our industry verticals. So as we are seeing muted growth in transportation, can we expect strong growth on medical devices front from this fiscal and contribute significantly as a percentage of sales in this year? Or this growth will gradually open? That's my question. And if you can just let us know what has been the utilization rate in this quarter versus last year? That's it from my end.

Yes. So medical devices continue to grow for us. I think we've grown 26% year-on-year and about -- slightly more than 5% quarter-on-quarter. I think we will continue this growth trend. As I said -- as I communicated in my last investor calls and so on, we have been investing significantly in this business, both from a delivery capability perspective as well as from a sales force and demand creation perspective. So I'm happy to let you know that this growth momentum would continue. COVID is like a blip here. We could have done much better, if not for COVID. But having said that, even now we see strong deal momentum happening in this industry. From a utilization perspective, I would say, last quarter, we were about 75%, 76%. And I think now we're slightly below 70%. So that is the room for us to really -- as the demand creation goes up, we'll be able to absorb the additional capacity that we have.

The next question is from the line of [ Naveen Bothra ], an individual investor.

Congratulations sir for good set of operating performance even in these difficult -- very challenging times. My question is regarding the growth opportunity. In the last con call, Q4 con call, you had said that we do have 2 or 3 opportunities that are being evaluated, but at an early stage. So if you can throw more like on that growth opportunity has that moved forward? Has anything moved forward?

You're talking about acquisition opportunities, right?

Yes, yes.

No, we have -- in the last quarter, also, we have evaluated about 3 opportunities. But we couldn't see a strategic fit into our domain -- our company as well as the valuations were on the IR side. So we have not progressed on those. But however, we are evaluating, there are -- because of COVID related issue, there are opportunities that are coming up to us. I'd say we are in the evaluation stage. And nothing to report, nothing significant to report right now, Mr. Naveen.

Okay. So in this year, there is some chance in organic acquisition going forward in the Q3, Q4, for some sort of...

Sure. We are constantly evaluating on this front, and there is definitely a team with a mandate that is going after it. If there's anything that comes up at the appropriate time, we will keep the investors informed.

Okay. My next question is regarding the top 5 customers. In absolute terms, JLR has in year-end, declined by INR 7 crores. But if we see second to fifth top customers, they have grown from INR 80 crores to INR 106 crores this quarter. So that is a growth of more than 30%. Suggesting increased engagements with our -- all these core customers. So is there any further room to ramp up this going -- these customers [indiscernible] customers and this growth sustainable going forward?

Of course, I think the good part about our -- not just the top 5, top 10 customers is that they have been with the company for a long time. We've had issues in a couple of customer places where we had some dip in business because of COVID. But everybody else, we have really strengthened. If you look at -- compare last -- Q1 of last year and Q1 of this year, we've shown a pretty good bounce back. And that has really helped us to mitigate some of the revenue dips from accounts like JLR.

Is it sustainable going forward [indiscernible]?

Absolutely. Absolutely, Mr. Bothra.

Yes, that's good. And my last question is regarding JLR. Have we seen the bottom of JLR in the absolute terms? Will it stabilize or further de-grow from here on?

Your guess is as good as mine.

The visibility and deal pipeline and then?

Yes, it is a difficult business. I mean, the company itself is in a difficult situation.

From INR 98 crores top 2, we have come to INR 53 crores from JLR, INR 98 crores if I am not wrong in Q1 FY '19, we have come to INR 53 crores. So this stabilized [ JLR ] around INR 50 crores? Or...

So we have 2 objectives, Mr. Bothra. One is to protect our revenues from our top customers. And I feel -- my intuition is that we have bottomed out and we are getting good vibes from the management out there. That we will -- there are some new deals that we're talking of and so on. So hopefully, next quarter will be slightly better is my hope. And then the other thing that we're doing is we definitely want to de-risk the situation. This is not something that is a good situation for us when we have dependency on one key customer. I think we've de-risked -- to a large extent we've de-risked, however, in the subsequent quarters also, we'll de-risk that. Other accounts, we are growing far more aggressively. So that -- any plus or minus in some of the key accounts, should not affect us disproportionately. That is the focus for us.

[Operator Instruction]. The next question is from the line of [ Harish S. Talwalkar ], an individual investor.

Thanks for the opportunity and congratulations for your performance. I have around 2 to 3 questions. First one is regarding your transportation vertical. That is -- it is impacted and has muted sales, right? So what are the company's plans to mitigate this sluggish demand? This one is 1. And second one is regarding employee benefits. It's increased. So it is increased due to salary increments? Or it has some bonuses or performance incentive? And third one is regarding you had in the financial report, you said allocable assets and liabilities. So what it is exactly and what it includes?

Okay. So transportation business definitely is showing muted signs right now. So traditionally, we have been working with automotive OEMs and Tier-1s. So what -- consciously, what we have been doing over the last, I think, at least 2 or 3 quarters, we have been looking at adjacencies to this market, which is we're looking at rail, off-road and commercial. So that -- the skill sets are similar. The skill sets are fungible. So that is a segment that we are really focusing on having additional sales bandwidth, delivery bandwidth and so on. So to an extent, yes, we have been pretty successful. It's early days, so we have some new customer engagements there, and that business is growing. So that is one of the key de-risking plans from our transportation business overall. And of course, the other thing is we have been aggressively growing our media communication business as well as the medical business. Again, in the last 3, 4 quarters, that has been a focus for the organization. So that we sort of derisk the automotive industry and the potential downturns in the particular industry segment. So I think we have been doing that consciously. And I would say that is one of the reasons that we have been able to mitigate this steep decline that we've had and come out with a respectable sort of numbers. Employee benefits have gone up slightly. I think...

Fact is the other way around. Marginal has declined.

There's a marginal decline? Okay. We have added about 200 people in the quarter, right? But we've also had a set of people from overseas, who have come back. So if you see net-to-net, what I understand from our team is that those expenses have actually come down slightly, right? There has not been any new bonus or any other incentives that has been paid. So we have actually managed the costs very, very well, I would say.

I checked it year-on-year basis. That's why I have seen it's increases.

Yes, year-on-year, if you look at it, I think that's -- okay. Let me just open the -- so we are seeing year-on-year in June 2020, we say, INR 217 crores.

INR 217 crores.

No, that is '19 -- 2019.

Correct. Yes. From INR 217 crores, it's gone to INR 251 crores. And that is explainable because if you think about it, we have added employees from that period because June of 2019, we already had plans to add about 600 fresh engineers that we added over that period. So in general, overall employee headcount itself has gone up. And we had revisions between that period. From that time to now, we've had one round of revision. So it accounts for those 2 costs. So there is nothing -- let me put it this way. There's nothing unusual here. Because if you look at quarter-on-quarter, you'll find that we've managed cost quite well. While on a year-to-year basis, simply because the headcount increased and there's some amount of employee benefits increase that has happened during the one year that we're talking about.

Right, right. No issues.

Regarding the third question, I'm sorry, you were not clear regarding the assets and liabilities. What I would suggest is please frame your question and send it to our company secretary. We will have our finance team respond back to you with the right answer.

The next question is from the line of [ Kishore P.] an individual investor.

Congratulations on a good set of numbers in the challenging year. And my question is like, did we find any opportunities from this COVID crisis, so which could be implemented in the company's future path that may help us to reduce the cost structure amount?

Okay. So Mr. [ Kishore ], from what I understand, you're not talking of opportunities from the market, you're talking of opportunities within the company to reduce costs. Is that correct?

Yes, sir. Okay.

Okay. So from -- if you talk of reducing cost, I think that will happen over the long-term where we rationalize our office space and the requirements and so on. Right now, we are still maintaining all our office space and in fact, we are spending more because of the additional IT security requirements and laptops for employees and so on, right? In the short term, I won't say you will see any reduction, but in the mid to long term, as we relook at our overall infrastructure requirements, office space requirements and so on, we could see a reduction in some of those expenses. But you have to also bear in mind that many of our office rentals are long lease rentals. They are locked in, so we can't just get away. We'll have to pay before we can get away. So we have to evaluate all of that. And I think we'll do that at an appropriate time.

Correct. And any large deal wins in any of our vertical, sir?

Yes. We've had deal wins, I would say -- I wouldn't say large, but in a couple of million dollars, we've had a couple of deal wins, one in the automotive space and one in the medical space. Our existing engagements continue to grow, especially in the media communication as well as medical space.

Thank you. The next question is from the line of Mayank Babla from Dalal & Broacha.

My first question pertains to -- basically, we've seen broadcast and communication grow over the last 2 years and transportation reduced in the revenue mix. Where do we see going ahead, what is the management's vision? Where do we see this normalizing? And what kind of mix can we see going ahead, if you could point us in that direction?

Yes. So I think we have been communicating this in multiple calls. In the long term, we definitely look at 40:40:20. 40 from transportation, 40 from media and communication, and 20 from medical. So that's going to be the long term -- in 3 to 5 years, that's going to be the way the revenue is going to look like. There would be the short-term ups and downs, but in the long term, that's what we're looking at.

Okay. And sir, my second question would be, if you could help us with any new platform that is in the pipeline like we have AUTONOMAI and Falcon in transportation and media. Any new platforms that we are developing, which is in the pipeline?

Mayank, this is Nitin here. Yes, we do have few platforms that are under development. Some of them actually relate very appropriately to what is happening with COVID, especially where customers do not have the ability to manage and maintain operations with human capital at the site. And therefore, they're looking at how they can remote operate, many of their operations or network operation centers and so on. So we are building -- not just building, in fact, we have built some very, very interesting platforms that allow you to remotize or virtualize some of your management of these assets. And at this time, in fact, it's actively being deployed at a leading operator, so we already have our first customer win there. We are actively trialing and scaling that deployment. And the idea is to go from 100,000, 200,000 to 1 million devices under management and then go beyond. So I think we are on a very, very good wicket as far as this particular platform goes because when we built it, we did not have COVID in mind. It was just meant to move customers in the direction of automation and remote operations. But with COVID, I think we're only going to see accelerated interest in these kind of platforms.

Okay. And Nitin, sir, which industry would this be present in -- this platform?

Okay, which industry? Telecom industry. This is meant for operators, who actually have operations centers right now, which -- and in fact, even in India, people have had problems because these are 24/7 network operating centers. And you need a large set of people sitting inside, operating and managing these centers live. And what we are building is a solution that is now log where -- from which you can log in from anywhere, you can monitor, but not just monitor. Because monitoring is not enough, you can manage the network, too.

Okay. And sir, last question for Manoj sir. Sir, you guided that you have seen some green shoots in the top client and overall transportation, like most of it is -- the worst is behind us. So Q2, can we see a good bump up? I'm not asking for a guidance, I know you don't give guidance, but qualitatively, if you could guide us for transportation?

From the transportation industry, I would still say it's early. We really don't see -- of course, situation is improving. But at this point in time, I wouldn't be confident to say that we have a recovery and things will improve and so on. However, from the media communication and health care medical practices, definitely, we see increased spend, lot more customer tractions and so on. So at least in the short term, which is one quarter, I would say, we would see the trend that we saw in Q1 continue. However, I would say, maybe Q3 or Q4 or in H2, we would see some amount of recovery in the automotive industry. I think Q2 is still -- I'm not so confident that we will see a great recovery.

Sure. Thank you so much for your time.

The next question is from the line of Henrietta Seligman from Somerset.

I have about 3 questions. The first is just on the trend of working from home. Will that also help you to increase your offshore ratio going forward? And how could that sort of impact the margin? And then the second is on the security of working from home, which you sort of mentioned in the introduction. Could you perhaps go into a bit more detail about how you are able to keep customer data secure and sort of reassure them that it is safe when your engineers are working from home. And then the third question is just what is the -- I understand that there's limit in visibility on some of the outlook. But how does the deal and tender activity you compare at the moment versus this time last year and perhaps breaking it down by vertical?

Thank you. If you've seen in this particular quarter, our onsite offshore ratio actually came down to more offshore and less of onsite. I think it is 63.5% to about 36.5%. So that's the -- I mean, so far, we have always been in the 60/40 sort of situation. So definitely because of COVID, many of our customers, their budgets have been affected. So we have gone back aggressively to our customers and push the model of more offshoring, so that within whatever is the reduced budgets of the customers, we'll still be able to manage overall activity and provide services to our customer. At the same time, moving work from on-site to offshore also helps us improve our margins. So I would say we will see that accelerating a little bit. At least in the short term, we will have -- maybe in a quarter or 2, we will have more offshoring and less of onsite. Also the fact that air travel is still not -- to different countries, air travel is still prohibited. So we have to use local resources and we will not be able to have engineers travel from India. So that also pushes us to really move a lot more work offshore. Yes, work-from-home perspective, we do have -- the security-related issues are there. But we have a pretty -- very good security architecture that we have built. We have -- we have used Microsoft Advanced Threat Protection. We use McAfee, so there are multiple ways. We use Palo Alto firewalls. There are only employees, who need to access resources directly over Internet like office mail and so on. They come in directly with multi-factor authentication to have a secure application log in. For everybody else, who needs to access source code and so on, though, they're working from home, they do a VPN and dial in remotely into a server that is within our firewall. And so we are really able to use many of these, including VPN, multi-factor authentification, firewall that is there and remote RDP into our network, right? That is where we have been able to ensure that none of the information goes out of the organization. And as usual, all the endpoints that we have deployed, we have USB disabled, we have endpoint protection software that is installed. We have no admin rights on any of those machines and multiple of these factors that we're looking in. And we have also looked at red teaming, and we have organizations like BitSight that we have used to really check how secure is our overall infrastructure. I think the last count that I heard was we were about 730 or 740 points, which puts us in the top half of many services companies from an information security point of view. So we continue to really use internal resources and external resources to ensure that we do all the red teaming, ethical hacking and all that and see that there are no holes that any hacker could exploit. So we've looked at the Maze ransomware that had attacked in another company. So all of that, within minutes of that, we had all the patches installed across the network, and we are well protected. So I believe -- I mean it is ultimately a cat and mouse game. But we have done all the investments for a secure work environment. And we continuously focus on really evaluating best-in-class security architectures available and constantly on the lookout for better options to protect ourselves. So this is something that we are very, very careful, and we will continue our investments in this line. So I hope I've answered that. Regarding deals and tender activity, I would say, as compared to Q1 last year, definitely, we do see some slowdown. And that is natural because of the scenario -- COVID scenario that we have. We're hoping that Q2 and Q3, we will see a better -- we already see some signs of -- at least in a few verticals, activities restarting. So we're fairly confident that things will improve from now.

That's very helpful. And just on question about the offshoring ratio, do you expect that to be sustainable to some degree beyond COVID?

I think so because the customers also have -- see more -- see, given -- if you leave it to ourself, we would like it to be 90-10, because it is very much possible to really go all the way there. But most of it is our customers are not confident that we'll be able to manage remotely and so on, right? But right now, because of COVID, I think slowly, customers are also getting around to understand that yes, offshoring can work, remote working can work. Even in their own locations, people are working from home and are able to contribute effectively. So I think the resistance is more from the customer's end and which I hope will come down because of COVID.

The next question is from the line of [ J. Raman K. ] an individual investor.

I just wanted to have a lead on the revenue mix going forward, we can expect from the company?

Would you phrase your question a little better so that we understand what you want?

One minute. I just wanted to have guideline from the company and the revenue mix going forward. We have 3 verticals. And I can see the medical sector is around 7%, 8%. Given the opportunity COVID, do we see any remarkable increase in revenue? Are we exploring opportunity in this particular field?

As I said, our long-term revenue mix is about 40% in automotive industry, 40% in media and communication, and 20% medical. So that's the revenue mix to which we will be moving.

The next question is from the line of Rohan Advant from Multi-Act.

Most of my questions have been answered. Sir, on the drop in JLR revenue, I wanted to understand how much of the drop is on account of, say, business volumes itself dropping or it's more on account of reduction in value owing to offshore onshore mix? That is my first question. And secondly, on the Industrial Design segment, we've seen revenues at around INR 40 crores for around 9 quarters now. So just wanted to get a color on the opportunities we see here. And also the kind of end industries we serve here. Is this mostly transportation? Or is this more than that? And are there growth opportunities here? Thank you.

JLR, right? Okay. So JLR revenue drop is a mix of both offshore and pure reduction in their overall budgets, right? I would say -- I would -- if I -- I don't have the numbers immediately, but my interpretation is almost 80% of the drop is because of the budget issues. And 20% is because we are moving to offshore, plus or minus, I would say, 5%. This is a broad indication. I don't have the numbers offline with me. But the real fact is that, yes, it is more -- it is more budget related. IDV, I think Industrial Design business also, I think, has been affected significantly due to COVID because a lot of work that they do are on design intervention, research, need people to go out into the market, interact with people. So many of these activities could not happen because of COVID, because of lockdown across the world. Having said that, we've -- in the beginning of Q1, we had a leadership change there. We have a new person, who has come in. And there are a set of activities that we are doing to really refocus on this business, because we believe this is one of the key differentiators as compared to competition. There is a lot more that we can do in this business. And I would -- just give us a couple of quarters, and we will see some amount of turnaround in this particular business. So that's something that we're working on.

The next question is from the line of Karthik Sambhandham from Unifi Capital.

So my first question is regarding the capital efficiency that we usually see historically is quite high for us. But in FY '20, we saw a little bit dip in the ratio. So given the amount of cash that's been built up, how do we see it going forward for this year? Sir, are we looking at a better payout or bonus? Or could you shed more light on that?

So our -- our dividend policy is up there -- out there in our Internet site. We'll definitely relook at it. I think even in our AGM, you had some questions about it. So we will really evaluate it with our Board of Directors and come out with clear plans of how we're going to use our capital, right? So yes, we have about INR 650 crores of reserves. So we -- definitely as a growing company, we need significant cash portion, especially when we are trying to do some inorganic activity. So we will keep that in mind and come out with a clear policy shortly.

And sir, just one more question. We see that even the year-on-year increase is around 10%, but the bottom line has increased significantly. And we've seen like in -- our travel expense is almost 30% of our bottom line in previous fiscal years. So given that this year, because of COVID, we might see some tailwinds from that. Are we expected to have this kind of a margin uptick going forward? Because you mentioned you wanted to focus on the year-on-year growth for this fiscal.

So yes, absolutely. So we will continue to focus on the year-on-year growth. Our margin guidelines, PBT guidelines remain the same. We would want to be in the 22% to 24%. I think we had a dip in a few quarters in the last financial year. But if you see over the quarters, we have smartly been able to ramp up our margins and almost end the year with slightly lower than the 22%, but we began Q1 with a very positive increase in our margins. So I think we would to continue that, and we would to be in that 22% to 24% range. Yes, your observations on travel cost is valid. Because of COVID, there was no international travel. And hence that expenses have been saved, and it also contributed to improving our margins.

And sir, are we seeing any -- like you mentioned that work from home completely is not possible for an R&D kind of a firm. So as we -- going forward, we are looking at any rent renegotiations that could probably happen?

We've already done that. So rent negotiations have happened. We've got some minor concessions and so on. But what we will do is we'll really look at, hey, do we really need all the office spaces that we have currently, right? And we will take a call. But we want to take a call once we have a clarity on when this pandemic is coming to an end. And also, we need to restructure our own policies and work from home and so on, right? So we are in the process of doing all of that. Of course, as I said, we have gone back and negotiated some reduction in our overall spend.

Sir, what is the overall USD revenue for this quarter? I guess I probably couldn't get it out.

Yes, it's an old data. I don't have the data upfront. It's about $55 million, I would say, $54 million $55 million.

Hello, sorry.

Yes, it's about $54 million to $55 million.

The next question is from the line of [ Gaurav Hinduja from GEPL ] Capital.

Yes. Congratulations on a great set of numbers. My question was broadly on the order book. If you can sort of give a guidance on the growth going forward, say, from a 2-year point of view, and do we see most of these orders coming from high-margin accretive segments, like you mentioned, broadcast. And also, you mentioned regards to the off-road transportation mix with regards to the railways and auto ancillary. So what percentage of the overall transportation revenue can we look at that in the next, say, 2 years to 3-year guideline?

Sure. So we don't give projections for order book and so on, right? But however, what I would like to tell you is we would definitely want to grow year-on-year, right? If you look at it in the last investor call, I said that our focus is to ensure that in Q1, we definitely grow more than Q1 of last year. But I'm happy to say that we have even beaten the Q2 numbers, both top line and bottom line. So we are ahead of our own, whatever estimations, we would want to continue that definitely. In Q2, we want to really accelerate and grow beyond Q3 last year and so on and so forth. So we want to keep this growth momentum up. And hopefully, end the year on a pretty positive note. Maybe if you extrapolate it between 5% to 10% is the growth we are looking at in this financial year. Of course, high margin, both our medical health care business as well as media and communication business are relatively from a margin perspective, better than our automotive margins. So we will continue -- as we continue to grow that, that is definitely a benefit that would accrue to us. Off-road, rail and so on is still a small percentage of our overall transportation business. I would say it's currently about 4% -- 4% to 5%. Currently, it's about 4% to 5%. But having said that, this is a new initiative. So it will take some time. And over the 3 years, our stated objective is to have these adjacencies grow between 15%, 20% of the overall transportation business. So that's what we're looking at.

The next question is from the line of Ashish Aggarwal from Principal Asset Management.

My questions have been answered.

The next question is from the line of Dipan Mehta from Elixir Equities.

Sir, good afternoon. On our good set of numbers, I have 2 quick questions. One is that have any of our orders been deferred or canceled because of this COVID situation? That's question #1. And question #2 is that because of this COVID-19 and there are perhaps changing spends as far as technology is concerned, changing trends on technology spend. So will the company be benefiting from those changing trends? Or it is not going to make much of a difference because of what the world has gone through in this pandemic?

Yes. So orders deferring and canceling, yes, we've had a few of them, especially in the automotive industry. So -- and I think that is a direct result of why we are showing this dip in that automotive industry segment. Regarding technology trends, I will ask Nitin to respond to you.

Sure. So I think it's a bit of a mixed bag on how we see technology trends and whether they really have a headwind, tailwind or a neutral effect on us. In general, because we are in the ER&D space and R&D is a discretionary spend. So in general, I would have said that any pressure on companies typically tends to reduce a little bit of their technology spend, especially in discretionary. But having said that, you would notice that, that is not true in media and communications, because what you've actually seen is an upsurge in consumer demand, whether it's OTT, whether it's data, voice and so on. Equally, if you look at health care, again, there is accelerated demand in certain sectors for the kind of medical devices and equipment that is required. So it's a bit of a mixed bag. So in general, auto is depressed because of the fact that mobility as a market is affected, whether it's a shared mobility or whether it's individual consumers buying cars for their own. On the media and communication and healthcare, it's always a positive trend. The second headwind -- sorry, tailwind that we see is what I described as our platform play, right? For example, what you're building out is intelligent consumer experience, iCX. That's a platform that is meant to automate and enable remote operations for companies. So platforms like this, I think, will see an upsurge in demand and requirement. So I think there are certain positives. So anything that you're doing for companies, which enables them to digitize or to enable automation or to do things remotely, I think there is a new demand for it. While for everything else, it is subject to their own market position and their own ability to spend.

The next question is from the line of Prakash Chellam from Marathon.

Could you just give us some color on the revenue growth in terms of constant currency, both year-on-year as well as in dollar terms, please?

Sure. For one quarter and year-on-year constant currency growth, right?

That's correct. Yes.

Can you please set us the numbers here. Just give us a minute. I'll just -- just a minute. Yes, there it is. Okay. So sorry, yes. Year-on-year, it's about the -- year-on-year growth it is 10.7%. And quarter-on-quarter decline is 8.7% in constant currency.

Year-on-year, it's 10.7% in constant currency?

Growth, yes.

Sorry. That was year-on-year growth of 10.7% in constant currency. Is that right?

Yes.

Great. And maybe on the transportation vertical, could you give us some sense with sort of projects that you're seeing in terms of demand growth? Is it in the car train side, is it in the connected car side, what are you seeing growing? What are you seeing dropping in that segment or the ADAS segment?

So, this is Nitin here. I think what we are definitely seeing there's a lot more activity in the electric car space. So I can tell you what is going up and what is not necessarily growing. So the effort towards electric platforms, electric components and electric vehicles is a definite, definite trend that we see. Connected technologies, we're definitely seeing an upswing, partly because -- that is very consumer spacing, partly also because that is being seen as a new revenue stream, where with connected cars, you have new revenue streams that OEMs can drive better value that they can drive. Autonomous, I think, is definitely seeing a slowdown, right? So without question, autonomous technologies are definitely seeing a bit of a slowdown in terms of R&D investments, deployment as well as expected production program dates.

Sorry, I think I made a mistake in the numbers that I gave earlier, I apologize. The constant currency year-on-year is 4.1% growth. And quarter-on-quarter, there's a decline of 10.7%.

Okay. So Nitin you were saying electric car, you're definitely seeing trends in terms of growth. Is that right?

Correct. Sure. Yes.

The next question is from the line of [ Arjun Balakrishnan ], an individual investor.

Yes. I just have one question. It's regarding the fact that over the years, we have developed a nation, all our intellectual property oriented more towards the automotive sector. But now there's a decrease in spending in the sector. So do you think that we have enough means and IT developed in the other 2 sectors to exponentially grow?

This is Nitin here. So if you look at how we are investing. Automotive and broadcast and communications always in almost near equal investments, because though you hear or rather we have talked more of what we've been doing with AUTONOMAI and other platforms in automotive, there are equally great solutions that we have been developing and deploying in the media and broadcast world too, including FalconEye, which has been our automation and test automation solution. That's been on for the last 4, 5 years now. Intelligent Consumer Experience is really a solution for the telecom operators and similar companies. TEPlay is a new OTT platform that we are building out that enables very, very rapid launch of new OTT services. On the medical side, at this time, we are not trying to build too much of intellectual capital. By the way, we do have patents filed even in the medical space. We have about 8 or 9 patients that have been filed just over the last 1 or 2 years. But having said that, the focus on medical is right now to scale customers and scale business volume. And investments in platforms, et cetera, are being considered a little more slowly in that space simply because of where they are.

The next question is from the line of [ Naveen Bothra ] an individual investor.

My couple of questions has already been answered. Constant currency counts and all those things. One small question regarding the only way industry vertical it is around 4.2%, 4.3% for the last 4, 5 quarters. So in the absolute terms, it is around INR 16 crores to INR 18 crores. So is there any component of licensing recurring revenues, which we are getting because the revenue mix, revenue a few terms are more or less, INR 16 crores to INR 18 crores. So any recurring licensing revenues we are getting in that other segment?

You're talking about the Industrial Design business.

No revenue-wise industrial and others 4.3%.

The other group. Okay. No. Other is a set of different activities that we do in consumer appliances and one-off projects from other industry segments and so on. So no, we don't have any intellectual property. These are all one-off projects that we get.

Okay. Okay. It will be better if you -- from now on if you can present the tax statement in the constant current income also, that will be quite helpful.

Sure, Mr. [ Bothra ]. So we will consider including that in the fact sheets, constant currency.

Ladies and gentlemen, we'll take the last question from the line of Bharat Sheth from Quest Investment Advisors.

Sir, congratulation on good execution. You have been beautifully, I mean, moved, I mean, from onsite and offshore mix ratio. Sir going ahead, can you give some sense how do it really move, I mean, from onsite to offshore? And second thing, within that, how much -- I mean, do you think because of once you move the onsite to offshore revenue -- hit on the revenue side, approximately? As a broad part, I mean, or...

Yes. So we don't see it happening all of a sudden in 1 quarter and so on, right? This quarter, we've had -- we were able to change the onsite offshore mix fairly a little bit because of COVID and so on. But I think it will stabilize, maybe slightly more, maybe, I would say, by end of the financial year, we may reach anywhere 68% or 70% offshore and 30% onsite. So we're also conscious of the fact that suddenly, if you move everybody think -- everybody from onsite to offshore, it will be a hit in revenue, even though margins may look better, there will be a hit in the revenue. So I think we will moderate that. So that, along with our business growth in other areas and so on, we will gradually move the ratio to about 70-30. So I don't think you'll see a hit in our revenue because of this. We will take care of that.

But that will be definitely -- I mean, helpful on the margin side, correct?

Yes. So -- and not just the margins. It is -- in general, ease of doing business, motivating our employees, ensuring that we are in charge, in control, a lot of things, right? Training our employees. Once they go onsite, many of these, it becomes very difficult to manage. So we do see a lot of other positives when we have a better onsite offshore ratio.

Okay. And sir, one question to Nitin. I mean Nitin, about the platform, which you said, can you give some color? I mean, one is where you are talking of millions of devices, I mean connecting with the COVID. So how much of big is the opportunity do we see? And have we already started commercializing that platform?

Right. So yes, we have already started commercializing. So what we did was that because it's mission-critical products, because it actually works in the operations of customers. This is not R&D where you can delay by one month or the program delays by 2 months, and your launch is affected, but nothing more. Here, it is managing active devices in the field and monitoring and managing active consumer devices. So to that extent, what we did was, even as we developed it, we started to pilot this about 4 months back. In fact, just before COVID, so that is very interesting in terms of timing. We started to pilot this before COVID. We didn't know about COVID at that time. And what happened with COVID is it just accelerated. So the customer also forced us to make sure that it works better, it implements better, it manages more devices. So we have reached a point where now we are controlling more and more devices that the customer currently has under deployment. Right? And the idea is to increase the amount that is under deployment. But the good part that is happening for us is that solution is also becoming hardened. So when I say hardened, I mean in terms of it getting baked better in terms of how we can take it to other customers. We already started to take that case study and the capability, and we are starting to already discuss this with certain other customers across the world. And we are seeing very encouraging interest in the platform. But however, you have to note that adoption is not going to be sudden, because these are also big decisions for customers, because automation is not just something you can do as a casual decision. You will have to take a strategic decision on saying, yes I will implement the solution, please start piloting, please start implementing, now switch over from what we were doing before to this. So that is going to take some time. But I think what is good for us is COVID has taught that you have to have something like this as your plan A and plan B. And that is why we think there is great potential with this.

And is it fair to understand, I mean, that you said that this is for this communication center?

That's right. I, it is for -- typically, it's made for operators who may have set-top boxes, who may have gateways and other devices deployed either with enterprise customers or retail customers like us.

Okay. All the best. And any other platform that near-term that we would like to launch?

We are thinking and conceptualizing a few, but of course, we will announce them at the right time.

Thank you. Ladies and gentlemen, I now hand the conference over to Mr. Vaidyanathan for closing comments.

Yes. With this, we come to the end of the con call. I would like to thank Manoj and Nitin for joining the -- taking the call and all the participants for joining the call. Please stay safe and healthy. See you in Q2 results Con Call. Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of Tata Elxsi, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.