Tata Elxsi Limited (500408) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Tata Elxsi's Q2 FY'22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I'll now hand the conference over to Mr. Lokesh Pareek from Christensen Advisory. Thank you, and over to you.

Thank you, Spencer. Good afternoon to all the participants on this call. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risk that could cause further result performance and achievements to differ significantly from what is expressed or implied by such forward-looking statements. To take us through the results and answer your questions today, we have the senior management of Tata Elxsi, represented by Mr. Manoj Raghavan, MD and CEO; Mr. Nitin Pai, Chief Marketing and Chief Strategy Officer; Mr. Gaurav Bajaj, Chief Financial Officer; and Mr. G. Vaidyanathan, Chief Investor Relations Officer. We will start the call with a deep overview of the past quarter by Mr. Raghavan, followed by a Q&A session. We would appreciate your cooperation in just sticking yourself to 2 questions to allow other participants an opportunity to interact. If you do have other questions, do join the queue and we would be happy to answer them if time permits. I'll now hand over the call to Mr. Manoj Raghavan. Over to you, sir.

Thanks, Lokesh. Good afternoon, everybody. Thank you for joining us today and hope you and your families are safe. I'm happy to report that we have delivered another quarter of steady growth across industry verticals, and we continue to execute strongly on both top line and bottom line. Our revenues from our operations for the quarter gone by was INR 595.3 crores, registering a growth of 6.6% quarter-on-quarter and 38.4% year-on-year. The growth was entirely volume-led, reflecting in a constant currency revenue growth of 7.4% quarter-on-quarter and 37.2% year-on-year. We had product losses to an extent of INR 4.7 crores, while we had an almost equivalent gain in the last quarter. We will continue to monitor our hedging policy and tweak as required as the real focus is on driving operational performance, while managing downsides in currency. Our profit before tax grew 11.1% quarter-on-quarter and 65.5% year-on-year to INR 171 crores. Net profit for the quarter stood at INR 125.3 crores, reporting a growth of 10.5% quarter-on-quarter and 58.9% year-on-year. The company's growth was powered by Embedded Product Design (EPD), our largest division, at 10.6% quarter-on-quarter and 34.4% year-on-year in constant currency terms. Within EPD, the growth was broad-based across verticals. Our Transportation vertical business posted a smart double-digit quarter-on-quarter growth of 12.9% and 29% year-on-year. Media & Communication and Healthcare verticals delivered another steady quarter. Media & Communications grew by 7.8% quarter-on-quarter and 32.9% year-on-year growth and Healthcare grew by 6.6% quarter-on-quarter and 72.3% year-on-year. We are seeing significant growth in the automotive market, with large and strategic deals with both OEMs and suppliers in EV and autonomous technologies, underscoring our technology and engineering leadership. Tata Elxsi won a multimillion US dollar electric vehicle software development program for a new-age EV OEM in the APAC geography. We also won a software platform development deal for Level 3 autonomy and beyond from a North American system supplier. Rest of the world, which is really Japan, Korea and China for us, has been muted for some quarters, especially because it was automotive heavy and travel restrictions also damped the start of new projects in these regions. We are seeing some revival here. We also won an EV system software development deal from a leading Japanese Tier-1 supplier, which will ramp up from this quarter. Our Media & Communications business continues to grow steadily, led by organic growth and deeper mining in our top customers, and platform-led deals, which are enabling entry of the operators and broadcasters that are otherwise not accessible. We are selected as a platform provider and system integrator for a multi-region Android TV launch for a leading America-based operator, and this will be a multiyear engagement. Our award-winning iCX platform for customer experience was chosen by a leading global telecom operator to be adopted and deployed across multiple countries. We will see new countries signing on over the next few quarters. Our Industrial Design business declined 14.2% quarter-on-quarter basis. The sequential decline was due to a shift in program timelines for a large ongoing design-led innovation project with a U.S. customer, who also featured in the top-5 customer list. We are [indiscernible], but subsequent places are deferred, and we expect it to resume in the next 1 to 2 quarters, but the values will be spread over a few quarters. In the meanwhile, IDV is creating traction through design-led deals, which have a multiplier effect for the three verticals and has won significant projects for itself. An example is a deal we announced this quarter where we are selected as a strategic design agency to redesign an entire portfolio of appliances for a leading Asian appliance company. IDV grew smartly at 64.5% on a year-on-year basis and continued to baseline at much higher numbers than the same quarter in the previous year. This is a better sign of long-term trend of sustained revenues, while some work is still project based and that was subject to volatility quarter-on-quarter and the lease that it became [indiscernible]. Overall, we are also focused on deeper mining of our customers beyond the top 10. We believe there are great logos in our customer base that can deliver growth. We are also carefully adding customers in each vertical that can drive future growth for us. We added over 700 new employees to the Elxsian family in the quarter. While attrition increased to 13.9% for the quarter, we are still lower than industry averages and continue to actively work on retention, especially for key employees, while continuing to plan and add new employees to drive future growth. In summary, it has been a very satisfying quarter with superior top line and bottom line performance that was supported by industry-leading operational excellence and talent retention. And we are entering the third quarter with a strong order book and a healthy deal pipeline across key markets and industries. With that, I hand it over to the Q&A session. Thank you for your time.

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

Congratulations on a good quarter. So my first question was if you could just point it out, the last quarter you had a onetime large bonus payout. And this time around, I guess there would be salary hikes that would have got executed. So if you could just highlight what was the impact of the salary hikes on margins in this particular quarter? And my second question was related to the Transportation vertical. We've seen a very, very good sequential effect in Transportation. If you just take us through what is the outlook there in one of your largest clients over there, which is JLR. How is it doing? Would you say that it is probably close to its all-time highs as well, along with other clients. And medical devices also, we were expecting to take it to 20%. So are we are on [indiscernible]. These are my three questions.

Yes. So there are multiple questions there. So yes, we've had a full salary hike in this quarter, starting from July. So the salary hike went up the range of about INR 13 crores to INR 15 crores, right. So that's the part of salary budget, hike budget that incurred in the quarter. You talked about automotive business. Yes, automotive business has been subdued for many quarters and in the last quarter, and in this quarter we saw a decent growth. This quarter, definitely a double-digit growth. So a lot of good traction in the marketplace in both OEMs and Tier-1. Our JLR business definitely has also grown. So it is very satisfying. But again, we are nowhere close to the peak we were sometime in 2017, 2018 time frame. So we are much lower than peak. So there is a long way to go. And we strongly believe that as JLR pivots into some EV products, OEM manufacturers, there are a lot of opportunities that will open up for us and hopefully, in '24, we believe, we should be able to cross the peak that we achieved in 2017, 2018 time frame. The medical business continues to grow. And as you have seen from a year-on-year basis, we have grown significantly. And we continue to focus our investment and focus our sales efforts in that business. And we hopefully will grow that business quarter-on-quarter as we are in yet this business.

[indiscernible] the engineering budget for OEM, I don't feel will get impacted because of any temporary slowdown in their volumes. Does that [indiscernible] other engineering budgets or, let's say, outsourcing budgets typically for OEMs and other large operators, they have sort of recovery from that volume growth. And this trend has been sort of accentuated in recent times. Would that be a fair assumption?

Yes. I think, yes, the industry is struggling with the semiconductor shortage and so on, but that's more of a temporary this quarter, next quarter sort of a situation. But long-term outsourcing, long-term projects and so on, we don't see any effect of the temporary situation on any of that. And we are pretty confident that unless this continues for the next 6 to 8 quarters and the industry is in a great sort of difficulty, we don't see effect of this on our business.

The next question is from the line of Bharat Sheth from Quest Investment.

Raghavan and Nitin, congratulations on good set of numbers. I guess, I'm trying to get some sense from a medium-term perspective. See, if we really look at -- I mean, till Q3 of FY '21 and full FY '20, we hired almost say -- 7 quarters, 756 employees. Whereas in last 3 quarters, we have hired -- added almost 1,800, which is almost more than double. So how do we really see this medium term? And second thing on this attrition. So attrition, have we seen on medium and higher end or at lower end. So the net addition whatever we have done. So how do we see the overall employee cost versus sales?

Yes. If we look at the overall employee cost, I think we have been able to manage pretty well. If you look at it, [indiscernible] 25% of our revenue is employee cost. So we've been able to manage it pretty well. Yes, you're right, we have seen accelerated hiring in the last few quarters, and that will continue in the subsequent quarters also because our utilization has gone up significantly. In the earlier quarters, the growth claim -- I mean, we had resources and we were planning for it. But the rate at which we have been growing, we definitely need to add more resources both laterals as well as freshers. So whatever you've seen the last couple of quarters that we've been adding, I think this quarter, we've added over 1,200 engineers and last quarter also we added about 1,000 engineers to our graph. And we hope to continue this in the next 2 quarters as well. So what we are doing is we are planning for this growth that we're seeing right now, right? And for us, if you look at it, I would say there is huge demand in the marketplace. And that we're gearing ourselves, we're getting ready to meet the demand, and that is why you see this accelerated pace of hiring.

So in last year, despite, I mean, we grew 13%, but since the change in onshore/offshore mix, we grew more than 40% if we really like-to-like basis and even offshoring is increasing. So how do we see the margin trending from here onwards?

I think, you've indicated from a headcount perspective. We are at about 27.5% from a headcount perspective. I think that's a good sort of margin and it gives us cushion even if we need to go out and hire experienced people and so on. It gives us a good cushion to be able to manage it without really bringing down margins significantly. And the fact that we have been able to move more work offshore also gives us that cushion. So yes, we're sitting on a good cushion as far as margin perspective is concerned. So that gives us a good confidence that whatever investments are needed to grow business, we can confidently go ahead and do that without really affecting the margin -- overall performance for the year.

But this kind of growth, I mean, and with the addition of the employees that we have grown almost 40%. So this kind of growth do you think is sustainable for at least a few years, the kind of work in pipeline? And second thing is in our commentary, you are saying that we have won a very good business on the product and platform basis -- digital platform. So how we are seeing this platform action increasing?

Yes. So yes, we need to add our headcount just keeping in mind sort of the demand that we are seeing in the market, right? As far as the platform is concerned, yes, we've been building a number of platforms, including FalconEye, iCX Quotient, there are a number of things that we're building, especially in the Media & Communication vertical. And that has really helped us to win customers and operators that are otherwise difficult to really -- we need to bring something of value to them that they will engage with you. And so our strategy of building these platforms has been pretty useful and we have shown some good customer wins, including this quarter where we've really licensed our platform and built solutions around it to win the first communication in the customers we always know would be very difficult to engage. So we definitely would continue building this platform, building these increasing proxies and per se, the licensing revenue from those will not be very significant. But what really helps us is it helps us to get engaged and then build our services revenue around their platform. And it's also a very strong value proposition to differentiate us in some competition and also build an [indiscernible] with the customer, right? So there are many, many reasons why we would continue doing this [indiscernible].

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

Congratulations for continuing getting excellence in industry-leading EBITDA margins and high [indiscernible] quarterly profits and reaching all the [indiscernible]. Bharat has already asked about the [indiscernible] employees and the platform [indiscernible]. So I won't like to repeat that. If you can throw more light on our inorganic acquisition and further capital allocation towards the organic R&D and innovation-led investments or inorganic acquisitions, if you can throw some more light on that. And relating to that if you can provide us the data, whether our IPR-led revenues are now below 5% or more than 5%.

Yes. No, the IPR landscape is a little different. IPR is definitely below 5%, from a stand-alone basis, right? And as I said, what's really good for us is IPR-led revenue, the services around IPR, that is showing a good traction. And that is what we are depending on. From an inorganic strategy, I've always repeated that we're not shying away from an inorganic activity. And the situation is the same. We have nothing to report as of now. I think then that is something for investors, we will let you know.

Okay. And second question is regarding the introduction of new verticals in the education, training, and all that because in the [indiscernible], we had seen some [indiscernible] and all these things about the training and all these things. You can say that just like help there, and going forward we will be positioning new verticals or standalone verticals to give more focus [indiscernible] and all this?

Yes. We are continuing to invest in our EdTech business, but it is still a very, very small business, but there is a definite focus. Similarly, in the [indiscernible] of our manufacturing, we're continuing to invest. So these are two new areas that -- we're not calling it out as separate industry verticals and so on. But we continue to invest in that and we have early customers in both those cases. However, at an appropriate time, we will lay it out to the investors. So it is still at an incubation stage right now.

Okay. And just a small question regarding the hiring target for the next 2 quarters, if we will be touching the [indiscernible] employee 10,000 just like that.

Yes. So I guess we should be able to. Our hiring would be in the range of, again, similar, 1,200 to 1,500 a quarter for the next 2 quarters.

Okay. So by end of the year, there'll be around 10,000 net additions?

Yes, looking at the way we continue to hire, we are [indiscernible].

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

Yes. I just have a couple of questions. The first question, finally, on the client concentration described. So earlier top 5 clients used to contribute somewhere around 35% to 40%. So how that is changing? And the second question is primarily on the ER&D space. We've made announcements, the global OEM spend has increased. So what's the trend looking at? So what I see is, it's across all ER&D companies. So they show significant growth rates. Maybe as the [indiscernible] is growing higher, the [indiscernible] get a sense of what's driving this trend? Will this trend continue for 3, 5 years. And if, for any reason, the trend reverses, like how are we capped at for this since we are adding 1,500 employees in the quarter. So how is the project portfolio mix being balanced in terms of any macro impact?

Yes. So the top 5 customer concentration is almost 37%. And what we have been definitely looking at is to definitely mine the top 10 accounts as well as get beyond the top 10 customers and also aggressively grow the top 10 to 20 customer base also, right? So there is an active effort going to really look at the top 20 bucket and see how we can grow that customer base. Regarding the ER&D question, I mean, it's well known that there is going to be a boom in the ER&D. [indiscernible] all data and trends indicate the same. With the entire digital [indiscernible] in the ER&D space, including AI, Big Data, digital trends, this trend towards digital manufacturing. All of that would definitely mean a lot more growth for companies like us. We are seeing traction if you look at the industry segments that we are in. Automotive because of EV -- the entire car industry is going digital in a way, right?. That is a positive trend for us, and we continue to benefit from that trend. Of course, the Media & Communication with OTT, with digitization, with more digital labs, all of this coming in. So the opportunity in a way is pretty big. I will say the same for medical devices and healthcare space also. So all the 3 industry verticals that we are in are showing growth. And the investments that we are doing right now in headcount and so on is to really cater to this growth. I do not see a plunge in any of the industry segments in the next 2 to 3 years at least. So I think, if at all there is something happening, I'm sure we will be able to see it much before a lot of others, and we will take corrective actions and that's why we've also built an adjacency [indiscernible]. So I would say we're pretty much covered from an industry risk perspective. Unless something drastic happens in the world, I think next 2 to 3 years, we don't see suddenly our side or overall industry segment going down and decreasing employees.

Got it. And one last question I have is regarding the M&A pricing. So almost all the ER&D companies are also trading at historically high valuation [indiscernible], especially from a price to [indiscernible]. Are we facing any challenges in getting good acquisition targets, primarily from inorganic standpoint.

Yes. So we're looking to acquire any company which fits into bill, right? What we're looking at is and we're really focused on adjacencies that we are in, and we're trying to identify companies that can come at a reasonable margin, right. So yes, you rightly said, the market is pretty hot and companies are overvalued at this point in time. So unless something comes up that will meet the criteria, we'll not rush in and buy a company just for the sake of buying it.

[Operator Instructions] Next question is from the line of [ Amit Sawani ], an individual investor.

I just wanted to confirm that is JLR our largest client this quarter?

No. JLR is not the largest client for us this quarter.

Okay. And the other point is that, so you mentioned that the employees cost went up by INR 13 crores because of the increments, but the USA increase in the employees cost is INR 8 crores. And our number of employees has also gone up. So it was just not adding up.

No, there are a number of...

So I can come up with some clarification here. You've to remember that we did have a onetime bonus last quarter, right? So that came in last quarter, but does not have much of an effect in the quarter that just went by, and comparing Q1 versus Q2, Q2 really sees 2 big ticket items. One is salary hikes that were deployed with existing employees and on the additional subset of new employees.

The next question is from the line of Kshitij Saraf from Tusk Investments.

[indiscernible]. So Mr. Raghavan mentioned on the geography as well as the capabilities front, right. With the M&A, what are the adjacencies that Tata Elxsi is looking to get into. That's one question, and related to that is, given the market scenario at present, are there any plans to build certain of these capabilities in-house in the event that a good deal doesn't go through.

Thanks, Satish. This is Nitin here, and maybe I'll take that question. I think the natural path and the preferred growth graph for entering new areas, building capacity as well as capabilities is organic. So to that extent, we are very clear. Anything that can be done by us and can be done in a given time period with a reasonable chance of success and customer acquisition is preferred, right? And if you look at M&A, it is really -- when we do our NPV calculation, that the path of organic is not as efficient as M&A, right? And therefore, the value that you're acquiring at, the risks of integration, then balanced out against what it will take us to [indiscernible] is really what [indiscernible]. So to that extent, we are not waiting for M&A to deliver [indiscernible]. So I think, Manoj did refer to certain integrations of certain new practices, some new technology capabilities as well as some new verticals. All of these are being done organically. But what we're doing is examining inorganic options to accelerate the chart? And this is true for adjacencies. When we talk about adjacencies, I mean we have called out rail and [indiscernible], we've called out OTT and new media in the context of Media & Communications. We called out [indiscernible] and digital health. So all these are declared adjacencies. And these are some things that we're working already organically on. And we are building and accelerating our revenue there, right? So when M&A comes in, it's only to create a shorter path to scale, only if it makes sense for us.

The next question is from the line of [ Manish Malkani ], an individual investor.

There have always been rumors of Tata Elxsi merged with TCS. So every now and then this news keeps coming in. So what are the possibilities of that happening in the near future, if there is? And considering the -- for the investments, the prices right now are skyrocketing for the [indiscernible]. So any chances of a stock split or bonus in the near future?

Yes. [indiscernible] now and the, right. And this is not only now, right. So 25 years ago, when I joined the company, it started. So it still continues. [indiscernible] to say that it has been continuing, right. So yes, if it happens, it'll happen, but right now, I don't think there is any indication whatsoever on this platform. [indiscernible] Then it stops with, yes, I think, mostly these are decided in our Q4 [indiscernible] wait till then.

The next question is from the line of Hiren Ved from Alchemy Capital.

I have no questions actually. I just came on the call to congratulate the two of you on a very strong set of numbers and fantastic execution. Keep the good work going.

Thank you, Hiren.

Thank you.

The next question is from the line of [ Apurva Prasad ] from Enara Capital.

I had a question on the client bucket. So the sales like top [ 2 to 5 had ] a close to double-digit sequential decline -- So is that comparable to the previous quarter of the top 5 or is that changed? Because it looks like a double-digit Q-on-Q decline. So that is one question. The other is, if I can get the utilization number for the quarter. And finally, on the impact, is there going to be another onetime follow on impact in the third quarter?

Sure. So the top side, there is no change. We regret that in the -- what you say order of sequence, there is a change. But otherwise, it's not [indiscernible] same. There is no change, right. And again, that -- we've already called it out. It is a specific customer in our industrial design business that we are executing a large project, to design the project, which concluded and the follow-on project, which was supposed to happen immediately, got delayed. So that's the only reason. So we don't see any impact of it going forward also. Of course, we will this particular client investment continues. But the ramp-up will happen now over a few quarters to that extent, there will be some rate of growth there, but however, it will not impact our overall top 5 customers and so on. Utilization -- So that's the for [indiscernible] another question?

Yes, no, I think that is so just a note the approval, that excludes fresh campus hires. We include campus hires that above 25%. But when you consider only [indiscernible] about 80%.

Got it. And is there a follow-on impact of the [indiscernible] bonus that comes in Q3? Or is that all done in the first quarter?

So it's all done in this quarter, Q2, [indiscernible] all done.

No. So I mean the onetime which happened in the fourth quarter, has that also spill over to Q3? Or was that also part of the Q2?

It is also part [indiscernible].

That was primarily Q1 with a little bit spread to Q2 and that's end of that.

The next question is from the line of Dhruv Shah from Ambika Fincap.

Congratulations on a really good set of numbers. So I really want to know what's the outlook on our onsite and offshore mix because every quarter, you surprised us positively with the mix. But do you see it going above this or with work from home closely ending, we should go back to 65% to 70% range?

Yes. So we are at [ 75 25 ] right now, right? So on-site literally speaking [indiscernible] right, for the same hard work to put it in a double the revenue. If you got to imagine this growth, we are primarily pushing this growth through offshore revenues, and which means we will work doubly hard to get this revenue growth. So unlike other companies and so on, the growth comes from purely project led offshore engagement. And if you look at from a headcount perspective, so that's also another reason why we're aggressively adding headcount, right? Because we are growing offshore project execution and offshore revenue. Having said that, the Q3, some economies are slowly starting to open up. So we could see a little bit of onset opportunity anywhere between that. But I don't see too much of effect of that in Q3, but we will just closely watch people in the next Q1 to see how the situation changes, right. But at this point of time, I think we would be trending in [indiscernible] that's the [indiscernible] that we have.

[indiscernible]

I'm sorry to interrupt. We can't hear you that well.

I wanted to pick you at one point you made that Japan, Korea and China are coming back. So maybe 3, 4 years, what would be as a percentage of transportation these 3 countries put together?

3, 4 years down the line?

No. Before, like 3 to 4 years back, what would be the share of the transportation vertical?

I can take that. If we look in there, that's certainly about 20% or so. But the revenue is something but at that time, it was primarily Japan only, while China and Korea are just starting to build up their geographies, right? And over a period of time, we have tied with China and Korea, we had a lot more customer wins and addition of customers in these 2 regions. But on the other hand, Japan has always been muted for some years now.

The next question is from the line of Ravi Naredi from Naredi Investment.

Congratulations to Mr. Manoj Raghavan and all his team. When everyone is facing attrition, but you have done wonderful job sir, some investors had asked to split the share in one-off, please never do that for investor benefit because due to this so many investors in the company and whenever the market goes down, then the share prices are impacted for the [indiscernible] so our request is this, no bonus, no split, please.

The next question is from the line of [ Harish Surana from Neal ].

First of all, congratulations for good set of numbers. And my question is like basically only about some concerns, so are we seeing the structural shift in working like working for our employees working from home? Or are we planning to bring them on those on the, working from offices on a phase to phase manner, so this is my other question.

Yes. Right now, still maybe 6%, 7% of the employees work from office, that majority of our employees are on home. However, over the next period of next few months, we are gradually bringing back on the senior people, the leadership teams will go on, back to office and of course, certain customer engagement that is more efficient as they all work together because of lab facilities and so on. So some of those we will bring people back to office. But in general, from January onwards, we see a move towards this hybrid working culture environment for a few days in a week on rotation basis people will come to office and otherwise they will work from home. So I think going forward it's clearly a hybrid sort of an option, and we are exploring various ways of making this more effective very largely.

The next question is from the line of Tushar Bohra from MK Ventures.

And congratulations to the management kind of achieving those numbers. Apologies for the ones that [indiscernible]. So you had a few quarters back, you mentioned in one of the calls to a question of mine that you have stated intention of 10% quarter-on-quarter growth run rate, 10% revenue from IP and also looking at shifting more projects to a sort of long-term engagement, if I could just understand where we are in that journey today and just qualitatively, how things can shape up over the next few quarters.

Yes. So very clearly, on the long-term projects and investments, there is work in progress and the sort of growth that we are seeing over the last 8 quarters, it's a prime indication of the sort of client mining that is happening and a sort of long-term deals that we're winning, right? So all the policies [indiscernible] already changed from an incentive policy, sales force and et cetera, is really focused on rewarding long-term deals and so on. So I think, we are progressing pretty well from a long-term perspective. From an IT perspective, I think we are still below 5%. But what point [indiscernible] especially is that we're pretty [indiscernible] because what we see instead of a stand-alone IP and revenues and that alone because of add-on revenues that we get by licensing our IP and building the services around the IP that is what we are leveraging and that is what we are, is helping the company grow. So I would say that is okay. Also that question 10% quarter-on-quarter, I think, I will get it.

Sir, you had in one of the earlier calls, sort of hinted at the management's intention to see a double-digit quarter-on-quarter [ 24% ] growth run rate that will be stated intention, which we are sort of -- this quarter, we are there in [indiscernible] terms.

I'm not sure it's in terms of double-digit quarter-on-quarter growth. Yes, double-digit year-on-year is what I've talked about. I'm not sure whether I said anything on quarter-on-quarter.

Otherwise specifically mentioned quarter-on-quarter. No, I think the bigger point is that the kind of growth we are seeing right now is this something we think that can be sustained for a few quarters, you think that this is more strategic shift in terms of your own business trajectory?

I said, the growth rate is, if you look at each quarter performance, we do achieved, you see that we are around the [ 8% ] sort of [indiscernible] right? So we have been consistently growing up within, I would say, 6.5% to 8% over the last 8 quarters. Yes, one of the focus on quarter maybe we will add a little bit of it here and there. But by and large, perspective, we have grown in this range. So that's the sort of focus that we have as a management team and as a modernization. And we're putting in everything right internal investment, hiring focus on customers, bigger mining, top [indiscernible]. All of that focus has been to really put -- continue to grow at this rate, right? So that's what the intent to and that's the purpose. But we really don't know what the picture looks like and what challenges we face. But whatever come whatever else sure that we will be able to get over a [indiscernible] continue at that momentum.

Next question is from the line of Bharat Sheth from Quest Investments.

On the designing led growth, which we were harping a big of course, its initial state. So when do we really think that this designing business will give us sustainable growth every quarter-on-quarter or [indiscernible] relation with the client and reading the business on that, like what we are doing on the IP side.

Absolutely. So initial [indiscernible] typical end charge for us to be able to mine able to get into [ mind ] customers and also maintain our margins due to product design led innovations that we in, right? So if you got it compared to last year, the industrial design business is almost sort of at [ 70% 80% ] higher than the last year's run rate. That is going to give you a good indication of the sort of changes that we have made to enable this sort of a growth. Yes, design less gains and industrial design customers. Not always do we have multiyear deals and that is still a work in progress, I would say. But we have a great team, a great potential. It is just that we need to be a lot more consistent. And as we take another 3 to 4 quarters to get that. But I'm saying that even at this stage, I'm pretty happy in but we're in a good shape as compared to last year.

And this is really related more with the Media business or Healthcare?

It cuts across media, healthcare, automotive, industrial, manufacturing, education. It cuts across multiple industry verticals.

Okay. And second thing, since we are, we have done a lot of campus hired. So how much time really it makes or take us for to deploy the same people?

Recently, it takes about 9 months to 12 months, and then we could take them to a [indiscernible] training programs and to out. But this time, what we have done is, we have moved everything into online learning and so on. In fact, with many colleges, we also have tie-ups [indiscernible] join we really make them ready. So what -- right now, we are hoping to crunch the time line to between 3 to 6 months. But we really need to see how that works out.

And last question, I mean earlier in ERD business clients were insisting more of on-site, but since the COVID has provided us the opportunity and we have been able to prove successfully that offshore also can do, which can help, I mean, saving in the cost to the client also. So in -- even if things open up, and so how do we once look at, I mean, this onshore/offshore mix going on medium-term perspective?

If we opened up, I would say medium term, we should be anywhere between -- so [ 55% to 70% ] offshore and remaining on site. I doubt, if we will go back to our earlier 50% on-site, 50% off-site, right, those ratios -- we may not go back to those ratios.

And so typically, it will look a little lower, I mean initial quarter growth terms will be lower, correct?

Yes.

The next question is from the line of [indiscernible], an investor.

In our other calls, you mentioned that there is order book visibility for our kind of company for next 6 to 9 months. Now that you are talking that you are confident of growth for the next 2 to 3 years, so what has made you change your mind or what has changed in the industry that makes us confident for growth for the next 2 to 3 years? And the second question is how is the rail segment picking up within the transport vertical and what kind of opportunity do we see for that segment? And how much it can contribute to the transport segment maybe within the next 3 to 4 years?

Yes. So all of the visibility, as I said, it's pretty good and all about visibility is one thing that is overall growth in the industry, right? When I say growth in the industry, growth expectation, right? I'm not saying that next 2 to 3 years, 100% will grow. What we're talking about from an order book visibility is the 6 to 9 months, right? So that continues that visibility is there. But all indications, all whatever you read the trends that you've seen in the marketplace, whether it is on the EV side, whether it's on the OTT side, on the communication and healthcare side. All you talk about customers, you talk about the overall industry, the ER&D trend, whatever you really indicate that this cycle will continue for the next 2 to 3 years. And that is the confidence that I talked about. It's not that we have a order good coverage for the next 2 to 3 years. That's not true, okay? Rail segment, yes, rail segment continues to grow for us. We won some good deals given in this quarter. From a midterm to a 3 to 5-year perspective, I would say, we would expect rail and off-road like that segment contribute about 20% plus or [ 20% movement ].

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

My question is regarding the, taken from the last con call, our aspirational [ $1 billion ] revenue target, if you can enlighten us more about this? Is it the right time? Or it will take a little bit more time to articulate that $1 billion revenue by [ 2026 ].

No, we've never talked about anything on that Mr. Bothra. So we talked about having some internal goals and so on, but we have never talked about it to external investors, right? So we're not in a position to talk about something upon which we are not ready to talk about.

Okay. Now in the last con call, we had the discussion that we are in the process. Right now, we are in the process of.

No, what I told very clearly is there are internal goals and we're working on the internal goals but that is not the external goal.

Ladies and gentlemen, we take the last question from the line of Rohan Advant from Multi-Act.

Sir, my question is do the onshore offshore, it was 75, 25 now. Now in FY'23 or '24, we go back to [ 65, 35 ]. What does it mean for revenue growth and margin? [indiscernible] customers reduce volume because otherwise we have to pay a lot more or we have seen very high revenue growth at lower margin, but more actual profit. So if you just put some light on what happens when we move on the other direction [ 65 35 ]. What happens to the huge volume growth that we had in the last 18 months?

This is Nitin here. And maybe I'll take that I won't put it very simply, right? These are all scenarios. Now what is desirable was different from what scenarios may play out. I think what is desirable for us is very clear. We would like to demonstrate offshore delivery because that is where both scale and capability has [ clear place ]. So when you [indiscernible] one side, the capability of [indiscernible] whole company -- And how much of it unimproved -- [indiscernible] So we are very clear that from a strategic perspective, offshore is armor proposal on site. It's not purely for margin color. It is simply because the value delivery -- Now having said that, how does the market trend is slightly different because maybe certain customers who themselves have a slightly greater preference for a lot more on-site than and maybe which naturally demand a lot more on site. Similarly, if you look at the rest of world, especially Japan, Korea and so on, because of language barriers, that Is naturally and information for some on-site, especially multilingual on, right? We have to look at it as a combination of what dynamics come from kind of projects to execute reasons we are executing it and what is the desirable. We are very clear. we would like to promote and accelerate offshore value because we believe there's not only margin accretive but more importantly, strategically differentiates us from anybody else in the market because of that [indiscernible]. So I'll just take a point that 65, 35 is not a desirable and nor is it that we expect it to go all the way there in a hurry. We expect, it was very slowly and that is where a large part of our focus will be how do you make sure you can continue to deliver offshore.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

On behalf of Manoj and the management team at Tata Elxsi, I would like to thank all our investors for taking the time to harness today for the call. We had a good quarter. We hope to keep and we look forward to connecting with you again at the end of the quarter. Happy festive season to all of you.

Thank you. Bye-bye.

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