Onward Technologies Ltd. (NSE: ONWARDTEC) Q3 2025 Earnings Call dated Jan. 21, 2025
Corporate Participants:
Jigar Mehta — Managing Director
Analysts:
Asha Gupta — Vice President, Investor Relations Practice, Strategy and Transaction
Jyoti Singh — Analyst
Mihir Manora — Analyst
Shiv Dutta — Analyst
Varun Kulkarni — Analyst
Dhvani Shah — Analyst
Krish Kothari — Analyst
Vikas Mistry — Analyst
Sriram Rajan — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Onward Technologies Limited Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Ms. Asha Gupta from EY LLP Investor Relations. Thank you, and over to you, ma’am.
Asha Gupta — Vice President, Investor Relations Practice, Strategy and Transaction
Thank you, Sajal. Good afternoon to all of you. Welcome to Q3 FY ’25 earnings call of Onward Technologies Limited. The results and presentation have already been mailed to you and you can view them on our website, www.onwardgroup.com.
To take us through the results today and to answer your questions, we have with us Mr. Jigar Mehta, Managing Director of Onward Technologies Limited. He will start the call with a business update and financial performance for the quarter, which will be then followed by Q&A session. As usual, I would like to remind you that anything that is said on this call that reflects any outlook for the future, which can be construed as forward-looking statements must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties are included, but not limited to what we have mentioned in the prospectus filed with the SEBI and subsequent annual report that you can find in our website.
Having said that, I will now hand over the call to Mr. Jigar Mehta. Over to you, Jigar.
Jigar Mehta — Managing Director
Thank you, Asha. Good afternoon, and welcome everyone. Thank you for joining our Q3 FY ’25 earnings call. It’s a pleasure always to connect with all of you again every quarter. I hope you had a chance to review our results and presentation of Q3 post the — which we released few hours ago post the Board meeting this morning.
Let me begin by providing an overview of the performance of the last 90 days and highlighting the progress that we we have made. So Q3 despite being a weak quarter with a lot of holidays in India and North-America and Europe and of course, a big impact of furloughs. We — our top-line remained stable at INR123.4 crores, reflecting a growth of 8.2% year-on-year basis and our EBITDA was at 9.1% for the quarter. So we started — started the quarter and after my Q2 earnings call, we spoke about Q3 and we as an organization were expecting a bit higher-growth. We had very clear visibility until December 15th, most of our clients had very limited furlough plan, which was in-line with what we already had budgeted learning from the experience of the previous financial year or the previous December quarter. But this time, we saw the impact much higher and there were lot of last-minute changes at lot of our large clients and a lot of them actually shut-down for three to four weeks. So that did have a small impact on us. Otherwise, and our numbers could have been much higher in terms of both revenue and bottom-line.
For nine months, our revenue stood at INR364 crores, a growth of about 2.8% year-on-year basis and our EBITDA stood at 8.5% for the year. We continue to believe that we will meet our first guidance first time that we have given a guidance for the year of INR490 crores to INR510 crores for this financial year at 9% to 11% and we have good visibility going into Q4 and this continues to be again from our existing clients.
So, just to recap a bit about where Onward is today starting 2025 is we have 80-odd clients that we work with, which are all headquartered in North-America and Europe. We invoiced with them on three currencies or four currencies, one is dollar, second is pound in the GBP pound in UK, euros in Germany and across Europe and I&R in India. So even though the North American customer has a captive center in India, we would work with their captive center or their GCC in India and the invoicing would be INR, but it will still be US headquarter. So we continue to remain very, very focused on three verticals. Industrial equipment and heavy machinery is our largest and continues to grow for us and has good visibility and we continue to transition more-and-more towards the software side from mechanical, transportation and mobility where automotive is our main vertical again continues to grow for us and we are seeing a beautiful transition in 2024 where we had significant number of Tier-1 customers to large OEMs.
Today, majority of the large OEMs are — we are on the direct supplier illness and we are all working very hard to mine the clients, found the clients in North-America and Europe. And each of that, just to give a quick more perspective about what that means in 2025 is each clients have a dedicated account sales manager or ASM as we Call-IT, which will be locally based in US and Europe. So traditionally, about three years ago, we spoke about hiring a lot of people in US and Europe. There’s all the salespeople. We transfer a significant number of people to US and Europe who had gone to establish our offices, establish our presence, establish our credibility, showcase our delivery competencies to our customers and prospects back then. Now all of them are returning back to India, taking up various other roles and we are now hiring specialist account sales managers, which are seasoned, being there, done that for larger companies, larger 70 numbers in US and Europe. So again, very interesting phase for us as we enter this new thing, especially in the automotive vertical.
And third is our healthcare vertical, which we started last April. I think it’s making decent progress. I think we can do much more and we will continue to see very-high growth percentage there because it’s at a very low stage, a low number, but there is a lot of room in terms of to build because to build the entire digital capabilities that we are doing for customers in US in a short span of nine months, we have won some remarkable brands and as customers. Now it’s all about being relevant to them with building niche capabilities.
Now coming back to our numbers, our top-five clients and 10 clients continue to remain stable. They are growing and we hope to add lot more momentum with them in 2025. We have already signed client extensions with majority of them and we believe that there is lot more work which will come our way from these customers and we have — and we have building the capacity for them.
Our recruitment team, which was something that we were working on for last several years, is now becoming solid and more robust. We have 65 strong team. We used to have 100 back in the day when we were hiring a lot of different kinds of people all over the world. Now the model has changed. We have 65 specialist recruiters in our team as well staffing our various projects. So our dependency and external skills is limited. External search forms and recruitment houses that also helps us in optimized cost for us.
And in terms of infrastructure, very exciting things are happening. We upgraded a lot of our offices last year in 2024 in anticipation of what the big move for us in 2025 will be. So as we speak, we are in the final stages of signing a large office in Chennai which will be the largest design center of onward in India. And we hope to consolidate large number substantial portion of our delivery capabilities for industrial vertical and automotive vertical in Chennai starting Q3, Q4. So again looking forward to that. That gives us an opportunity to set up labs, centers of excellence, turn down facilities and a lot of other stuff that we can do for our customers. And what’s also very important here again from an investment perspective is this is not going to be additional cost, right? So the cost is already there. We have a lot of small, small, small, small centers all over the country, which we will consolidate into the Chennai facility. So that gives us the breadth and depth to showcase like a customer experience center and even for everybody on this call so you guys can actually see what we do for our customers. So again, looking forward to that.
Now in terms of outlook, as I said for Q4, we remain positive. We have a lot of hard work coming our way. Teams are excited to be back in office in 2025 and we’re definitely ready to make an impact. As mentioned in our previous calls, our strategy remains focused on disciplined execution for our existing customers. Leveraging our core strengths in mechanical engineering, in embedded electronics and building capabilities continuously on the software digital side. And we are pursuing strategic investments to unlock future opportunities.
Thank you again for all your support and trust in us. I will now hand over the call to the operator to start the Q&A session. Over to you.
Questions and Answers:
Operator
Thank you very much. Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Jyoti Singh from Arihant Capital Markets Limited. Please go ahead.
Jyoti Singh
Yeah, thank you for the opportunity. So my question is on the active client side we have seen decline. So if you can comment on that and what are expectation from Q4 as you have mentioned, we are seeing remain strong for Q4?
Jigar Mehta
Sure. So our clients are not declining. I mean it’s declining from a mathematical perspective. If you look at the ER and the industry and what our vision has been for the last three years and what if for the next three to five years is we continue to believe that we need 10 customers which can get to 10 million per year which can deliver $100 million or match 20 customers at $5 million revenue per year, right. So we are strategically continuously focusing on customers that can grow. So that’s where our strategy lies. So we want to spend all our energies towards the large customers who value us where we have the ability to deliver for them the most competitive, most cost efficient and of course very high quality deliverables. So that’s what we are doing.
So as I’ve said before, we would like to consolidate even further. I think 80 is a very, very large number for engineering company. It’s very different than it it services pure play or BPO where large number of customers Add more deal momentum. For us, being relevant to few customers is very important and then spreading out geographically with them globally is the right strategy is what I believe in. Our board believes so that’s what we are going for. And the visibility that we have shared is based on our customers feedback for Q4, the guidance that they’ve given us and the RFQs that are coming out and the RFQs are already out. So we remain hopeful in terms of that we can execute and deliver on what customers are expecting from us.
Jyoti Singh
Thank you so much, sir.
Operator
Thank you. Before we take the next question, a reminder to all the participants, you may press star and one to ask a question.
The next question is from the line of Mihir Manora from Carnel Asset Management [Phonetic]. Please go ahead.
Mihir Manora
Yeah.
Operator
Sorry to interrupt. Mr. Mihir. I would request you to please use your handset.
Mihir Manora
Is it audible?
Operator
Yes sir.
Mihir Manora
Yeah, sure, yeah. Thanks for giving the opportunity. You mentioned that from the 15th of December onwards there was, I mean this follow impact for you and that was higher than what it was previously estimated. So I mean if you can quantify as to, you know, if the formula would not have been there, what could have been revenue during the quarter on a broader basis and also if the furlough is there for three to four weeks and should we see furlough extending even in January for you know, half of January, how should we see the furlough impact for the balance part of the year?
Jigar Mehta
Sure. So the actual number, I mean it’s hard to quantify the furlough impact but if you look at from a pure rupee perspective, the number is I think approximately three, three and a half crores. Right. That we did not see it coming. This is over and above what we had budgeted apple to apple from the same time last year. So we did lose 3 crore which went away straight to the top line and the bottom line. But at the same time we won a lot of other things as well. Right. Last minute where customers had a lot of peaks or loads and our teams could ramp up towards that. So that’s the impact.
Did it extend to January? Yes, it did, I think till about Jan 5th or 6th, whichever. The last Friday of the first week was.
Mihir Manora
Sure. So it’s not an extended kind of a thing for January, right. It’s only for the first week?
Jigar Mehta
No, just the first week and I think that’s across the industry for what I understand.
Mihir Manora
Understood. Sure. Second thing was on the healthcare side, I mean, you know, healthcare is going to be a focus. Last time when the interaction was there. Now, this quarter, healthcare has come down for us and given the now new administration which is there in us. So how should we see your healthcare strategy from here on on the overall business side?
Jigar Mehta
Healthcare is a very exciting space for us. It’s a very new space. You know, we’ve been in the old school manufacturing belt for the last so many years, since 2016, since I’ve taken over. Healthcare is very exciting in terms of what we are doing because we are not starting from the manufacturing side, we’re starting from the digital side and the AI side. So, our teams are working hard. You know, we built a good team. I’ve shared before. My cousin Pratish is leading this. He’s based out of Chicago. And I think it’s only going to grain from strength to strength, right.
We’re only very, very — what we are clear with here is few things right, fundamentals. One is we’re only going to work with the top customers, the biggest brands in the world. And as a sales organization, historically and as a culture, we have been successful in getting some of the biggest customers in healthcare in a very short span of time. So we enter the clients, we are only on the digital side.
We want to go towards electronics and embedded hardware engineering, software engineering, mechanical. So it will keep gaining momentum. What’s important is we want to grow, I mean quarterly is very wrong for me. It’s too small to understand. I mean to catch, to do the math, quarterly, but on an annual basis I think it keep growing exponentially much faster than the other verticals and we see clear visibility for that as we speak.
Mihir Manora
Okay, sure. Does the change in administration change the funding and consequently would it impact the sector per se?
Jigar Mehta
Sorry, I didn’t get the last thought.
Mihir Manora
I mean does the change in administration now, I mean Trump is there as the president in US. So does the change in administration impact the funding of the sector? And so consequently would it, would there be an impact for us on this vertical?
Jigar Mehta
Again, it’s only been 12 hours or less than 24 hours. I don’t really know much. But what I can gather from our experience and what our customers have told us, I think it’s only going to be positive for us in India overall.
Mihir Manora
Okay, sure, sure. Understood. Correct. One more thing was just on the, I mean, you know, revenue and revenue growth side, I remember last quarter you had called out that you would expect growth on the revenue side, you know, not of 120 crores this quarter also. I mean if we adjust the further then yes, there is a growth. Should we see this kind of growth rate continuing for the, you know, next four or five quarters basis, the visibility or basis the interactions that you are having with your customers, is there a fair and a reasonable expectation on that side?
Jigar Mehta
Absolutely. I’ve hired 2,500 people on my payroll to do that. So it’s just not me. I have 2,500 employees working very hard globally to deliver growth and to remain relevant in our business and our industry. We have to deliver because customers don’t want a lifestyle partner who just stays and does whatever they were doing 10 years ago. So every quarter they want to see us add value, do more things, build more capabilities, more competencies. So that’s part of job. And please keep in mind I have 2500 plus employees doing that every day.
Mihir Manora
Absolutely. Complete respects and regard to that, the question is more with reference to the dealings which is there in the books and the interaction that you will be having for ramping up of those deals. So keeping that in mind, do you see this growth continuing?
Jigar Mehta
I think so. We see good visibility as we speak. I’m currently in Paris meeting customers and everything looks positive from that perspective. There is a slowdown, there are some challenges but for a company of our size the visibility continues to remain very strong.
Mihir Manora
Sure, sure. And just last question was there on the ESOP side, I mean this proxy advisory firm, you know there is a press release that you have given clarification is you can, you know, provide some details on clarity over here as to what is the size of the pool and when will that west and you know, what are the preconditions to waste that and who all are the wall are the beneficiaries of the tool. That will be really helpful.
Jigar Mehta
I don’t have all the specifics. I can give you a quick run, quick background about the new ESOP scheme. So the new ESOP scheme is based on the market price which is completely. So it’s not — first of all the new ESOPs team which is out there is based on the market test. It’s a discount based on that. And that was actually based on the advice and feedback given to us by all our investors in the past and of course guided by the board.
Number two, it has not been allotted to anybody so far, not even one employee. It is just a scheme to replace some of our old schemes when we were allotting shares, allotting ESOPs to employees at 10 rupees per share or 20 rupees per share irrespective of the market price. Now it is a discount in the market price right so huge change in terms of for upgrading the current policies where we are.
And third in terms of the proxy advisory firms they wanted to add the terminology performance based, and absolutely, the whole company is based on performance and merit only. Nobody is giving ESOPs. We pay very well and we are very proud that we are a well paying company. Our attrition companies to go down every day. So it’s more about performance only and they wanted that in return and we have given that.
Mihir Manora
Understood. Sure. And just lastly, I mean how many employees are completely covered in this new scheme?
Jigar Mehta
As of today, zero. For all 2,500 employees are eligible for it based on performance.
Mihir Manora
Okay. Okay. So it will be individual performance.
Jigar Mehta
We have three performance units as an organization. We have company performance where Maybe the top 40 to 50 people are measured on. Then we have a respective regional business unit performance which is a much larger pool, maybe about 30 or 40% of our workforce. And then there are individual contributors. So everybody is eligible.
In the past we have our security guards to our admin people to HR to recruiters, besides of course the delivery and sales people getting ESOPs. So and that’s how we have built a beautiful company. That’s how we are very proud of.
Mihir Manora
Understood. That’s it for my side. Thank you very much.
Operator
Thank you. Ladies and gentlemen, you may press Star and one to ask a question.
The next question is from the line of Shiv Dutta [Phonetic] from Thermopads Private Limited. Please go ahead.
Shiv Dutta
Hi. So my first question is about the revenue guidance you have given for FY26 of around 600 crore. So are we going to achieve that? And regarding the EBITDA margin, so from next quarter onwards can we see double digit EBITDA margin? Hello?
Jigar Mehta
Yes. So on the first question we are given a guidance for next year and that guidance continues to remain strong and we are very positive towards that. And the guidance again is based on our existing customers and the visibility they have shared with us last quarter.
And in terms of Q4, absolutely. As I said in my opening remarks, we are working very hard to deliver the projections that we have shared in the last earnings call which is revenue of 490 and 510 crores and 9 to 11% EBITDA, absolutely.
Shiv Dutta
And sir, Digital was the fastest growing segment for us but from last few quarters it dropped significantly to around 20% and now we are seeing improvement in that. So can we see that it’s again contributing to around 40% of the total revenue?
Jigar Mehta
Absolutely. I think very soon what’s going to happen is I think we are waiting for one or two more quarters. And overall we will start breaking up the company a bit differently into from software. Instead of giving three categories of digital, embedded and mechanical, we will give only two categories which is software and mechanical or old school manufacturing engineering which is not using the cloud or any of AI tools in line with how the industry is sharing numbers.
So software continues to be where the biggest demand is and we’re continuously building capabilities bench towards that.
Shiv Dutta
So, Digital is our high margin business, right?
Jigar Mehta
It used to be. That’s what I clarified before as well. If you remember last year or two years back, digital used to be the highest high margin business for everybody in the industry. Today when you work with the biggest companies in the world, the margin profile continues to remain the same, where the high margin is is in terms of niche skills versus generic skills. So if you’re building something for the future, that’s where the high margins are.
Shiv Dutta
Okay. And sir, can I know the current order book structure like ratio ratio of repeat revenue versus project based business. So you earlier said that project based business will be higher. Can I get a kind of idea about the ratio?
Jigar Mehta
I don’t have the exact details. I think you’re leading to TCV or ACV. I think IR managers Ernst and Young can share that with you. If you could email them your questions, I’m sure they can answer all the specific details, the pickups.
Shiv Dutta
Okay. Thank you sir. Thank you so much.
Jigar Mehta
Thank you.
Operator
Thank you. A reminder to all the participants, you may press star and one to ask a question.
The next question is from the line of Varun Kulkarni from InCred AMC. Please go ahead.
Varun Kulkarni
Good afternoon, sir. Thank you for the opportunity. I have three questions. The first one being, I think you’ve already answered that. But I would like some reassurance on that front. So if I were to look at the average of the the 3/4 the EBITDA margin standard around 8.4%. So for that I’m assuming you’d have to, you know, deliver a EBITDA margin of say 11 to 12%. A, how confident are we on that?
B, my second question would be you mentioned that your strategy is to have 10 clients and who would each contribute $10 million — $100 million, right. So is there no concentration risk in terms of that? Because wouldn’t it be better to have a diversified clientele?
And C, I remember, you know, attending one of your calls in which you had said that you would want to increase your revenue by geography in the US region. So historically speaking that number seems to be dipping like we are at 36. Sorry. Yeah, we are at 37% if I’m not wrong this year. And the India, the India region continues to grow. So what are your thoughts on that?
Jigar Mehta
Yeah, thanks for the questions. So I’ll go point by point. So on the first question, your maps, I guess that’s the right maths. And we feel optimistic and we are working very hard to deliver those numbers. So far the visibility looks good for Q4 especially. There’s no furloughs and very limited number of holidays and there are 62 working days. So that adds value, that adds the necessary depth in terms of delivering those numbers.
On the second question, in terms of concentration. So when I say 10 customers doesn’t mean onwards only have 10 customers. What we are simply saying is, let’s say if you have 80 customers, you cannot win all 80 battles. We are now competing against six or seven of the largest engineering companies in the world. The beautiful part for us and everybody else in the industry is industry is growing. I know there are some reports out there that industry is de growing. I don’t think that’s a fact. Industry is only growing and the India advantage is going to be even bigger and larger in the next three to five years. So I continue to remain very optimistic towards that and directly being a sales guy on the road, so that’s what I see every day. So what we are seeing is 10 customers out of 80. If we win those, that’s where the real engine is. And what I do every day is I want to make sure my best people, my top performing people, are focusing on the top 10 customers.
Varun Kulkarni
Sure.
Jigar Mehta
Right. So you put your, you know, putting all your eggs in one basket, but that’s what you’re doing.
And the third point, I clarified in my opening remarks, so all our customers are US and Europe. So what’s happening is a significant portion of our customers in US are opening GCCs in India. Already have or already has large GCCs in India.
Varun Kulkarni
Right.
Jigar Mehta
So that’s why I clarified. So when you are seeing revenue as we report our IR deck, US in — sorry dollar revenue comes in the US bucket. But there could be US customers in India which is a GCC which is in the INR bucket.
Varun Kulkarni
Understood. Okay, thank you for the time.
Jigar Mehta
I just want to make sure I clarify that.
Varun Kulkarni
Sure.
Jigar Mehta
And we are happy with all of them because now the numbers are not changing. Earlier the number, it was a challenge. Companies didn’t want to work with GCCs. We love working with GCCs and I think it’s a very fair play in terms of what they have, especially over the last 12 months.
Varun Kulkarni
Understood. Thank you. Yeah, that’s it from my side.
Operator
Thank you.
Jigar Mehta
Thank you.
Operator
The next question is from the line of Dhvani Shah from TCG AMC. Please go ahead.
Dhvani Shah
Thank you for this opportunity. Just sorry, this is my first time attending this call. So in case the questions are not out of the mark. But one thing I want to understand that the range that you’ve given in terms of your guidance implies that the Q4 could be 2% to 18%. I just want to understand the puts and takes. I understand the optimism built in with your conversations with the client. But maybe you could specify in terms of the verticals or what do you think will lead the growth?
Jigar Mehta
Sure. Just reinforcing again, our confidence is we are a delivery focused organization now, right. Our visibility is not based on new clients and new wins and new dealings. Our visibility is based on the pipeline our existing clients have shared with us, right. So even today we have a significant portion of people who have been trained in 2024, maybe in Q1 or Q2 and Q3 and now ready to get onto projects. So we have a significant portion of those people already in house.
Number two, we have a very strong talent acquisition team that we’re constantly hiring in the market. So we are doing that part. Number three, every year in Q3, Q4, end of the year, there’s the bottom 5% performers impact that comes through as well, right. So we hire a significant portion of people in Q1 to deliver, to accelerate the year. Some perform, some are not that lucky. We remove the bottom 5%. So that adds to the cost, adds to the margin as well. A lot of balancing stuff that happens in Q4 for us, right. And we are hoping, I think this time my HR organization has done a fabulous job to do it structuredly from July timeline, proper performance reviews, trainings, career paths. And I think that gives us a much better visibility. But fundamentally net net is the three verticals. It’s the existing clients. A significant, significant portion of our 80 clients, not all of them are looking at ramping up in Q4. And I think we are at the right place. We have to just execute.
Dhvani Shah
Understood. And just one more question. The entire industry has been mentioning about the slowdown in the auto industry. I understand your size is on like size is on your side in terms of smaller companies. But can you let me know if there are any kind of brand conversations that could hinder your Q4 and maybe that’s why there is the lower band which implies a 2% growth?
Jigar Mehta
Sure. So I think your first point is very valid. I think a few or three of the largest automotive engineering companies, their scale is much bigger. So we are talking very different stuff. And maybe they might have projects which are winding down, but new projects will start. As I said, the industry is only growing from an India perspective.
On the second question, so I am currently in Europe. As I was saying earlier, I met a customer yesterday. We have multiple meetings in the next few days. Again, the visibility continues to be very strong. All the customers have huge cost pressures. Majority of the automotive OEMs have anywhere from to 300 suppliers, onward not being one of them. And they are engaging with us because they genuinely believe that we can deliver. And the references other clients are giving them is really adding a lot of depth towards our meetings, right. So our meetings, which traditionally should be sales meetings, today are very focused on RFQs. Today are very focused on value. And I think that’s where the confidence comes in for me and my team. So there’s going to be vendor consolidation in automotive industry. There’s going to be huge pressures. There’s going to be a lot of factories shut down across US and Europe and majority of that work delivery wise has to be in India.
Like I was alarmed to learn and I was so happy to see that companies in Europe now are working, have asked their engineers to work 8am to 8pm Maybe unheard of one year ago today people are working and I’m seeing offices with high energy, high motivation and so much positive energy that things are changing around us and that gives Onward a great visibility as well.
Dhvani Shah
Understood. Thank you so much for the opportunity.
Operator
Thank you. The next question is from the line of Krish Kothari from Shinobi Capital. Please go ahead.
Krish Kothari
Hi. I actually have a question that’s sort of an extension to the previous one in specific to the auto sector. If there is some sort of downturn, you know that’s going on right now, how do you in your conversations with clients, how do you maneuver your positioning of Onward to showcase how valuable you are to them at such a time?
Jigar Mehta
So fundamentally there’s two points, right? One is when you’re saying there’s a slowdown in automotive, it’s not applicable to all the companies. If you look at the automotive industry, even Today, there’s a 50% slowdown for companies which are in the EV space and there’s a 50% slowdown in companies that are going through strikes or leadership changes. But I mean there is a lot of work that happens, right? So one of the, like most of the companies that you meet, OEMs out there have average of 10,000 engineers to 25,000 engineers. That’s a broad figure, right? I think you better seen all the reports on that part.
Traditional automotive OEM will have that many engineers out of that 70% they do in house and 30% is what they outsource onward creating the 30% outsourcing space, which is worth hundreds of millions of dollars, if not billions. So what we are talking about is very small. So There’s a slowdown. 10,000 engineers becomes 9,500. I hope I’m giving you statistics.
Krish Kothari
Right, right.
Jigar Mehta
10,000 doesn’t become 5,000. The work continues. It is just that they are working on the new hybrid models and new EV models or new versions or upgrade slows down. Onward Technologies, regardless is not playing in that space. Today. We are not competing for those large multimillion dollar or hundreds of millions of dollars of transformation projects. We’re still working on small, small, small, small projects. But for us, we don’t get affected by that big slowdown that everybody talks about.
Where Onward gets, my team gets affected, where we get affected every day, every quarter is when we were working with the, or paying our dues with the tier 3s, tier 2s, tier 1s, that those are cyclical and we’re out of majority of those kind of projects and contracts. So our impact is much less today than it is a was a year ago.
Krish Kothari
Okay, got it. No, I got it. I got the point you’re making. My other question was actually from a three to five year perspective. I’m trying to gauge the scope of operating leverage within the business. And I’m trying to understand that the incremental, say if you go from 500 to 800 cross top line, is that possible with very marginal increases in headcount. Just put more bluntly, do you think your revenue per employee will increase significantly over the next three to five years?
Jigar Mehta
That’s what we are working towards, right? That’s what we clarified before as well when I spoke about the whole U.S. strategy or approach. Traditionally about 90, 95% of the market for us is us, whether we invoicing dollar euro pound or up for the matter. But U.S. based companies who have a very mature outsourcing model, Europe is picking up in a big way and a lot of the other engineering service providers are doing a fabulous job there. We are not that heavily invested in Europe, but we continue to make inroads and we are doing a decent job.
Our teams are growing, our business is growing every year. So for us, I Think you will see us being around this headcount, 2,500 or 2,000 or 3,000 people range and we going more and more deeper and moving up the value chain with our customers. It’s not about adding 2,500 more people to get to double up the revenue.
Krish Kothari
Okay, understood. All right. Thanks, Jigar. Thank you.
Jigar Mehta
So, revenue per person, gross margin per person, everything will increase. I said the same thing three years ago when we were 2,500 people. I think half the revenue we had the same headcount and double the revenue now. So I think you will see that continuously as far as we keep investing in training and upskilling our engineers.
Operator
Thank you. The next question is from the line of Vikas Mistry from Moonshot Ventures [Phonetic]. Please go ahead.
Vikas Mistry
Hi, Jigar, how are you? Jigar, in last conference call from last two years our strategy has been to build the US and now from your opinion it seems like that you’re comfortable with GCC. Is there a dichotomy in the strategy that where we are targeting customers from us now they are asking us to just stay in GCC in India and the bill rates will be much lower than US?
Jigar Mehta
So, there are two points. One is, you know these are two types of GCC models. One was a GCC model when we are working with again the tier one, tier two suppliers. That was a very different model because it was a very transactional model. When I say transactional is you’re working, doing a great job, 11 months in the year and 11th month they will send back 50% of the staff to your office. That was a very different model, very cost based model. And that’s where we never enjoyed working with GCCs. And I think most companies didn’t enjoy working with GCCs. I’m talking about the larger, let’s say the top six, seven engineering companies.
Today, if you see it’s a very mature GCC model, right. It’s not like a grocery store, you come and go. It’s actually a very, you’re an extension of the client R&D department. There’s a lot of respect, there’s a lot of training and the GCC is also very clear. It’s a highly indicated model and we highly enjoy working with them. We are learning a lot. They are spending a substantial amount of time and money on training our engineers or the whole industry as a whole in India. And I think it’s a win win situation. So the GCC attrition rate which used to be about 30, 40, 50% just few years ago, I think is down the single lower digits for everybody now. Right. So that’s the first part.
The second part on the US side, US continues to be our focus. That’s where our investment go and we will continue to invest big in US every year. So substantial portion of our budgets goes to us and we are making progress. It’s not the speed I would like. Obviously we are going at low single digits this year. There’s nothing really to be, you know, to be Tom Tom about. But we want to grow in US and we do believe onwards future and growth continues to be if we are successful in U.S.
Vikas Mistry
Okay. Jigar, extensive that question is that what is the builder differential if similar client tends to give business in US and similar kind tends to give business as a part of GCC?
Jigar Mehta
I don’t know if I can share that those kind of numbers in this forum.
Vikas Mistry
Okay, okay, okay.
Jigar Mehta
You can reach out to E&Y and maybe they can share what all the public information out there.
Vikas Mistry
Sure. Okay. My final question is that you said that we are in competition with all 4, 5, 6 companies. What gives you comfort that you will be moving at the value chain? What capabilities you have developed in maybe last one year that gives you more comfort that you will win over more customers and try to give more value addition as compared to all other companies though your wallet share is lesser. But capabilities are much more necessary. So, my question pertains to the capability point of view.
Jigar Mehta
Sure. So what I clarified was the industry is growing so we are not competing with the larger players. It’s not possible to compete when they have that level of delivery depth or huge investment in labs and centers of excellence. What we have done is we are now in this working with the same customers where the large er IND service companies are playing. Right. Or where they have been dominant for the last 20 years, 10, 20 years.
We are the new company out there. So for us it’s just a privilege to be there. The beautiful part I’ve always shared before, we are an industry which is growing. The Indian outsourcing industry is growing. We don’t see a slowdown there. And customers have never asked us to compete with other Indian companies. As I said, I’m in Europe right now. They’re asking us to compete local European companies which are 5x or 7x more expensive. And that’s where we want to play. That’s where we are building capabilities.
So for example, if a customer gives us an option, okay, there’s another Indian company in South India doing this. Can you make it cheaper? We usually walk away from the deal. I’ve Always said that but if they say this is what a French company is doing or the German company is doing or American company is doing, can you build capabilities for us there? And we see a huge visibility where we can ramp up 100, 200, 300 engineers that’s where we onward will invest.
Vikas Mistry
No, that’s understandable, but intent of the question was not that you’re competing with the Indian counterparts. We already know that Indian Air and the industry and this industry continues to grow market share from other competition. The question point is that what capability you have, let’s take SDV in SDV what capability you have that will give you further market share to be gain out and what let’s assume in healthcare what capability you have built it out which you find that that will be much much better from your perspective.
Jigar Mehta
So, I highly recommend you know Bharati plan a visit to one of our facilities in Pune, Chennai, Bangalore that will give you. This is again a wrong forum for me to share information because obviously customer. All our projects are based on customers and we sign very strict agreements with them, but very happy to showcase all the delivery capabilities that we have built for our customers. ODCs that we have built for our customers. A new office in Chennai will be launched which will house more than thousand engineers that will show you the kind of depth and breadth of capabilities that we have built. E&Y can again organize that. We have a lot of people visiting all the time.
Operator
Thank you. The next question is from the line of Sriram Rajan, who is an individual investor. Please go ahead.
Sriram Rajan
Yeah. Thank you. Hi, Jigar. Thanks for these wonderful updates. I think I just picked from the last question that the previous gentleman was asking. Just keep the capabilities aside. But in terms of skills, are there some niche skills that we are building capabilities proactively on?
Jigar Mehta
Sriram, no. Hi. We are not building anything new which our customers are not asking us. We have not got to the stage today. We need to get to 15, 18% EBITDA margins to invest 3 to 4% back in very futuristic skills. Today we are in a very focused execution mode that I shared a year ago and I think for the next one to three years we will be in execution mode just to sort of get the company back on double digit growth and double digit EBITDA. That’s the first vision.
So we have actually proactively cut down drastically compared to 3 years ago post the pandemic where we invested in building a lot of new skills on venture particularly.
Sriram Rajan
Understood. I think that’s a wise thing to do. In terms of I think somebody else asked this question that the guidance for FY26 remains at 600 crores based on what you see today. And the EBITDA that you said in the previous quarter was in the previous conference call of last quarter was that it would be better than the closing EBITDA for FY23. And does that still hold good, is for us to bake in the forecasts?
Jigar Mehta
Yes, absolutely. That’s what we are working towards. And as I said, I only shared some of the points as well. Another big point also which I just my team just pointed out was a substantial part of our investment in automation also has been completed. You know we had built, we took a lot of our internal systems that were outsourced with other very high end expensive things which were not catered to the R&D industry. We have built our own OTL apps that all integration is going on beautifully and that cost also comes down drastically I think from March itself.
So, yes, I think double digit is what we should be playing at where Onward should be at. And I think sky is the limit as far as we can get our execution capabilities right.
Sriram Rajan
Superb. Just the last question, Jigar. I think maybe somebody asked this question, but I just thought I’d specifically ask it. Given the fact that this and I had a chat with the E&Y team maybe 3, 4/4 ago on this topic. But I think I’m facing the impact in the market today, the impact of automatic code getting generated through generative AI. So, we also built some utilities for that. So, we’re able to see knockout 20% of the actual engineers who do the coding. So, when you look at the digital side of the business, if there’s a modernization project, upgrading from a particular version of Java to the next version which has taken us modernization actually robot is able to do it and just need somebody to make sure it’s all okay at the end. Just the final pieces. Is that coming and impacting us? Do you see that in some way impacting Onward?
Jigar Mehta
Not so far, Sriram. We haven’t seen that. But is Onward engineers working on stuff like that for various projects? Probably at customer sites, not in our offices. In our premises, customers more and more asking us not to use any kind of AI in three in the meetings that I’m having in Europe right now.
Sriram Rajan
Okay.
Jigar Mehta
Right. For the enterprise level, we are not seeing that. They’re seeing it on the IT side of the CIO organization, not in the engineering research and develop an organization yet. But I’m sure it has to come right. The benefits are so many. I Think one moment, one company starts, everybody else will follow the track.
Sriram Rajan
That’s it from me, Jigar. Wishing you the very best. Thank you.
Operator
Thank you.
Jigar Mehta
Thank you.
Operator
Before we take the next question, a reminder to all the participants. You may press star and one to ask a question. The next follow up question is from the line of Dhvani Shah from TCG AMC. Please go ahead.
Dhvani Shah
Thank you for the opportunity again. Just one clarification is that you have a portion of your revenues which are legacy revenue. Could you just let us know what’s the percentage of that legacy resume?
Jigar Mehta
It’s zero.
Dhvani Shah
Okay. Now in your digital and ER IND segment.
Jigar Mehta
Sorry, not very clear. If you could just speak a bit louder.
Dhvani Shah
Sure. Thank you. Thank you. That’s about it. So, 0% is legacy revenue, right?
Jigar Mehta
Yes, zero.
Dhvani Shah
Thank you.
Operator
Thank you. Ladies and gentlemen, as there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.
Jigar Mehta
Thank you. Thank you everybody for joining us today. Just to summarize, we are coming off two years of single digit revenue growth. We have a lot of work to do as an organization and we are doing that. We have a beautiful team working very hard and we’re constantly making the right steps or corrective steps to make sure that we build a high performing organization.
And we are privileged to work with some of the best customers and companies in the world in the three verticals that we are focused on. And as I said, sky is the limit in terms of what we can do with them. And a lot of work is going on in the background and we remain committed in terms of building a great organization. Thank you again and have a great evening.
Operator
Thank you. On behalf of Onward Technologies Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.