Tata Elxsi Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Tata Elxsi Ltd (TATAELXSI) Q1 FY23 Earnings Concall

Management Update:

• TATAELXSI said net headcount addition during the quarter was 771, which is more than double the net addition of 4Q22. Attrition rate dipped marginally to 19% in 1Q23 as compared to 4Q22.

Q&A Highlights:

• Bhavik Mehta from JP Morgan asked about the company’s client’s R&D budgets for FY23. Manoj Raghavan MD clarified that the company has not heard any intent from clients to reduce budgets. Also the deal pipeline and order book has improved QonQ.

• Bhavik Mehta from JP Morgan also asked about the supply situation, given that attrition still remains at elevated levels and if there is any plan to do another wage hike in FY23. Manoj Raghavan MD replied that it will take wage hike as it comes. A substantial wage hike was done in Jan. and Apr. Attrition is still high but it’s coming down. TATAELXSI will relook at the situation a couple of quarter from now and take a call on wage hike.

• Vimal Gohil from Union Mutual Fund enquired about the hiring target for FY23 and fresher intake in FY23. Manoj Raghavan MD replied that in FY23, the company is looking at hiring about 3,000-3,500 fresh intake. And laterals will be as per business needs and could add about 1,000-1,500 of laterals.

• Vimal Gohil from Union Mutual Fund asked about the outlook on the communications vertical. Manoj Raghavan MD answered that the media and comm vertical over the last 6 quarters have shown consistent growth rate. TATAELXSI continue to remain bullish on the growth prospects.

• Bharat Sheth of Quest Investment enquired about India business that’s grown substantially. Manoj Raghavan MD said India business is a combination of factors. The SI business growth has contributed to India business. And the captive [M&C] customer business has also been growing well.

• Arun Maruti asked the reason behind other expenses remaining same as 4Q22 despite revenue growth. Gaurav Bajaj CFO said that other expenses are not directly proportionate to the revenue scale. Those are some of the other discretionary expenses that TATAELXSI has at the company level.

• Apurva Prasad from HDFC Securities asked about margins and if it’s sustainable in the near term. Gaurav Bajaj CFO said in the short term the company continues to believe and being confident with the tight execution and disciplined focus objectives.

• Rohit Ingle from First Global Securities asked about the reason of highest EBITDA margin reported. Gaurav Bajaj CFO clarified that it’s due to optimized G&A with the economics of scale and the top line growth and other operating levers along with some of the rate hikes.