Tata Elxsi Ltd (NSE: TATAELXSI) Q4 2025 Earnings Call dated Apr. 17, 2025
Corporate Participants:
Manoj Raghavan — Chief Executive Officer & Managing Director
Gaurav Bajaj — Chief Financial Officer
Nitin Pai — Chief Marketing Officer and Chief Strategy Officer
Analysts:
Shashank Ganesh — Analyst
Sulabh Govila — Analyst
Manik Taneja — Analyst
Ashwini Singh — Analyst
Hasmukh Vishariya — Analyst
Nitin Shakdher — Analyst
Amit Chandra — Analyst
Debashish Mazumdar — Analyst
Mayur Matani — Analyst
Apurva Prasad — Analyst
Chirag Jain — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Tata Limited Q4 FY ’25 Earnings Conference Call . As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Sushan Ganesh from EY. Thank you, and over to you, Mr Ganesh.
Shashank Ganesh — Analyst
Thank you very much. Good evening to all the participants on the call. Good morning if you’re joining us on the Western site. 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. Therefore, it must be viewed in conjunction with the business risks that could cause the result, performance or achievements that differ significantly from what is expressed or implied by such statements.
To take you through the results and-answer your questions today, we have a the senior management of Tata LXC, represented by Mr, Managing Director and CEO; Mr Nitin, Chief Marketing and Chief Strategy Officer; Mr Gaurav Bujad, Chief Financial Officer; and Ms Shiram, Company Secretary. He will start the call with a brief overview of the past quarter by Mr followed by a Q&A session. We would appreciate your cooperation in restricting yourself to two questions to allow participants an opportunity to interact. If you have any further questions, you may join the queue and we’ll be happy to take them forward.
With that, I would like to hand over the call to Mr Manoj. Over to you, Manoj.
Manoj Raghavan — Chief Executive Officer & Managing Director
Thank you, Shashank. Good evening and good morning to everybody who is joining us on this earnings call today. For the 4th-quarter of FY ’25, we reported an operating revenue of INR908.3 crores and a PBT margin at 23.3%. We ended the financial year with a revenue of INR3,729 crores and a PBT margin of 26.3%. The Board of Directors have recommended a final dividend of 750%, that is INR75 per equity share of par value of INR10 each for the financial year ending 31st March 2025, subject to approvals by the shareholders.
Coming to the business, we reported a healthy quarter-on-quarter growth of 3.5% in constant-currency terms in the quarter for our Healthcare and life sciences segment. We have established a strong foundation for continued growth in our healthcare and life sciences business with addition of 13 new monthly customers in the year and expanded capabilities and platforms in new growth areas such as sustainability and AI-powered diagnostics and therapies. Our automotive business witnessed challenges in the quarter as some OEMs and suppliers paused new program starts in the face of geopolitical and market uncertainties and focused on conserving cash.
We also saw delays in ramp-ups plans for ongoing deals won in the previous quarter that we expect to resume starting Q1 ’26. We won a strategic EUR50 million multiyear SDV and software engineering deal with the Europe headquartered global car OEM that will actually start ramping starting Q1 FY ’26. We are transforming our customer-base with a continued shift towards OEMs and SDV in the automotive industry, providing us with a set of customers and a platform for our long-term growth.
Our Media and Communication business saw some customer-specific issues in the quarters due to M&As and business restructuring, while the overall industry continued to exercise caution in R&D spend and innovation. But I’m pleased to report a strategic multiyear product engineering consolidation deal of over $100 million US dollars with a marquee operator in the media and communications vertical, it’s the largest single deal in our company’s history. We also won a strategic $10 million consolidation deal with a global broadcaster for the streaming video platform engineering.
Both these deals are with existing customers and we won again some of the best global competition. This again lends a strong foundation for the coming year as we bring back growth in this segment. Our system integration and support business is pivoting to value-added services and innovation-led products such as Experience centers. It worked with our design team to deliver the design and technology implementation with the prestigious Bharat Pavilion at the World Export 2025 in Osaka, Japan, that was inaugurated earlier this month.
I’m delighted with the international recognition for our design digital proportion with two IF award wins for 2025. We won the US Award for GameSense, our experiential solution that brings together UX design, AI and digital technologies to deliver enhanced fan engagement and monetization for global sports and live events. We also won an IF award for product design with our next-generation racing simulator gear design for Turtle Beach, a leader in gaming technologies.
Our design-led revenues have grown at over 25% in the year, clearly underscoring the strength of our design digital proportion. We are expanding our vertical presence with addition of aerospace and defense, addressing emerging opportunities for space, unmanned aerial vehicles, software-defined systems and indigenization in the sector. We are pleased to have been associated with HIL Hindusan Anauticals Limited for the Combat Taming System or CATS Warrior, an unmanned autonomous combat air vehicle, which was displayed at the Aero in February 2025.
We have signed strategic partnerships with NAL and Garuda Aerospace and have been empaneled with two global aerospace majors and a new-age company. We continue to invest strongly in digital AI and Gen AI technologies across our verticals, targeting efficiency and quality in-product engineering and novel applications of Gen AI combined with domain and design expertise to solve complex business, product and engineering problems. Over 70% of our talent base is now AI ready and we have built a pool of over 500 specialists across domains and application areas.
We enter the new financial year as a foundation for stability and long-term growth laid by the large deal wins, the continued confidence of our customers across the world and a strong deal pipeline and a differentiated design-led proposition for innovation and product engineering.
So thank you and let’s start the Q&A session. Thank you very much.
Questions and Answers:
Operator
We’ll now begin with the question-and-answer session. Anyone who wish to ask a question may press R&1 on their touchton telephone. If you wish to remove yourself from the question queue, you must press R&2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you must press RN1 to ask a question.
The first question is from the line of Govila from Morgan Stanley. Please go-ahead.
Sulabh Govila
Yeah. Hi, thanks for taking my question. So the first question is on the large deals that you announced. Just wanted to check especially on the consolidation deals, what’s the net-new component there in the media vertical.
Manoj Raghavan
It’s a multi-year deal, it’s a three-year deal. So the net-new component would be approximately 25% to 30%.
Sulabh Govila
Okay, understood. And then the with respect to the auto vertical, given that there have been changes globally with respect to tariff announcement, et-cetera, some of our clients, especially the top client has made some certain announcements with respect to certain strategic changes that they are considering. So just wanted to understand how does that have any bearing on the business that we do with them?
Manoj Raghavan
So I think it’s not just us, but I’m sure many other companies are facing the same challenges with our OEM customers, especially in the automotive industry due to all these geopolitical issues and the tariff issues. So actually in this quarter, we have seen a number of projects, you know that we are working, especially with our top customer as well in terms of project process.
And we are hoping that over the next couple of quarters, we will have a lot more clarity on this. At this point in time, you know, we’re too early for us to have that clarity. However, we — with the new large deal wins that we have announced again, you know today, we’re really hopeful that those projects will ramp-up and some of this weaknesses will get covered up.
But however, we are in discussions With our key customers to really navigate this difficult scenario.
Sulabh Govila
Okay, understood. Understood. You know just a follow-up there. And this is you know, maybe both for auto and the media vertical. And given that there are multiple moving parts here, with respect to the current quarter, which we are currently in, how would you think about the visibility currently, given that there were certain pauses which were there and some deals which will ramp-up. So on a net-net basis, how should we think about the visibility that we have? Do you think that we can improve from the 4th-quarter that we had and get into the growth trajectory or that could be something away?
Manoj Raghavan
No, the entire focus of the management team is to ensure that we grow from Q4. I would say we have decent visibility and a lot of encouraging discussions with some of our key customers. We strongly believe that we will be able to grow back-in Q1.
Sulabh Govila
Understood. Understood. And just one last question on the margins bit. The other expenses, they fell very sharply on a Q-on-Q basis. So just wanted to understand what led to that and what should be a sustainable number going-forward? Thank you.
Manoj Raghavan
Yeah. Yeah. I will have Gaurav respond to that.
Gaurav Bajaj
Hi,., I think we — as a — this is a soft quarter and difficult times, uncertainties. So though we have been very disciplined in terms of some of the discretionary spend that we have been doing. So along with some of the other expenses, non-people costs, we have been very cautious in terms of how much to be spent and where to be spent.
So — and most of that saving is coming from some of the third-party contractors, consultants, rivals in the visas and the office consolidation. So most of those savings are coming from those discretionary spend, which we believe can be awarded for the time-being till the time we see the better growth on the top-line. So I think we put those measures into consideration executions even before this quarter. So those are starting to give us some better results in the quarter and we continue to measure those as we move forward in the next quarter and the next financial year.
Sulabh Govila
Understood. Thanks for taking my question. Thank you.
Manoj Raghavan
Thank you.
Operator
Thank you. Next question is from the line of Manik Taneja from Axis Capital. Please go-ahead.
Manik Taneja
Sir, thank you for the opportunity. I actually wanted to clarify on a couple of things. Number-one thing is that if I see your last three years’ performance, you’ve had challenges on in two of the three industry verticals, automotive was the one which is driving growth. So with some of these deal wins that you’ve announced in the current quarter, do you think we begin to essentially reverse the course of declines that we’ve seen in the other two industry settlements? That’s question number-one.
The second question is with regards to margins. Once again, I would presume that some of the margin decline is on account of revenue weakness as you are now saying that we should probably be looking at stability to improvement in growth rate from Q4 levels, does that mean that we should probably start to see an improvement in margins as well?
Manoj Raghavan
Yeah, definitely margins would improve with the growth in our business, right? I think one of the — one of the key reasons for the margin decline has been the revenue de-growth, right? So very clearly, our focus is to bring back the revenue growth, which will automatically bring back the margin growth.
Regarding you know in each of these industry verticals, we have announced a large deal wins. Our healthcare business continues to grow and we really expect that to continue to grow strongly over the next financial year. We won some very, very good logos in the last financial year. And for us, the focus would be really to go deeply and mine those logos that we have won in the last financial year.
In the case of automotive and media and communication, the good part is because of the large deal wins, we will have stability in our long-term businesses. So very important to really protect the sort of downside for us. And so these large deal wins gives us that confidence. Now we really need to go and see how we can mine these accounts and grow faster, right? So those are the activities that we will really focus.
And so FY ’26 will all be about growing back, getting that momentum back and really focusing on these key deal wins that we have and really scaling them and mining them faster and better.
Manik Taneja
Just a question with regards to whatever we’ve been hearing from some of your IP peers in the course of recent days. Typically, we have seen first-half being seasonally strong second-half because of the calendar effect and the usual tends to be weak. With the current backdrop, do you think we probably start slow and see an acceleration in sequential growth risk through the — through the course of the year or do you think it is difficult essentially building that kind of a trajectory at the current moment?
Manoj Raghavan
So I think for us, these large deal wins would mean that we really need to start expanding the relationship right from Q1, right? Of course, Q1 and Q2 would be — because these are consolidation deals, we would need to take-over from existing suppliers and there will be some amount of investments that we would need to put in to really build that business.
But however, towards the — from Q2 onwards and subsequently, we expect the full value of the deal to come in play. So for us, we would really expect that, look, we will see an accelerated growth as we move into the — into the financial year.
Manik Taneja
Sure. And the last clarification question is, do we also look at the change in our typical on-site offshore mix as we consolidate some of our competition as well as how should we be thinking about hiring now, even we’ve been trying to essentially keep cost in control and then thereby through the course of this year, we have cut headcount.
Manoj Raghavan
Yeah. From an onsite-offshore, you know mix, I don’t think we will see too much of a change because some of these large consolidation deals have also been focused on, you know, servicing them from the best-cost countries. You know, customers don’t really want us to spend additional budgets by having people onsite and so on.
So the signature of the deals that we see moving forward are a lot more onto best-cost countries rather than high-cost countries. So that is the signature of the deals that we see whatever deals that we are closing. So that aligns with our philosophy as well that we are traditionally strong at delivering offshore. So we would — we don’t see a big change there in terms of either having a lot more resources on-site and so on.
That could be some temporary blip as we take-over and transition work and so on. But in the mid-term to long-term, we will be at the sort of offshore ratios that we see today.
Manik Taneja
Sure. And any questions or any response on the headcount as to how should we see that play-out given you cut headcount for the course of the year focus on improving utilization, etc?
Manoj Raghavan
Yes. So we have — when I say cut headcount, right, we have natural attrition, we have not replaced because we have a very good-quality bench that is available and we have been very, very careful to add laterals — of course, we do add laterals also on a need basis, but we have been very, very selective in the type of people that we bring in. So I think we would continue to be cautious over the next two quarters, I would say.
Having said that, we will have a few freshers coming in this quarter and next quarter. But from a lateral perspective, we will definitely be a lot more cautious and it will all be based on the business growth that we see.
Manik Taneja
Sure. And there is enough kind of bench trend to improve utilization and service the so-called improvement in-demand that you foresee over the next three to five months?
Manoj Raghavan
Yeah, absolutely.
Manik Taneja
Thank you, Manish. Wish you all the best.
Manoj Raghavan
Thank you.
Operator
Thank you. Next question is from the line of Ayush from Dayman Asia. Please go-ahead. Ayish, may I request you to unmute your line and proceed with your question please. Ayush, can you hear us you. Is no response. We move on to the next participant. Next question is from the line of Ashwini Singh from Fintech. Please go-ahead.
Ashwini Singh
Yeah, hello. Hi, sir. Sir, as you be well aware that there is a huge capex currently underway for semiconductor fabrication and assembly plants in India, the largest deal from Tata Electronics, which is a promoter group entity. So I’d like to understand if there is any opportunity for Tata Lexy because I understand that Tatai is a leader in semiconductor space design such as Design, etc. So whether you are in talks with some of the semiconductor companies which are coming out and if you look at some opportunities over there.
Manoj Raghavan
Yeah, so of course, yes, we are in discussion with the companies that are planning, you know to set-up fabs and so on right now they are in the factory setup stage and so on. So there are — there are discussions ongoing with these customers from a viewpoint of our design offerings, also our manufacturing and industry — industrial industry 4.0 offerings. We are having discussions with them.
So there — it’s pretty early from a chip design side because the focus right now is not really building new chips and so on. But however, those are discussions that we are having that is still early stages, I would say. We would definitely be interested to see how we can support the India inner semiconductor ecosystem moving forward.
Ashwini Singh
So can you just quantify what kind of opportunity size you are looking at least like in the coming few years in this space?
Manoj Raghavan
No, it’s very, very, very, very early, I would say to give a — to give a — what your business value however, we are in close discussions with a few of these customers to see how we can be relevant to their plans, right? I think it will take at least our couple of quarters before we can formally get back and say, hey, what sort of — what sort of value proportion we have for these customers, right? So however, today we are engaging with them. We are supporting them where we have capabilities, especially from the design side and the manufacturing side. And those are areas that we are focused on. On the chip design side, we are on a wait-and-watch, right, to see what sort of opportunities evolve, right, for us.
Ashwini Singh
Okay. Thank you.
Operator
Thank you. Next question is from the line of Hasmok from Tata Mutual Fund. Please go-ahead.
Hasmukh Vishariya
Yeah, hi. Thanks for the opportunity. I just have one question around FY ’26 growth. So I do understand that you don’t provide guidance, but considering the weaker exit and acceleration of growth from Q1 onwards, would it be fair to assume that you will be grow better than FY ’25 — in FY ’26?
Manoj Raghavan
That is the clear focus of the management team and we are a little more confident because of some of the deal wins that we have had in the last quarter and we have entire four quarters now really to scale-up some of these deal wins. So we really hoping that we will be able to deliver better performance than FY ’25.
Hasmukh Vishariya
Okay, got it. Got it. Just one follow-up here. So this large deal wins, are you witnessing — are you witnessing any delay in ramp-up or those are, let’s say, getting started on-time program.
Manoj Raghavan
And these deal wins have been — we have been in discussions over the last four quarters. So it is not that, you know. So finally the deal — I mean, finally, the announcements are happening and we are happy that we are seeing the light at the end-of-the tunnel. So to that extent, I’m really happy that things are moving. So definitely, we really don’t see too much of delays moving forward because the customers also have the need and the necessity to ramp-up and move quickly. So this financial year definitely, we will see a lot more — lot of revenue uptick coming in from these deals.
Hasmukh Vishariya
Got it, got it. Thanks a lot.
Operator
Thank you. Next question is from the line of Nitin from Green Capital. Please go-ahead.
Nitin Shakdher
Hi, good evening to the management. My question pertains more as an investor. Now obviously, there are some risk mitigation strategies that the management would have liked to undergo in terms of trying to change the revenue mix, maybe reducing USA exposure and increasing exposure to rest of the world, China, Japan or increasing exposure to India or to EU. Just wanted to get a sense of what the initial chats of feedback have been from some of your larger clients in terms of IT spending and some risk mitigation strategies towards that. Would love to hear the management thoughts.
Manoj Raghavan
Sure. I think as you would have seen this, the geopolitical situation you know, with the tariffs and so on and with the war going on, we have — of course, we have seen Europe and US two large geographies really showing a slowdown here and across both automotive and media and communication. So consciously, if you look at it, we have been really expanding beyond the two main markets. We’re really looking at emerging markets, including India, Japan, the Middle-East, Africa, LatAm and Southeast Asia.
So we have consciously really expanded the bucket, expanded the markets that we would go into. And I think we’ve had decent successes, I would say. Japan business grew pretty well for us in the financial year. Similarly, our India business really grew accelerated in the financial year. And I think that gives us a lot of confidence that there are a lot more you know, companies based in India now who really appreciate the design digital offerings and we have some wonderful successes in the Indian automotive industry.
We work with the — in all the major players supporting them in a lot of the new product launches. A lot of the connectivity platform that you see car companies launching in India have been powered by platform. So there are lot of interesting stuff that we are doing with India — India and India-based customers as well, right? Of course, GCC is our strategic play for us and we’ve also seen an increase in the GCC business, both in our automotive as well as in Media and Communication and the healthcare space, right? So I think for us, India and the emerging markets will continue to be an important market for us in the coming financial year as well.
Nitin Shakdher
Yeah. Yeah. So the follow-up to that is like I do see over the year in terms of the revenue mix of the US exposure has reduced from approximately 38% to 31%, India exposure has increased from approximately 16% to 19% and rest of the world exposure has increased to about 5.6% to 8.3%. So I’m sure that there has already been a movement within the company to hedge a lot of exposure away from US and maybe reduce Europe and get more specifically into LatAm, as you said or Africa or Southeast Asia or more towards Japan or East Europe.
So having said that, is it so easy for a company to change the revenue mix so quickly or does it take time and does it take like a quarter or two lag? Or will you be also clear with the situation maybe once the US clients are more clear maybe after a quarter as to what specific tariffs and taxes are applying and how their spending is getting affected because not everyone will be painted with the same boat. Just some thoughts on that?
Manoj Raghavan
Yeah. So these new — the emerging markets that we talked about, it is not a 1/4 player, right? We have been investing and actually building relationship, building local partnerships, building sales channels over more than four to six quarters, I would say. And I think that is that derisking strategy that we planned in the previous financial year has actually helped us now. I mean, nobody could have predicted the current geopolitical situation and you know that the tariff issue that we are seeing, right? But however, our strategy of expanding the universe of markets that we go after, right, has actually helped us in this particular situation. So it’s not been a — it’s not a knee-jerk reaction only for the last 1/4. This has been planned out it has — that strategy of really looking out for newer markets has really helped us in this current difficult situation in both US and Europe.
Nitin Shakdher
Okay, thanks a lot, Moonoj, and all the best to the management to go through this tough period and I hope we come out of this much better as we go across the year. Thanks a lot.
Manoj Raghavan
Yeah, thank you.
Operator
Thank you. Next question is from the line of Amit Chandra from HDFC Securities. Please go-ahead.
Amit Chandra
Yeah, sir, thanks for the opportunity. Sir, my question is related to the last deal in the media and communications vertical that you have announced. So if you can throw some more light in terms of what is the tenure of the deal? And in terms of margin, is the margin similar to the company average or generally, the larger deals have you know lower margins at the beginning. So it is similar to that is there any like rebatging also involved in this?
Manoj Raghavan
Yeah. So this is an Existing customer as I talked about. It’s a — it’s a three-year deal of course, since it’s a consolidation deal, it is a deal that has been won over you know all the I would say all the major competition, global competition now it’s I would say it’s a very prestigious deal for us, gives us — gives us the confidence, I mean the confidence that the customer has placed on us, I think that is something that we really are very, very happy. So, yes, as I said, since it’s a consolidation deal, we had to be competitive from a pricing perspective. So it definitely, I would say, comes at a competitive rate. But the good part for us is, it gives us that stability in over three years. But it is up to us now to see how we can leverage this deal and you know, extract the margins. And there are a lot of things that opportunities are there, including AI, Gen AI and so on, how we will leverage this to improve our margins. There is no rebadging in this particular deal. So to that extent, we don’t take any unnecessary risk with local an on-site, you know, that we have to rebatch some high-cost resources and so on. So we don’t have any of those challenges.
Gaurav Bajaj
And Anit, just to add to that point, I think with large deals also comes to a billable deployment opportunity for us and with the quality of the bench available with us, that will definitely help us on our margins to move upwards from what we have seen in this quarter. That’s what we said. I think the margin is the direct function of the top-line growth. So our focus is to get the growth back and the margin you will see automatically start to get back to the normal levels.
Amit Chandra
Okay. And also on the auto OEM deals, 50 million on a euro deal. So these two deals, we have won in an environment when there is a lot of uncertainty in the macros. So these — looking at these two deals have been committed by the clients like despite of the tariff scenario and like despite of the ongoing challenge, or these you know factors like not impact or maybe you know these are committed much earlier than the uncertainty started.
Manoj Raghavan
No, as I discussed earlier earlier question, right, these are not new deals that come up just in the last quarter. Both these deals have been worked on over multiple quarters, right? So-so it is I know whether you know the current geopolitical issues and that is you know our influence recession. I mean I wouldn’t say that it, you know the customers you know, had to do a lot of what you say, internal negotiations there are you know worker council related issues, there are lot of regulations that they have to be careful before they take these because these also involves moving a lot of work from high-cost locations to locations like India.
So there are lot of sensitivities involved when you take such — when a customer announces such deals. So naturally, it took a long-time before they got all those internal approvals and so on. And that is a deal cycle nowadays, especially when you look at large deals.
Amit Chandra
Okay. And lastly,, in terms of the deal to revenue conversion cycle, so anything has changed in the last two weeks in terms of the revenue conversion or everything is on-track.
Manoj Raghavan
So I would say everything is on-track. We’ve not seen any undue or any negative things over the last two weeks to make us cautious.
Amit Chandra
Okay, sir. Thank you and all the best.
Operator
Thank you thank you. Next question is from the line of Debashish Mazumdar from Swan Investments. Please go-ahead.
Debashish Mazumdar
Hello. Good evening. Hi,. Hi, Nitin. Thank you so much for taking my question. So I have just only one question. If I remember the view you on some of your competition discussed describing the OEM situation last quarter and last to last quarter, it was like there were lot of pressure in the OEMs own business. Some of those pressures are structural like not shifting to EV or Chinese putting pressure on European OEMs and stuff like that.
In this quarter discussion, as of now, it is more seems to be related to tariff-related uncertainty and seems to be those OEM-related uncertainties are behind us. Is my understanding correct? Is it that in your solid or new order wins or new deal wins are giving us confidence.
Nitin Pai
So, if I may, and this is Nitin here. I think the points that we made earlier stay because there’s nothing that has changed in terms of China still being a very, very credible threat to business and China as a market are coming under pressure for a large part of the OEMs or global OEMs who traditionally have a large part of their revenues coming from that market, right? So that doesn’t go away. That still stays true.
I think what tariffs have provided is an additional of complexity and uncertainty, right? And that is where we have seen a even further delays in terms of either decision-making or pauses in terms of ramp-ups that we have — that we’ve seen in deals that we already won. So that is the pain, why? Because we’ve built capacity, we have built bench, we have targeted it for the kind of business that we already won and seen and that unfortunately has come under a pause simply because of this uncertainty and therefore a customer-related on starts and stops.
The deal wins, I think, however, in response to the previous question are made in well — in good cognizance of all the uncertainties and the tariffs and so on. And therefore, we don’t see an issue in those starting off ramping-up and going according to plan. In fact, some of the older deals are also hopefully coming back for ramp-ups, right?
So just to address your point again, tariffs bring another layer of complexity. It’s not that the previous issues go away, they stay. But even as OEMs are just starting to get their heads around those problems, I think tariffs have gotten another headache. So just look at it that way.
Debashish Mazumdar
Okay. So basically — so basically if I — if what are you saying, if I understand that correctly, so when are you saying that your FY ’20 fix is a possibility of FY ’26 will be a possibility better than FY ’25. It is just because of the deal that you have done already or the pipeline that you are currently have of liquidity. Is my understanding correct?
Manoj Raghavan
In general, I would say is look at it this way. The fact that we have a fantastic customer-base, we’ve been in this business for a long-time. So customers continue. It’s just a matter of whether all business venues extends and so on and you have new project starts. So on one-hand, there are a set of customers like Tier-1s where we continue to see pressure on their business. Over the last two years, we’ve very strongly and smartly pivoted to OEMs and they are now 70 plus of our revenues. So that gives you one-level of stability and a foundation for growth.
Two is we locked into LGB programs with a large number of these customers. LG programs by nature are long-term. They are not projects, projects in that sense. So that gives you stability from an annuity perspective. Third, I think the large deals provide additional layer of confidence, which is that even as some project ramp-down, Tier-1s kind of slow-down a little more, you have now these new OEM wins that are starting to layer on new revenue and growth. So that itself is not the answer to growth, but it provides confidence for growth.
Debashish Mazumdar
Okay. Understood. And one last question, over the period of last two years at least, we have seen a significant pressure on our margin performance. Do you think that where we are standing today, is it kind of bottom and is a very-high possibility that we will turn back from here or in our model for next two to three years, should we built-in a comparatively lower-margin for compared to what we have seen in the past.
Gaurav Bajaj
Hi,. This is Gaurav. Hi. I think we are very confident that you know in our operating model and all the operating KPIs that are there in the organization that we will bounce-back on the margin. I think it is only the equation of the revenue and the growth coming back. We tend to believe that we will start to see the margin level start to improve as the growth comes back-in the coming quarter.
We don’t see any significant change in the signature of how we have been doing our business, whether that’s on-site offshore mix or T&M versus fixed-price. So all those KPIs remains very robust. We have a good bench available. Our utilization today is slightly lower to 70%. So we have a good headwind, you know, a way forward To improve our utilization and that automatically helps in terms of improving our margins without doing much of the hiring that would be required for some of the large deal that has been won. And our SG&A is also quite controlled and that will — that will not go up linearly in terms of the revenue growth. So all those factors, levers are available for the company to improve on margins. And we can see while I cannot comment in the short to mid-term, whether we will get back to our normal margins. But yes, for definitely, there is a path to — and there is a very focused approach from our side to get back to our normal levels of margins where we used to operate about 1.5 years to two years back.
Debashish Mazumdar
Just a small follow-up. So when you are saying normal margin level, is it like 20% to 30% kind of margin is the normal margin level in your mind or it is something?
Gaurav Bajaj
Since you brought the point of margins two years back, so I’m just circling it back to the margins level that we used to see in after about 1.5 years to two years back.
Debashish Mazumdar
Sure, sure, sure. Sure. Understood. Thanks,.
Manoj Raghavan
Thank you,. Okay. Thank you.
Operator
Thank you. Next question is from the line of Mayur from Hesh Kumar Company. Please go-ahead.
Mayur Matani
Yeah, good evening, sir. Thank you for the opportunity. This year-after — this quarter after a long-time we have seen a growth in the healthcare vertical. So if you can throw some more picture on it, how is the growth looking at and the deal pipeline that you see forward because last one or two years were difficult for this segment. But now we have seen a pickup after a long-time. So do you think that this kind of growth can be maintained in the times to come?.
Nitin Pai
This is Nitin here. Maybe I’ll take that question. If you look at what hurt us for the last five, six quarters in our healthcare business, there are two fundamental causes. One was something called the medical device regulations, which is largely a part of what we were doing in our regulatory services for the healthcare business. So that was set for a certain timeline to complete.
There was supposed to be a big volume of work that would continue. That suddenly disappeared because the implementation timelines were relaxed by another three, four years. So customers suddenly has a choice of saying, look, let’s not do anything right now or maybe I will in-source some of this, so I have the luxury of time and so on, right? So that kind of put us on a revenue cliff, which was not expected. So that is part number-one. Part two was we had a very specific client issue somewhere in the middle of the year where the customer had a standard renewal coming up for a very large program that we’re working on for them, very prestigious, very next-gen program that has put on-hold because of certain signatures that we saw and that has not resumed. So we actually have climbed over two big holes that we have fallen into. One a few quarters back, one a lot more recent in two, 3/4.
And I think the positive signs there, the fantastic addition of customers, right? That’s the part number-one, which is how do you derisk your customer-base? Because remember, this is a small-business, not too many customers in the portfolio, each customer being deeply mined, but also, of course, creating a risk of a single customer failure. I think we have derisked that to the largest extent. Two is, I think our portfolio shifted significantly in the year two core product engineering, innovation and AI and that takes away the risks of regulatory. So I think in that sense, I would say, truly, as we stand today and as we look at the year ahead and the years ahead, the healthcare business is in good health.
Mayur Matani
So we had an ambition of 20% of our revenues coming from this vertical. So when do you see that happening or do we have any visibility that maybe two, three years down the line that can be a possibility?
Nitin Pai
Yes. So I think that would be a good timeframe because please note, we want the media and communication automotive businesses to grow too.
Mayur Matani
Right. Sure. And my next question pertains to the automotive vertical. So we have been talking of large deals coming in media vertical and all, but what is the pipeline of the large deal coming in the automotive vertical as we have witnessed slowdown in Europe and all those markets. So there is — after a certain time there is people always look for cost-cutting. And do you see those opportunities coming to us over the next year or so where we can transform the company from a certain level to the next level in the automotive vertical.
Manoj Raghavan
Yeah. So maybe I can take that again, Mayurv. Definitely, yes, because I think two or three things are very true. One is that unfortunately, you cannot relax on innovation. The renovation fundamentally depends on software and digital and AI. But the fact that for these skills, there is no better place to come to than India, simply because you do not have the talent base and the talent base is going to be very expensive anywhere else in the world. And if you’re already under pressure on your revenues and your bottom-line and yet you have to execute on your strategic R&D agenda and innovation agenda, we believe India is well-placed and is best placed.
And so that I think is the fundamental point that we’re making about how we see long-term sustainability and growth in our business, right? Of course, we will see issues at times. There will be quarters where there will be either customer-specific issues or structural issues like tariffs being announced that shake the world and cost — cause them to pause for a bit. But in the medium and long-term, we are very, very bullish on how we see automotive and our competitive advantage that we have in the automotive business.
Mayur Matani
Okay. So earlier we used to talk that the automotive verticals can grow up to 20% to 25% CAGR on a sustainable basis, but that has not happened. So what factors would contribute to that do you think? Because near-term, I agree that there are lot of challenges and all. But the 20% growth in the automotive vertical and with the kind of advantage that India has, that has not come to us. So some of our listed competitors have delivered a higher-growth in the automotive segment. So just wanted to have your view on that.
Manoj Raghavan
Yeah. So my there would not be a black-and-white answer to that. I think there are two-parts to this. One, you will see that a large part of competitive competition growth would also have inorganic components. You have to note that we are very, very organic in the way we do business. Two is their margin profiles are substantially different.
We allowed to understand that the quality of the business and the nature of the business is different. We are very clear that while we want growth, we also want margins, right? So therefore, we’re not constraining ourselves, but we are ensuring that what we do is at a certain level of quality and a certain signature of business. So look at it as constraints, but you’ll have to remember that both inorganic and the nature and quality of revenues are not options that we have exercised at this time.
Mayur Matani
Okay. And last question on the — what is the deal timeline which we have because earlier we used to have a short-duration deal. So has that changed over the last year or so? And last question is with regards to the payout. So we have a large cash on our book. So probably we can think to look at increasing the payouts in the times to come. Thank you.
Manoj Raghavan
Sure. So our deal — I mean our deal, you know, nature of deals have, of course moved to larger multiyear sort of deals with — especially with some of the deal announcements that we have made. I think those are all trended in a positive direction for us. Definitely, we’ll take your point on payouts and so on. If you have noticed, we have increased dividend payout you know from 700% to 750%. And so yeah, we will take that note of that,. Thank you so much.
Mayur Matani
Thank you. Thanks a lot.
Operator
Thank you. Thank you. Next question is from the line of Apourva Prasal from Templeton. Please go-ahead.
Apurva Prasad
Yeah, hi, good evening. The question that I have is on the automotive side, actually it’s even beyond auto, how would the annuity mix have changed, let’s say, over the past years and now across different verticals and generally what is being done to increase the annuity mix.
Manoj Raghavan
I think at least you know from the top-10 customers, if you look at it, lot of the top-10 customers are — I mean we have moved from a project-based engagements to an annuity-based engagement. While in ER&D, some of these annuity-based projects definitely will span multiple years, 18 years, 24 — 18 months, 24 months and so on. But having said that, the current situation in the market and so on, sometimes customers also take of you know, cutting off some of the long-term deals and so on, right. In general though, the annuity profile has increased 7 but there’s always a risk that we carry that. Look, even though there is a confirmed business that we have for two years or three years, a lot of it is also dependent on the macroeconomic situation and the financial situation of our key customers, our key automotive customers, right? So I — in general, I would say, yes, the annuity business, I would say the component has definitely increased for us. But at the same time, it doesn’t mean that, look, there are no risks.
Apurva Prasad
Where would that number be, Manoj now
Manoj Raghavan
We should be around, I would say around you know, 450%
Apurva Prasad
Okay also on on the GEC support or the GCC support, I’m broadly trying to understand how is the current mix of business around services around that. And I mean, if more such deals happen, is there a margin implication over the medium-term?
Manoj Raghavan
Yeah. So I think we are very, very careful and strategic about the type of deals that we do even with GCCs and so on, right, given the fact that we have a large bench and we have resources that we can deploy. So at times, we do take those strategic calls, right, especially if you have a junior resource pool, we are not so focused on the margin profile in some of those deals. But having said that, we also limit the — in a number of such deals that we go after. If you look at our India business, it’s not only GCC, right, we also work with some of the OEMs and other product companies that are based out of India. And I think the deal — the margin profiles are pretty good. I mean, so to that extent, I think we’ve managed the overall portfolio of Burwa. We are not going completely into the low-cost sort of deals.
Apurva Prasad
Got that, got that. And that said, how are we thinking of let’s say medium-term sustainable growth levels for the company.
Manoj Raghavan
I think from a medium-term, I think we are in a very, very good question, right? The short-term, yes, we will continue to see some of these challenges and so on. But from a medium-term perspective, in all the three verticals, I believe we represent the best offshoring or best-cost you know destination for a lot of our customers, right? It is not just only best location for just manpower augmentation and so on. The processes that we have put in-place, the ability to take outcome-based deals, the internal processes that we have to deliver on the margins, they are fantastic, you know, I would say, the capabilities that we have built-in. So I think from the midterm to long-term, we are very confident of our business model and the team that we have and the capabilities that we have built.
Apurva Prasad
Thank you very much. Thanks much. All the best.
Operator
Thank you. Next question is from the line of Chirag from Ashika Group. Please go-ahead. Chirag, may I request you to unmute and proceed with your question, please?
Chirag Jain
Hello. Am I audible?
Operator
Go-ahead. Yes, sure.
Chirag Jain
Yeah. So my question is on pricing front. As the environment is very uncertain and even our clients also know that the tariff that is there and the acquisition cycle will remain challenging specific delay decision-making. On the pricing dynamics working in such environment, is it weaker than what we used to have in bottle also in?
Manoj Raghavan
I would say for the next-gen set of capabilities that we have, the digital skills, the Gen AI skills and so on, I think we still are able to work on a pretty good pricing and really maintain our margins and so on. However, as I said, in case of some large consolidation deals, whether it’s immense competition, 12, 15 companies bidding for a deal and so on, yes, there will be some amount of margin pressures. So I think that is something that we will — we will manage. So overall, I think especially for the strong — the areas that we are focused on and the capabilities that we have built, I think we still are able to extract a good pricing for us
Chirag Jain
And if I look at your annual growth in terms if you can provide like you know what percentage of has come because of the price increase or our mix change also hey,.
Gaurav Bajaj
Hi, this is Gaurav. You know, in terms of the price increases, consolidation, it’s a mix pack over the year. I mean there are cases where we have received the price increases also, but at the same time, there are newer projects, large consolidation deals where we also need to pitch the competitive rate. So put up a number as a of our constant-currency growth over the year would be a difficult thing, but there are — but there are good rate increases that we have received in some of the customers during the year. While we cannot quote the numbers there, but wherever we see an opportunity, we go back and depending upon the differentiated skill value propositions and the kind of the work we do with the customers, you know going up the value chain. So we go back to the customer, ask for those rate differentiation and the premium pricing for those.
Chirag Jain
Okay. Thank you thank you.
Operator
I request to all the participants kindly restrict to one question per participant. We take the next follow-up question from the line of Debish Mazumgar from Swan Investments. Please go-ahead.
Debashish Mazumdar
Thanks for the follow-up opportunity. Sir, while we talked about the expectation of FY ’26 being better than FY ’25, which verticals or how — which verticals would drive the growth here amongst media communication and transportation healthcare specifically. So what I’m trying to understand is, as we sit right now, what sort of visibility in terms of the pipeline and the deals in-hand, what would drive the growth in the next near-term or the next year.
Manoj Raghavan
I think growth definitely will come in both from our transportation and the healthcare and life sciences business. Media and communication business of course, also would grow, but the confidence level is higher for me from the transportation and the healthcare and licenses business.
Debashish Mazumdar
Understood. Understood. And one last question quickly. So in the in the investor deck, you have talked about the new vertical, which you are making investments and you’re trying to scale-up. Where are we in that investment cycle or the skill development capability development on there? And when do you expect it to become a sizable part so that you start to report it separately and it starts to add to the total number.
Manoj Raghavan
I think we have been building the aero and defense vertical, I would say over the last couple of years now. We’ve built a very good technical team, capable team. So we would definitely — we would definitely hope that in this financial year, we will really be able to report, you know revenues. We have — you know, the good part is we have had some impanelments already among some major customers and we really hope to convert some of that into revenues and win some large deals and make those announcements in this financial year.
Debashish Mazumdar
Okay. Thanks for the best of luck. Thank you.
Operator
Thank you. Next question is from the line of Jaya Jain from Masterd Investments. Please go-ahead.
Unidentified Participant
Yeah. Thank you for taking my question. I have one question. Is China a competitor in our international offerings.
Manoj Raghavan
No, I mean you know, the Chinese companies are pretty strong in the domestic market. But given the current situation between China and US and China and Europe and so on. At least in the major markets, we don’t see them as competition. There used to be some amount of competition in the Japan market. But again, because of geopolitical issues between them, we see a lot of Japanese companies also planning a move from China to India and so on.
So I don’t see them too much as a challenge in the international market. But definitely in the Chinese local Chinese market, they are very, very competitive but
Unidentified Participant
As follow-up on that will China start looking more at these kind of projects overseas because of tariffs that are coming this is Nitan here the question if you can just because of these tariffs service
Unidentified Participant
. Yeah, so services are not subject to tariff, right? So will that change their approach to international business?
Manoj Raghavan
No, I don’t — I don’t think so. Maybe I’ll put it aside differently. Services are never subject to. Yeah, irrespective of that, you know, if they could have always competed with us in US and Europe and in other countries, we really don’t see too much of them in the markets that we.
Unidentified Participant
Okay. Thank you.
Shashank Ganesh
Thank you very much. I now hand the conference over to Mr Manoj Ragwan for closing comments.
Manoj Raghavan
Yeah. Thank you. Thank you, Sushank. And it was wonderful to have you all-in the call. Of course, the industry has been going through some tough situations, but I’m pretty confident with the deal wins that we’ve had. I think for us as an organization, we strongly believe that FY ’26 will definitely be a much better, you know financial year as compared to FY ’25. I hope to continue to see you in the in the next meet in beginning of Q2. Hopefully, we will come with a good set of numbers. So thank you so much for the support once again. Look-forward to talking to you again next quarter. Bye-bye.
Operator
Thank you very much. On behalf of Tata LXC Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.