Tata Technologies Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Tata Technologies Ltd (TATATECH) Q4 FY24 Earnings Concall

• Revenue Growth and Deal Wins
  • Achieved 15.9% revenue growth in INR and 15% operating EBITDA growth for fiscal year ’24.
  • Revenue from operations grew at 29% CAGR and operating EBITDA grew at 35% CAGR over the last 3 years.
  • Signed 12 large deals in FY24, including a $150 million deal and 5 deals in $15-25 million range.
  • Services business, which is 77% of revenue, grew 10.4% sequentially and 30% YoY, excluding VinFast runoff.
• BMW JV
  • Signed strategic agreement with BMW to establish JV in India for automotive software and digital technologies.
  • BMW selected Tata Technologies after 12-month evaluation of Indian engineering firms.
  • JV will focus on automated driving, infotainment, digital services, and enterprise IT solutions.
  • Regulatory approvals expected in next couple of months, operations to commence in H2 FY25.
• Customer Updates
  • Grew collaboration with Tata Motors and JLR on smart manufacturing and new EV development.
  • VinFast business ramped down as per guidance, mitigated by new customer acquisitions.
  • Customer pyramid improved with more $1M+ annualized revenue customers.
• Generative AI/Partnerships
  • Deploying Gen AI solutions for engineering, manufacturing, and customer experience.
  • Training over 10,000 engineers in basic Gen AI skills and 2,000 in advanced skills.
  • Partnership with Siemens for Pave360 software-defined vehicle platform.
  • Partnership with Databricks for data analytics, AI, and smart manufacturing solutions.
• Financial Performance
  • Technology Solutions revenue grew 6.1% QoQ and 28.5% YoY driven by education business.
  • Operating EBITDA margin improved 10bps QoQ to 18.4% in Q4.
  • Net income grew 8.9% YoY to ₹6,794 million (13.3% of revenue) in FY24.
• Operational Metrics
  • Headcount grew 0.5% QoQ to 12,688 employees aligned with revenue growth.
  • Utilization improved 180bps QoQ to 86% due to higher working days.
  • Added 1,017 net new employees in FY24, up 9.2% YoY, including campus hires.
  • Attrition declined to 14.5% in Q4 from 15.4% in Q3.
  • Customers in $10-50 million category increased to 5 from 3 in Q3.
  • Offshore revenue mix improved to 38% in FY24 from 36% in FY23.
• VinFast Transition
  • VinFast relationship enabled development of full vehicle capabilities including EVs and connected architectures.
  • Anticipated VinFast ramp-down 12 months ago and aligned pipeline/resources accordingly.
  • Able to navigate material headcount transition from VinFast to other customers.
  • Expect growth to pick up after completely decoupling from VinFast projects in current quarter.
• EV Demand Outlook
  • Not seeing any drop in demand despite global EV sales slowdown.
  • Automakers doubling down on building EV portfolios to counter Chinese OEM threat.
  • Market dynamics driving tailwinds for engineering and new product development services.
  • Research intensity is similar for EVs and hybrid vehicle programs.
  • Some automakers renewing interest in balanced EV-hybrid approach as transition hedge.
• Education Performance and Outlook
  • Education business saw growth, products business was relatively flat (seasonal pattern).
  • Worked to smooth out education revenue across quarters compared to previous years.
  • Incremental Q4 education growth was in line with plans.
  • Expect to build on Telangana win by executing well, driving order book growth.
  • Visibility for year-on-year improvement in FY25 and beyond.
  • Relationships generally extend over 10 years with services component.
• Deal Pipeline
  • Deal conversions were robust and in line with expectations.
  • Seeing no drop-off in demand, targeting new logos leveraging BMW deal.
  • Sales team productivity remains at a high level.
• Growth Drivers ex-VinFast
  • Growth ex-VinFast fairly diversified across anchor and non-anchor clients.
  • Both segments grew 25-35% YoY, no single large client replacing VinFast.
  • Seen traction in aerospace (Airbus), Tata Group (JLR, TML), and EV value chain (Agratas partnership).
• Aerospace Business Performance
  • Doubled aerospace revenues at Airbus in Q4 from small base in Q3.
  • Expect momentum at Airbus to sustain in FY25.
  • Bullish on overall aerospace market opportunity given doubling of aircraft fleet expected.
  • Tata Group influence providing opportunities in commercial and defense aerospace.
• Agratas Partnership Progress
  • Involved since inception, providing pack design support as Agratas confirms OEM anchors.
  • Working on enterprise IT/digital backbone deployment in India.
  • In planning stages for industrializing two gigafactories in Gujarat and UK.
  • Partnership already at scale, expected to build further in coming quarters/years.
• Growth in New Areas
  • Accelerating tech change requiring lifelong learning and reskilling for engineers.
  • Leveraging TechVarsity capabilities to drive education offerings for public/private sector.
  • Expect customers to outsource more non-differentiating areas as new tech needs grow.