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.