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00:00 [MUSIC]
00:06 Hello and welcome.
00:07 You're watching NDTV Profit and we have with us a very special guest joining in to talk
00:12 about a recent big order win.
00:14 It's Nanadhan Amit Chadha, CEO and Managing Director of LTTS.
00:18 Thank you, Amit.
00:19 Thanks for joining us on the show.
00:20 And this, of course, is After Your Earnings, where we'll be talking to you.
00:24 It's been a big order win for LTTS.
00:27 You want to talk to us about the size of this order, the partnership that you've entered
00:31 into with an automajor?
00:32 Sure.
00:34 So thank you so much for having me.
00:37 This is a $50 million program that over a five-year period that we have won with 4via.
00:45 4via, of course, is a market leader in the tier one space in clean mobility.
00:50 This particular program allows us to go deeper into clean mobility solutions around
00:56 hydrogen technologies, stocking technologies, etc.
00:59 This is, if I look at the hybridization, electrification field, about a third of the
01:07 revenues that we deliver in mobility for the company.
01:10 And mobility, of course, is a third of the entire company itself.
01:13 This particular program goes into production immediately, as soon as tomorrow, and allows
01:21 us to be able to provide solutions and our technologies to our customers as we move forward.
01:27 About 300 people are going to be transferring over with this transaction over to LTTS between
01:34 Germany and Bangalore.
01:36 And we will continue to use the OSBORG, leverage the OSBORG facility of the client, as well
01:43 as our own centers in Bangalore as we proceed to expand the solution offerings to our other
01:50 clients in Europe.
01:51 Right.
01:53 Mr. Chheda, help me understand this.
01:56 So you get on to execution immediately on this deal?
01:59 Yes, we do.
02:02 Absolutely.
02:02 And what is the timeline, the payment cycle of this one?
02:05 So this is a five-year program initially.
02:10 And it's, if I may, there's a little more work to be done in the first couple of years,
02:16 and then it stabilizes.
02:18 So unlike other transactions where they ramp up over a period of time, this is an immediate
02:23 ramp up.
02:25 And it helps reconfirm and give confidence to you in our organic guidance.
02:32 That's fantastic.
02:33 And while there is the initial first couple of years will be the heavy lifting, will the
02:38 cash payout be in line with that?
02:40 So will you be upfronting a little bit of that payment?
02:43 How much percent of the deal value will be upfronted over the next financial year?
02:48 Or rather this financial year now?
02:50 So there's no upfronting.
02:52 It will happen as the execution happens.
02:55 What I'm saying is that the five years is front-loaded and execution in the first couple
02:59 of years.
03:00 In fact, it's an immediate ramp up.
03:03 And like I said, first couple of years and then the remaining in the next three years.
03:07 So look at it as a 60-40 rather than normal 40-60 that you normally look at.
03:13 Amit, how does this set you up for other deal wins of a similar nature in the industry?
03:20 Cutting edge after this auto win, you think?
03:22 Should this also help you flow in or, of course, attract better and bigger conversations?
03:27 Yes.
03:30 So there are two parts here.
03:31 Number one, hybrid electric are key technology areas that the world continues to invest in.
03:38 And this sets us up properly.
03:41 We made organic investments in the past in the electric vehicle area.
03:45 With this win in hydrogen technologies as well as hybrid technologies, it sets us up
03:51 very beautifully with clients as we move forward and people look at mobility and look at alternative
03:56 fuels and alternative technologies.
03:58 So that's number one.
03:59 Number two, it also helps us differentiate ourselves in this space with the know-how
04:06 that we are picking up with the program.
04:09 Number one.
04:10 Number two, it allows us to be able to expand in Europe, which is an area of interest for
04:16 the company and future expansion for us.
04:19 Right.
04:21 Amit, how will the pass-through cost affect your margins?
04:24 So thank you for asking that.
04:27 There is no pass-through cost in this case.
04:30 This is efforts and this is people, which is normally.
04:34 See, we have traditionally operated at the 18% plus EBIT margins.
04:39 We structurally continue to operate at that 18% plus EBIT margins.
04:43 If I go back three years, we used to be about that 14, 15% range.
04:48 We were able to improve ourselves that 18% plus range and we continue to be in that area.
04:53 There will be continued investments that we will make over a period of time.
04:58 And that's where we will end up.
05:01 So I'm reconfirming structurally at about 18% plus.
05:05 This particular deal will be at the same segment margins as a segment operates at.
05:09 And we continue to hire and leverage other levers that we have got in our hands, including
05:15 freshers, rate increases, improving the offshore pyramid that will help us in terms of operating
05:21 at levels that we've operated at.
05:23 Amit, if I understood correctly, this should start reflecting on your top line of the revenue
05:31 credit from the first quarter of FY25?
05:33 Is that a fair example?
05:34 Yes, ma'am.
05:35 Also, we talked about how this was a long term deal.
05:39 And as you clearly mentioned, it's a five year deal.
05:41 Too early to talk about scope of renewal, right?
05:44 Yes, yes.
05:46 We're just starting.
05:46 We're just starting.
05:48 We're just being optimistic.
05:49 Not just that, this also allows us to be thankful to 4Wear for having their confidence in us.
05:57 This will become a top 20 account for the company immediately.
06:02 And then we are talking about other areas that we could work in together.
06:06 With 4Wear, 4Wear is an up and outward looking tier one automotive company.
06:12 We're talking about other collaboration areas as well.
06:15 So there is scope for increasing wallet share, if I understand that correctly.
06:18 Yes, ma'am.
06:20 Yes, ma'am.
06:21 You talked about how this is significant because of the geography as well.
06:24 This is a market you want to focus on.
06:26 More conversations underway in this geography.
06:29 Can we hear from the company sooner than later about more order wins?
06:32 Anything that's at the conclusive stage in that sense?
06:35 So all I would say is that Europe grew faster than company average in the last two years.
06:41 And I would like to confirm that Europe will grow for us more than 15%.
06:45 So the organic guidance was 8 to 10.
06:48 Europe for us will grow more than 15% for us in FY25.
06:53 And we are making sizable investments in the geography.
06:57 We are, there are other deals in play that we have at this point.
07:00 There are other empanelments that we have got going on.
07:03 So we are fairly upbeat about the geography as we move forward.
07:06 Right.
07:07 Amit, also with the fact that employees are going to be transferred from Foreo to LTTS,
07:13 how will the employee pyramid look like?
07:16 So this is, see, we've got 25,000 odd people now in the company.
07:22 And this is only about 300 people.
07:24 So it's not a very big lot to create a difference in the pyramid.
07:28 At the same time that we are hiring people, that we're taking over people from 4BiA,
07:32 we are also taking on a number of freshers in the company from colleges.
07:37 Our intake of freshers was close to about 1500 plus last year,
07:40 will remain at similar levels or slightly higher levels in FY25.
07:46 So I don't see this impacting the client, the employee pyramid in any way.
07:49 In fact, I do believe that by the time you end FY25,
07:54 we should have a better pyramid than we had in FY24.
07:58 We are also investing in areas of AI,
08:00 and that is allowing us to make changes to the pyramid
08:03 in a manner that helps our margins as we move forward.
08:08 Very quick last question, and I'm certain you've had
08:11 an extensive conversation about this around the earnings as well.
08:15 This from the sound of it is a clean cut transformational deal, right?
08:19 It's discretionary spending.
08:21 And that's largely when the concern with the industry,
08:23 where these deals are not coming through,
08:25 they're not converting into revenue.
08:26 And those have been the bigger problems industry wide.
08:29 Do you feel like with this order, when you're a lot more confident
08:32 that discretionary spends are up to pick up from where we stand?
08:37 So what I would like to confirm is that if you look at the ER&D space,
08:43 a significant part of the ER&D spend is what I call tied to product shipment.
08:49 As long as the product ships, as long as the product is consumed,
08:54 you will have ER&D spends.
08:56 That's why you've seen ER&D companies doing better
09:00 as they have come out with their results in Q4
09:03 and the guidance that we've all provided you in FY25.
09:07 ER&D has done more outsourcing to India as opposed to IT,
09:13 and the growth has been higher, even though the wallet,
09:16 you know, it's smaller in terms of size in FY24 as well,
09:19 per reports that you would have already read.
09:21 So I do believe that as we move forward,
09:23 FY25 will see ER&D continue to accelerate and expand
09:29 as compared to the IT sector.
09:30 And this deal is just one in terms of the others
09:34 that we are already, we've got in the pipeline,
09:36 and we continue to pursue those to see which ones will close when.
09:40 But we're fairly cautiously optimistic about the future
09:43 and what it holds for us in FY25.
09:45 Just one last question.
09:46 This is, of course, keeping up with the commitment
09:50 of organic growth that you had set out for LTTS and FY25.
09:55 Any update on M&A activity?
09:58 How soon can you be looking at closing an acquisition?
10:01 Anything on the cards that you want to tell us?
10:02 So there is various, so look, there are three areas
10:06 that we will focus on, that we are focusing on for M&A.
10:10 It's in the ISV hyperscaler space.
10:12 So a service provider that potentially is working
10:15 with hyperscalers in the automotive area in Europe,
10:19 or in the medtech area in the US.
10:21 So these are three areas.
10:23 We've got various companies in the pipeline
10:26 that we continue to talk to.
10:27 And we stay invested in the fact that we'd like to get
10:32 to the $1.5 billion run rate before the end of the year.
10:36 And so therefore, more action to be done
10:38 and more announcements.
10:39 We just started the quarter, we just started the year.
10:43 Couple of more conversations lined up with regard
10:46 to the numbers itself, we're in the thick of earnings.
10:48 But first up, we'll go straight to that, in fact.
10:52 First up, we have Rucha who spoke with Railtel's Sanjay Kumar
10:58 about the quarter gone by.
10:59 Listen in to a slice of that conversation.
11:01 This year, we will be around 40 to 60%.
11:06 You are right.
11:06 60% from project business and 40% somewhere around.
11:13 We'll be from telecom business.
11:14 Sure, sir.
11:16 So just one more thing.
11:17 When I look at the EBIT margin of these segments,
11:21 I think the project work is slightly a lower profitable
11:25 segment, if I'm not wrong, while telecom services
11:28 has a higher margin.
11:31 But in terms of revenue split, we have less revenue
11:34 coming from telecom services.
11:35 So how do you expect this to move around?
11:39 I mean, lower share from higher accretive business.
11:43 So what do you think around this?
11:44 Yeah, yeah.
11:46 So this year, there are a couple of good contracts,
11:51 tenders being already floated by railways.
11:55 And railways, we're being from railways, signaling,
12:00 and telecom sector.
12:03 So we expect that in those words, we may get better margins
12:10 because we are working on those tenders for quite some time.
12:16 Those are from LT and Kavach, where we have worked out
12:20 a strategy and two tenders of around 17 to 1800 rows
12:25 are already there.
12:26 So earlier year, I know to get into education sector,
12:31 we had to enter.
12:32 We wanted to enter the education sector.
12:34 So we had to take some very low margin works
12:38 also to win the works.
12:40 This year, we have grown wiser and we are also taking
12:45 that care that our margins in project business also improves.
12:49 So we are sure that we will remain in 17 to 18%
12:53 of EBITDA margin, or maybe if you talk of EBIT,
12:56 yes, 12 to 13% should be there.
13:00 Right, right.
13:01 Got that.
13:02 So next in terms of your cash generation, right?
13:06 So when I look at the CFO to EBITDA margin,
13:10 that was pretty healthy, more than 100% for financial year
13:14 '23, while it has come down a bit in FY '24 to around,
13:20 say, 70% levels when I look at CFO to EBITDA,
13:23 excluding the exceptional items.
13:25 So what do you think on the cash generation?
13:28 What can be a sustainable ratio going forward
13:32 on your basis?
13:34 I think I don't find any issue in cash generation.
13:38 Last year, we had tweaked our ECL guidelines.
13:44 So maybe you are able to perceive it a different way.
13:47 But now we have mostly, we have actually fine-tuned it.
13:52 And this year onwards, even '23, '24 also,
13:56 we have now, we are satisfied with our ECL guidelines.
14:02 And we are sure that there should not be any problem
14:05 in cash generation.
14:08 OK, OK, OK.
14:10 Got that.
14:10 So OK, got that.
14:13 So in terms of other expenses as well,
14:15 so when I see the other expenses item was around 9 to 10 crore
14:22 last year, the same cost of the other expenses
14:26 the same quarter of last year, while it has been around,
14:29 say, 14 odd crore.
14:32 So what is the major share in this other expenses?
14:38 And how can we see that going forward?
14:41 I mean, what constitutes the highest
14:43 share of other expenses?
14:45 See, I will come to that.
14:49 I will come to that.
14:51 Before that, you can ask some other question.
14:53 But these are very small numbers.
14:55 The other expenses include mainly administrative expenses
15:01 sometimes.
15:02 I'll just come to that.
15:06 Office rent.
15:08 Sure, sir.
15:08 Not a problem.
15:10 OK, fine.
15:10 So let me move back to margins.
15:12 A couple of things that I would want to understand.
15:15 So in the last quarter's commentary when I read,
15:21 you'd mentioned that you would expect the project margins
15:24 to be in the range of 5% to 7%.
15:26 So do you still stick to that?
15:28 Because when I look at the EBIT margins for that
15:33 in the current quarter, it is a tad lower
15:35 than what you had mentioned for the long term.
15:37 Do you still stick to that target?
15:40 Or do you would like to revise it?
15:41 Yeah, so very, very right question.
15:45 So the last quarter, incidentally,
15:47 it was a one-off incident that we
15:50 had a few low margin businesses which we got the last year.
15:56 And incidentally, those were executed
15:58 in the last current financial year,
16:00 and last of the previous financial year.
16:03 But if you see the overall margin,
16:07 we remain in the 5% to 6% region only.
16:11 And there should not be any problem.
16:14 Rather, I'm expecting to make it even healthier
16:17 this current financial year.
16:19 Mm-hmm.
16:20 OK, sir.
16:22 Another question around CAPEX, maybe.
16:26 So what kind of trajectory do you expect it?
16:31 Do you expect it to increase or just remain
16:35 around the current levels?
16:36 Yeah, we will certainly have plans.
16:39 We have plans for this year for around 250 crores of CAPEX
16:45 in the range of 250 crores.
16:48 We have increased budget for CAPEX this year.
16:52 OK, got that, sir.
16:55 OK, sir, so another question which I'm--
16:59 I can answer your previous question, the other expenses.
17:03 So there was nothing exceptional.
17:06 There was routine expenses.
17:08 And if you see the overall--
17:11 if you see the total revenue and the amount of other expenses,
17:16 it's not that much.
17:18 So I don't see any reason to worry about that.
17:22 If these are rents, trainings, business promotions,
17:26 legal charges, and all that.
17:28 Nothing special.
17:29 Sure, sir.
17:33 Lastly, on Edge Data Center, just wanted to know about
17:40 where are we in that context?
17:43 And what do you expect from the same going ahead?
17:48 So Edge Data Centers, we have already finalized the partners
17:54 and partners have started working on survey.
17:57 And this year, we are expecting that at least 10 to 12
18:01 Edge Data Centers will become operational.
18:04 And next year will be, of course, the remainings
18:06 will come out.
18:08 And we are very hopeful from--
18:12 Edge Data Center business.
18:15 Maybe by the end of the present current financial year,
18:20 we start seeing the results also.
18:22 Okay, so end of current financial year is what you mentioned
18:27 that you will see the synergies from.
18:29 Okay, and another last question around maybe 100 locations
18:34 that you had identified last quarter,
18:36 anything around that, any increase or decrease
18:38 or change in estimates around that for Edge?
18:41 That will be around 100.
18:43 And this year, we should be, I told you, 10 plus numbers,
18:48 10, 12 numbers, major Edge Data Centers will come out.
18:53 Sure, sir.
18:57 That's it from my side.
18:58 Thanks for joining us on the show.
19:00 And we'd like to have you back again soon.
19:03 Thank you.
19:03 All right, that's the management of Railtel.
19:07 Let's switch over though to NeoGen Chemicals,
19:10 that one in focus as well.
19:12 The company reported an 18% jump in net profit
19:15 as well as a margin expansion in Q4.
19:18 We spoke to the company's managing director,
19:20 Dr. Harin Kanani on the quarter gone by
19:24 and what to expect going forward as well.
19:27 Listen in.
19:27 Last year, we have seen dramatic changes
19:31 in the raw material prices,
19:32 especially lithium, which was dramatically down.
19:35 So while you can see on quarter on quarter,
19:38 our lithium sales have reduced significantly,
19:41 but that's mainly just because of the price.
19:43 And in terms of volume, there was a 5% to 6% increase there.
19:47 And where we saw biggest increase was in our organic,
19:49 where we see both volume as well as revenue growth,
19:52 that the revenue growth was almost close to around 20%
19:56 and the volume growth was around 25% to 30%.
19:58 This was aided also by the acquisition that we did
20:03 for making organolithium compounds, Bui-Lai chemicals.
20:07 So that also was about done three quarters ago
20:10 and this quarter, it also contributed significantly.
20:13 So that also aided in increasing our organic revenue.
20:16 So overall, if we speak,
20:17 like in terms of volume growth for the whole year also,
20:21 there was almost a 30% increase,
20:23 25% to 30% increase in the organic production
20:28 and around 5% increase volume growth in the lithium overall,
20:34 giving us the increase in this quarter of around 20%.
20:36 Okay, so good volume growth here.
20:39 And we did see uptick in our margins also.
20:42 What were the levers for the margin uptick?
20:45 Just better volumes.
20:48 And again, before the percentage margins look lower
20:51 because lithium was a high price,
20:53 which was getting passed on.
20:54 And now that was not getting,
20:56 like, now that lithium prices are lower,
20:59 in terms of percentage, it looks slightly higher.
21:02 So that's why we basically request our investors
21:06 to basically focus on more absolute EBITDA
21:08 as compared to percentage EBITDA
21:10 when lithium is very volatile.
21:12 So basically now the lithium prices are like staggered
21:17 and they are one of the,
21:18 like close to one of the lowest prices
21:19 which we've seen in recent times.
21:21 So that's what gives a view that the margins are improved.
21:25 Okay.
21:25 Yeah, please go ahead.
21:27 No, and the other part is the volumes growth,
21:30 which we had, which has improved the margins.
21:32 Okay.
21:33 And also, is there any seasonality in your business?
21:36 Because if I see your numbers,
21:38 every time your H2 seems to be good as compared to H1.
21:43 So, we are a company which are always trying to grow.
21:47 We are doing new molecules.
21:48 So, that's one of the factors that some of the initiatives
21:52 that we take, start giving results
21:55 towards the end of the year.
21:56 So that's one of the factors.
21:57 The second factor usually is that our lithium business
22:00 generally does well in the last quarter,
22:02 where there are some tax benefits to customers
22:06 or users of the machines.
22:08 So generally our customers have a higher demand there.
22:11 And we also expect exports to be a little bit higher
22:14 in like second half of the year, normally,
22:18 both agro and the pharma segment.
22:20 So that's reason why our Q4 is usually higher.
22:24 And the same thing is also there for our pharma customers
22:26 who are in the international market,
22:28 where they also see higher demand in Q4.
22:31 So consequently, we also have slightly higher demand.
22:34 And there's a very detailed statement
22:35 in our investor presentation on our website,
22:38 which explains the seasonality.
22:40 Also now, let's talk about your battery material,
22:44 wherein all the investors are more,
22:49 what do you say, focused on,
22:52 considering the growth prospects that you have on that segment.
22:56 You are doing a greenfield project
22:59 when it comes to your battery material.
23:00 So can you just give us the key details of that project?
23:04 Sure. So actually we have two parts of the project.
23:08 Well, there's actually a brownfield.
23:10 In our existing lithium plant,
23:12 we have converted and we have set up
23:14 in our Daheja Sizzat unit capacity,
23:17 which can start lithium carbonate,
23:19 which comes from the mine,
23:20 do the purification, make the intermediate
23:22 and make the final electrolyte salt
23:25 and do the final formulation,
23:26 which will directly go to batteries.
23:29 So we start from something which comes out of mine
23:32 and then take it to very high purity level,
23:34 which will be ready to go to the batteries.
23:36 So the phase one of this is in our existing unit,
23:39 which is brownfield.
23:40 And like the first commercial plant of this,
23:43 like basically has started coming online stage by stage.
23:46 Part of the electrolyte salt capacity is already online.
23:50 We also made some initial trial production sales
23:53 for customer approvals and like, you know,
23:56 the final electrolyte also the trial production
23:58 for the rest also has started.
23:59 That was the management of Neogen chemicals,
24:04 but completely out of time on this edition
24:06 of Earnings Edge from myself,
24:08 everyone who puts the show together.
24:09 Thanks so much for watching.
24:11 Stay tuned to NDTV Profit, more on the other side.