Ladies and gentlemen, good day, welcome to the Cyient Limited Q1 FY 2024 earnings conference call. As a reminder, all participant lines will be in a listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note, this is being recorded. I now hand the conference over to Mr. Krishna Bodanapu, Executive Vice Chairman and Managing Director. Thank you. Over to you, sir. Thank you, Aman. Good evening, ladies and gentlemen, welcome to Cyient Limited's earnings call for the first quarter of financial year 2024. I'm Krishna Bodanapu, Executive Vice Chairman and Managing Director. Present with me on this call are Mr. Karthikeyan Natarajan, CEO and the Executive Director, and Mr. Prabhakar Atla, the Chief Financial Officer. Before I begin, I would like to mention that some of the statements made in today's discussions may be forward-looking in nature and may involve risks and uncertainties. A detailed statement in this regard is available in our investor update, which is available on our website and has also been emailed to you. This call will be accompanied with an earnings presentation. The details of the same have already been shared with you. As you know, Cyient DLM Limited listed on 10th July 2023. I want to take this opportunity to thank you for the overwhelming response to our IPO. Over the past several years, we have demonstrated Cyient DLM's credibility and capability in a wide range of design-led manufacturing solutions, and we are now, with your support, well-positioned to leverage the tailwind in this space. I'd also like to take a moment to thank the Cyient team that made the IPO possible, and for doing this in a very short and compressed timeframe. I also wanted to share an important update on the US Department of Justice case. The case against the Cyient executive on grounds of alleged violation of the Sherman Act has been dismissed in April 2023. Cyient has always conducted business with strict adherence to our values first framework. The acquittal of our executive further proves the highest standards of ethics our business adheres to. We remain confident that this will have no materially adverse impact on the company's operations, finances, or liquidity. At Cyient, sustainability is also important to the way we operate and underpins our overall vision. It is also one of the five mega trends that we are focusing on. Cyient has demonstrated its dedication to sustainability by participating in the Dow Jones Sustainability Index, a renowned benchmark for sustainability business practices that generate long-term value. We scored a great score of 66, surpassing the industry average in all categories, and we are confident that we will increase on this number going forward. With this, I would like to hand over this call to Prabhakar Atla, who will take you through the financial performance for the quarter. Thank you, and over to you, Prabhakar. Hello, everyone. Firstly, let me thank you for joining the call today. We greatly appreciate your time, we greatly appreciate your interest, and very importantly, your active participation in today's call. Before I proceed to present the results, please allow me to provide a quick overview of how Cyient's business is currently classified into various segments today. In this page, you'll find the nomenclature and current classification of Cyient's business segments. As you can see, we now have three business segments into Cyient group. Cyient DET, which is a short form for Digital Engineering and Technology segment is Cyient DLM, and Others. On Cyient DET, the reason for this nomenclature is that most, if not all, of what was traditionally engineering and engineering services, has already significantly transformed in the recent past with the adoption of digital transformation. This is now further rapidly evolving into adoption of advanced technology, such as generative AI. Therefore, as we stand here at a point of inflection, we see ourselves as a strong and growing player in this rapidly evolving space, and therefore, also the evolution of nomenclature at Cyient as Cyient DET. Cyient DET, as a representative segment from today, includes the erstwhile services business of Cyient, that includes core services plus acquisitions, as we were calling it before, plus a small portion of engineering parts business, which was earlier classified under DLM. I repeat, Cyient DET business, as a representative segment from today, includes the erstwhile services business of Cyient, plus a small portion of engineering parts business, which was earlier classified under DLM. Apart from evolution of segment nomenclature from services to DET, for reasons explained earlier, the additional item here is the reclassification of engineering parts business, and this reclassification is based on business and client adjacency, and was then previously held in their situation. This reclassification does not have a major impact on Cyient's DET business. Just as a measure of quantum, the engineering parts business, which is now merged into DET, has a revenue of about $0.9 million per quarter. I repeat, $0.9 million per quarter, which is about 0.5% of Cyient DET revenue. We have not reclassified the previous periods for this segment, given that the impact is minor and then some comparison may not be like to like, and we will attempt to provide a clarification in such instances in this call. The second segment is Cyient DLM. This is the DLM part of our business, which was diluted after the reclass of engineering parts business as before. The third segment is Other, which now includes Cyient aerospace tooling business, which was earlier classified under DLM and has been reclassified due to the diversity. The classification of business units within Cyient DET depends the same as delivery and services, which are basically transportation, connectivity, sustainability, and HDA. Today's presentation and discussion is on Cyient DET only. All the numbers and the data are for DET only, unless mentioned otherwise as group. We have received quite some valuable feedback from most of you on the content of this presentation, with a request to simplify and focus on highlights. Going forward, we'll adopt a dashboard model for this presentation on financial performance, with relevant details already shared in the next year. In the dashboard model, you will see that we are representing our performance across six key metrics, which basically are revenue in US dollar term, revenue in INR term, EBIT% term, PAT in INR term, EPS in INR term, and FCF in INR term. For each of these metrics, you'll also see that we have depicted the movement on QOQ and YOY basis. Before I walk you through the commentary, let me just summarize that we strongly believe that our Q1 FY 2024 witnessed a well-balanced performance, which was in line with our expectations. In terms of Q1 FY 2024 revenue, the Q1 FY 2024 revenue for DET stood at $177.1 million, at a growth of 0.3% quarter-on-quarter in constant currency and 30.6% year-on-year in constant currency. This, of course, includes the engineering part business. We have not presented the previous period numbers since the impact was not significant. A like-to-like movement for what was services revenue earlier, would be a movement of minus 17 bits quarter-on-quarter, constant currency, and sequential quarter break. In INR terms, the Q1 FY 2024 DET revenue stood at INR 1,455 crores, with a growth of 0.4% quarter-on-quarter and 37.2% year-on-year. I repeat, a growth of 0.4% quarter-on-quarter and 37.2% year-on-year. We have two key growth drivers behind this performance. The first is that our core segments, aerospace, automotive, and sustainability, continue to witness a very strong growth QOQ and YOY, and also our key clients, top five and top 30, continue to witness strong QOQ and YOY growth. Mr. Karthik Natarajan will address this in more detail in the business outlook presentation. In terms of normalized EBIT margin, the Q1 normalized EBIT margin for DET business stood at 16.1%, which is the highest we've had in the last nine years, and also grew by 93 basis points quarter-on-quarter and 327 basis points year-on-year. I repeat, the services EBIT margin, which was called services earlier, DET, is at 16.1%, which is the highest in the last nine years, which expanded by 93 basis points quarter-on-quarter and 327 basis points year-on-year. In rupee terms, the Q1 FY 2024 DET normalized EBIT is highest ever, at INR 234 crores, with a growth of 72.1% year-on-year. This margin expansion is driven by continued improvements in SG&A costs, resulting from optimization initiatives that we've undertaken in the previous quarter. In terms of normalized PAT, the Q1 FY 2024 normalized PAT stands at INR 170 crores, translating into a normalized PAT growth of 6% quarter-on-quarter and 56.3% year-on-year. I repeat, the normalized PAT growth for this business is at 56.3% year-on-year. This then translates into a normalized EPS of INR 50.5 for Cyient DET. In terms of free cash flow, the Q1 FY 2024 FCF stood at INR 176 crores, a growth of 150.5% year-on-year, which then translates into a conversion of 108.9% on reported PAT. As I close this chart, I'd also like to draw your attention to the balanced progression that one can see among several metrics. With revenue growth of over 30% year-on-year at constant currency terms and EBIT expansion of 327 basis points YOY, the PAT grew by 56% YOY, while retaining focus on FCF, which also absolutely grew by 150% YOY. Hence, our opening comment on we seeing it as a balanced performance in the beginning of my presentation. In terms of group numbers, the group numbers, you see here, are a combination of all three segments we went before, I just follow with a few comments. At $205.3 million, the group revenue for Q1 FY24 grew by 28.6% year-on-year in constant currency, the sequential growth was impacted with techni-cyclicality in DLM business, which would recover in the subsequent quarter. The Q1 FY24 normalized EBIT margin was at 14.7%, highest ever we've had in the last nine years, up by 332 bit year-on-year. The Q1 FY24 PAT stands at INR 177 crores, up by 52% year-on-year, while the FCF has also improved by 60% year-on-year. Therefore, also at the group level, we believe that this is a well-rounded performance, in line with our expectations, and this also gives us a very strong start into the financial year. With this, I'll now hand it over to Mr. Karthik Natarajan for an update on the business performance and outlook. Thank you, Prabhakar, good day, everyone. I'm trying to deep dive on some of the vertical performances that I will cover in the next few minutes. We had an all-round operational good quarter for us in terms of Q1 FY24. If you look at the four segments that Prabhakar detailed out as part of the Digital Engineering and Technology business. Starting with transportation, which is grown by constant currency, 3.2%, and then year-on-year, 19%. Connectivity business, which is affected by the wireless telecom operative business, which has shrunk slightly compared to Q4, so that has taken about -2.4% decline in Q1. Sustainability business, enabled by growth in energy mining and utility business, has had a solid quarter of 4.5% growth quarter-on-quarter. This business has grown, including VTech, at 104.3% year-over-year. New Growth Areas, which are at $30.5 million in Q1 FY24, has had a deep growth of -6.5%, this is attributed to the high-tech and semicon growth that we have seen, while we continue to see momentum in our automotive business, which has really grown very well compared to the last quarter. In terms of order intake, this is more of seasonality that you see on QOQ, year-over-year is the right measurement to compare with. We had $193.2 million of order intake, which has grown by 32.5% year-on-year in terms of constant currency. Our offshore mix continued to stay at 44.4%, as you may remember, the earlier core business of Cyient, which has moved to 54% over the last eight to 10 quarters. We have an opportunity to improve on this with all the acquired entities put together, which is back to 44.4%. We won six large deals in the last quarter, which is amounting to about $49 million. Interestingly enough, some of these deals include the software-defined vehicle for trucks and autonomous perception systems for construction equipment and grid analytics, and also floating production, storage, offloading for LNG and for one of the oil and gas customers. Very interesting quarter in terms of our performance on large deals and what we have seen on the operational. To move on and to share more of outlook for rest of the year. We continue to see the investments around the green transportation, energy transition, defense and security, digital health and automotive, as well as on the decarbonization areas. We have seen a significant momentum on the aerospace growth, and this will probably continue to be there towards this year, and both on new aircraft demand as well as on the MRO side of the business. I think both are looking strong for the rest of the year. We also started seeing momentum around advanced air mobility solutions, and this is one of the diversifications of our core aerospace business into urban air mobility. This probably gives us an acceleration over the next three to five years as the business evolves. In terms of connectivity business, I think wireless wide business, which is definitely on a stronger footing, with some of the funding coming from the US government on RDOF, which is called as the Rural Digital Opportunity Fund, and BEAD, which is the Broadband Equity, Access, and Deployment programs. They are likely to be about $60 billion plus spend over the next three to five years, and this continue to be the drivers of growth, apart from the public and private wireless, that we've spoken about in the past. In terms of sustainability, the energy minerals are at an all-time high in terms of demand, whether it is lithium, nickel, like cobalt, copper, and also the decarbonization related investments are continuing to increase from our customers. We are also seeing, hydrogen and ammonia-based green energy and carbon capture utilization. These are the investment areas we are seeing the momentum, we'll talk about more in the subsequent slides. New Growth Areas, this is the growth is led by automotive, again, by software-defined vehicle and electrification. We have seen some softness in the semiconductor business. We hope that gets better during later part of this year. Semiconductor business are seeing momentum from high-performance computing, artificial intelligence, and other segments. Healthcare and life science business has been flat as compared to the last quarter. We expect that to start getting into the growth trajectory in the H2 of this financial year. With that said, our investments around technology solutions and digital areas continue to really yield better results for us. To share some of the success stories, we won a very large program on semi-autonomous drive collision and obstacle avoidance system for a construction equipment major from Europe. This is one of the prestigious programs from Cyient, based on the capabilities that we built over the last three years, and we are actively working with the customers to convert most of their products to be enabled for autonomous systems. We also have won some of the projects from customers on ADAS feature development and integration with the EV truck. Software-defined vehicles, our core embedded and vehicle application software for one of the European truck manufacturers. These are some of the terrific wins that we had in the last quarter, and we expect the growth in automotive and off-road highways will continue to expand based on some of these wins. Network analytics and automation led by cloud-enabled and AI-driven analytics and zero-touch provisioning, and have really given us some of the results and new wins that we had, and also the pipeline that we have seen in this area is very strong. Enhanced grid analytics to integrate AMI data with some of the ESRA tools that we created some integration programs. I think they are continuing to fare well for us, and we're continuing to build momentum on the utility business that we are in. Generative AI, this has been one of the interesting areas of topic over the last six to nine months. We started seeing a lot of interest from our customers in terms of implementing conversational AI systems and distributing the contextual content to various stakeholders in a human-like natural language. Whether this is about product support, customer experience, and trying to help them through the complete aftermarket life cycle. SideVision, which is one of the video intelligence platform that we have built, and how we think this can help to identify the objects, such as vehicles and persons from live videos using deep learning modules. We continue to make progress on AThousand software testing and industrial data fabric with AWS as one of the key partnerships that we built, and also continue to make progress on optical grid analytics. With that, I will just move on to the next topic, which is about guidance that we have shared in the past. For DET business, which is managed services plus other small parts business, we are keeping our guidance at 15% to 20% year-on-year in constant currency terms. In terms of EBIT margins, we have guided earlier at 100 to 200 basis point improvement, and based on the operational efficiency that we have seen in the first quarter, we are revising it upwards to 150 to 250 basis point year-on-year. With that, we'll stop here and probably open for Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets when asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead. Yeah, hi. Thanks. Karthik, firstly, on the growth outlook, given that the Q1 was fairly muted, where are you getting the confidence for, you know, kind of delivering that 15% to 20% type of growth in services? Especially if you can speak about the connectivity part of the business, that's an area where we are kind of seeing weakness across regions, you know, from companies in the space. Is that something which will, you know, kind of remain a drag, and you will kind of deliver despite weakness in that space? Sure. Thanks, Mukul. To answer your first question, I think we understand the ask rate would be anywhere between 2.5% and 3.5% QOQ for the next three quarters. I think that's definitely within the reach of what we are looking at. That's the reason why we kept our revenue guidance intact. To answer your second question, I think, see, connectivity has two parts, right? One is the wireline, the second is the wireless part. The wireless is only about 20% of our business, and what we are seeing, the softness is from one of the customers. We hope we can probably see a pipeline that we already have getting converted into any part of Q2, which will probably give us a little advantage towards the financial year. On the wireline part and some projects which got shifted to the right, the investments still continue to be reversed, and especially the government funding, which is being talked about a year ago, have been assigned to all the states. The states are in the process of running RFPs and be able to distribute the work during sometime in Q2 and Q3, which will expect us to see the growth coming back in the second half of this financial year. Right. you know, just to follow up on that, is there a risk in case that space remains under pressure to our full year guidance? you know, do we think we have built in some buffer? I have a follow-up for Prabhakar. Yeah, I think, whatever we see at this point of time, we are keeping that 15% to 20% range, Mukul. I would just hold at that level. Sure. Thanks. Prabhakar, was there any reclassification during this quarter? The gross margin were down very sharply on the services side and, Sorry, gross margins were up very, down very sharply, and, similarly, your SG&A was also, you know, kind of down almost 300 basis points. Mukul, thank you for the good question. No, there was no reclassification during the quarter. Firstly, as we spoke, the significant improvement we have seen in the EBITDA this quarter is basically because we've been driving SG&A improvement for the last several quarters. We've been doing this exercise for most of last year, but we also had cost structure in the last year as we told those initiatives, and now we start seeing the full benefit of what we did last year in the current year. We see the improvement in SG&A translating into EBIT. That's the first part. In terms of gross profit movement quarter, gross margin movement quarter-on-quarter, this is basically coming out of two things. One is the merit increase that we had to count in Q1, and also a little bit of unfavorable revenue mix we had in Q1. This is how the global scenario evolves. These were all, there was no reclassification in the quarter. I understand. Thanks for taking my question. Thank you, Mukul. Thank you. The next question is from the line of Mohit Jain from Anand Rathi. Please go ahead. Hi, sir. Good evening. First is on New Growth Areas. I got some of the commentary, but can you just split the growth rate there? We are down sequentially in a big way. That's one. Second, our margin outlook got revised, meaning the initial guidance was also on the higher side compared to peers, but now it got revised further up. Where are we in terms of utilization? It appeared to me that attrition is still high, how do we get such high synergy or say, margin expansion opportunity into play? Mohit, I'll answer the first one, then we'll defer it to Prabhakar to answer the second one. On the first one, there are four subsegments as part of the new growth areas, right? One automotive, second is healthcare and life sciences, third is semiconductor, fourth is high-tech. Like what I shared in my brief, in the high-tech and silicon, they had a weak Q1, that's the reason why you're seeing the drop in terms of negative six point five. Healthcare and life sciences have been flat, automotive, I've seen a significant growth compared to last quarter. Sum of all this is what I've described it as like negative six point five. Automotive, automotive is flat, is it? Automotive, I've seen a significant growth as compared- Growth. Good. Okay, got it. Broadly, how is the split between these four? Like, should we assume more or less equal, or do you think it will be tilted towards one particular segment? Yeah, you can assume it to be almost on the similar range of, probably about $7.5 million to $8.5 million range. Okay, got it. Second one for Prabhakar. Mohit, on the margin front, thank you for the question once again. If you recollect the commentary we made in the Q1 earnings call, Krishna used the word pragmatic conservatism, and we've given the outlook for the full year in terms of revenue and margin guidance. I'd say the pragmatic conservatism we had in terms of the full year outlook for margin has played in our favor. As you could see, we already delivered a good quarter for the Q1 of the year, INR 3.27 billion year. We also see the potential roadmap ahead of us to extract the value of the various initiatives which we are running in SGE. Also, you've seen this performance in Q1 is even when, like, earlier questions, there was a marginal decrease in the growth margin, but we still maintain the numbers that we have maintained right now in margin front. As we recover across those growth margin segments and as we continue to extract the margin from the SGE initiative, we feel fairly confident with the updated guidance that we've provided you just now. Still being a bit pragmatic conservative. Then, like, uh, is it- Sorry, Mohit, maybe the question, please repeat that question. I couldn't hear you. For the wage hikes, will it hit us in Q2, or are you going to spread it across multiple quarters? We would spread it across multiple quarters. Part of it is already coming in Q1. The rest of it will spread across various quarters. We may not see that one quarter hit, is what you're saying? It should gradually improve. Yes. You will not see a one quarter hit, like what we have seen in the previous years, last year. It will be spread throughout the year. Right. Last one, I could not find utilization. Do you have a ballpark number, where are we currently? I think we are about 86% in terms of our utilization and actually to our comparison from last quarter. As we are in the process of getting all the companies that we acquired to be integrated, we will probably not provide the detailed breakup like what we have done in the past. Since this process will take some time in the quarter of Q2, and we would just take as the overall margins and gross margin, which kind of indicates the level of utilization of the operator. All right. 86% for the quarter, including the subsidiaries? Including what, sorry, Mohit? Including the target, 86% confirmed utilization is broadly, what we should assume for the quarter. Yeah. Perfect, sir. Thank you. Thank you. The next question is from the line of Vibhor Singhal from Nuvama Equities. Please go ahead. Yeah, hi, good evening, sir. Thanks for taking my question. Just, I know you built a bit upon it, but just wanted to understand a bit more about the optimism that we have about the transportation segment. In the, I mean, the last quarter also, we've kind of spoken about a very strong demand environment really coming up in the aerospace vertical. How do you see this industry demand shaping up, let's say, in this, the remaining part of this financial year? Not asking for a quarterly number, but do you think it's going to be a positive momentum as we have seen in this quarter to continue in the remaining part of the year? Specifically in the aerospace vertical, do you believe this cycle could actually last beyond FY 2024 as well, in terms of the opportunity that we see and the opportunity that we can capitalize on? Thanks, Vibhor, for the question. I think I think the momentum on the aerospace business, if I were to really classify into three subsegments, whether it is commercial aerospace of new aircraft, new engines, new sales, and second is the MRO part, and third is the defense business. I think all three businesses are come back with the bank as far as this year is concerned, there is definitely a very robust and strong demand. With China joining this party about six months ago, the number of aircraft that are flying at any given point of time is probably closer to what we have seen in 2019. The similar levels of air passenger miles is similar to what we have seen in 2019. That's definitely driving the demand. However, the customers are continuing to face challenges on the supply chain and labor productivity, and those two are definitely plaguing the growth that they want to achieve during this year. We hope it gets better during later part of this year. In terms of demand outlook for the next 18 months, we are positive about how this segment will look up to us for us. On the defense side, we have seen significant growth in defense and because of the conflict that was seen in Europe. I think that has really made every government to spend significant amount of money around the defense and security part, and that is likely to continue for a few more years as the internal security is becoming one of the key challenge for many countries, and they want to strengthen their internal security part. Got it. As a broad number, if I were to ask, I mean, in our guidance of 18% to 20% growth, would the transport vertical be higher than the company average, or do you believe it could probably be a similar range? I think we are interested to really make all of these four segments to grow in double digits. I I think that's the intent on which we are operating. Some would be on the higher end and some would be on the lower end. Got it. Got it. On the connectivity side, if I were just to maybe pick your brains a couple of for a couple of minutes. I think we've seen this this vertical actually being the problem area for almost all the companies, be it in the IT services business or in the ER&D space. I think the telcos globally continue to bleed, and there's not much of a trend either on technology or on the reserve, or on the research part that we are undertaking at this point of time. Do we also see the same things driving this segment, and which will probably keep this vertical under pressure in the near to medium term as well? I would say, as I mentioned in the previous question, Vikram, I think specific to wireless part, we have seen some softness and with some of the pipeline that we have today. We hope it will come back during the later part of this financial year. Broadly, what you are seeing is correct across the CSPs, the communication service providers, are muted in terms of their spending around wireless and 5G, as they've already started spending money on it for the last five years. They want to monetize some of them, while there is a pause that is seen on the wireless side. Like what I mentioned, the wireline part, which is continuing to see momentum and supported by the government funding programs on RDOF and BEAD, and these two in U.S. are likely to create significant demand over the next 18 to 24 months. Got it. Just like transportation, you expect connectivity also to be, I mean, positive, in a positive growth territory, for the full year? Which is expected to be back-ended as compared to what we have seen on the transport side. Got it. Great, sir. Thank you so much for taking my questions, and I wish you all the best. Thank you. Before we move to the next question, I'd like to remind our participants to limit their question to two per participant. If time permits, you may join the queue for any follow-up. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead. Yeah, thanks for the opportunity, and, congrats on a good execution, especially on the margins. Can you use the handset? It's not very clear. Is it better? Yes. Yeah. The first question is in terms of the guidance, again, as per my calculation, the ask rate is actually 2% at the lower end and 5% at the upper end. Even 2% is not conservative, looking at the macro environment and your commentary about the semiconductor, high tech, and communication, may have some gradual recovery rather than a fast recovery. How confident we are in terms of growth pick up starting from Q2, and do you believe 3Q, 4Q growth rates would be higher versus Q3? Yeah, just point of time, Sandeep, like what I guided on each of the subsegments. The growth is aided by what we have seen in aerospace, automotive, and energy and utility segment. We expect the growth in these segments and supported by healthcare and life sciences and connectivity during the second half of this year. We expect to keep our guidance in the same range of 18% to 20%. Okay. Where growth rates could be slightly back-ended this year versus maybe Q2 may have slightly gradual recovery as well? No, we are not guiding specific on Q2. I understand the ask rate that you talked about. We are aware of it. We are working towards meeting our overall guidance of 18% to 20%. Pramath, just in terms of question on nature of SG&A optimization. Why I'm asking this is, actually, the support staff has not gone down on a Q1Q2. What is the nature of such a big optimization which we have achieved in the Q1, and your expectation to continue going forward? Your Q1 EBIT margin is already 240 basis higher versus your FY 2023 EBIT margin for services business. That means on a next three quarters, margin may be more or less flattish, which is still a very good execution, but that is the way directionally one should think about despite wage hikes. I think it cuts across a number of levers, Sandeep, which we've already worked, like I said, in the last year. You've not seen the impact of it last year because there was also costs that we incurred along, which you're not seeing the full benefit with the full benefit in the current quarter. Therefore, our confidence that whatever we have, whatever we have done, we'll continue to maintain, if not further improve on that. Therefore, we'll continue to realize the same benefits through this full year. You, you're right, it also calls for continued execution excellence, of which we are confident of. Thank you, Sandeep. In the interest of time, may I request you to join the queue for any follow-ups, as there are several participants waiting for their turn? Thank you. The next question is from the line of Shradha from Asian Market Securities. Please go ahead. Yeah, hi, congrats on a good quarter. Couple of questions. Within transportation, would it be possible for you to split the growth between aero and rail transportation? No, Shraddha, we are not breaking down, beyond what we have categorized, into four areas, and we are not really breaking it down further on any of the. No, the reason I'm asking is, because we were facing some issues with one of our top accounts in rail. Are we out of that issue, or are we still facing some softness in that particular client, leading to overall subdued growth in rail transportation? No, we are not seeing any issue that we have spoken about on this customer over the last quarters. I think that continues to be doing well, and we don't see any negative surprise as far as the customer is concerned. Great. Another question on sustainability. Given the fact that you've shown a very strong 4.5% growth, is there any seasonality in the Citec business wherein 1Q is higher or is it, you know, business as usual growth in the sustainability segment for us? Sorry, can you repeat the question, Shradha? I'm asking whether the 4.5% growth that we reported in sustainability, does it have to do anything with the seasonality in the Citec portfolio, or is it business as usual growth for us in this segment? I think it is business as usual. Typically, what we have seen for Citec, they tend to have a high impact on Q4. That seems to be their best quarter. Q1 is not necessarily their best of the quarters based on what we have seen in the last three years of data. Right. Just one thing on the minority interest. I think the minority interest number seems to be a bit lower than what comes from calculation of what you reported for DLM financials. I was just checking if there's anything else in minority interest that has gone beyond DLM. Shradha, there is nothing beyond minority interest in the calculation, but our team will reach out to you to see what numbers you have. Sure. I think, Shraddha, just quickly on that, if you look at what has happened with the only a very small amount would have come, because that's from the pre-IPO placement. The majority would only start from July 10th. That's where you'll see the full impact only in this quarter. Last quarter, only that sort of small percentage of either or no pre-IPO placement that had happened would have come in. Thank you. That's it for the short term. Thank you. Shradha, may I request to join the queue for any follow-ups. The next question is from the line of Abhishek Shindadkar from InCred Capital. Please go ahead. Yeah, hi. Thanks for the opportunity, and congrats on a good quarter. You know, this may be a repeat question. I'm sorry I got dropped in between. I was not clear why the gross margins dropped this quarter. That's one question. The second thing is, on the SG&A rationalization, Karthik, you know, I recollect that we had been, you know, investing in SG&A, you know, after you came in in 2020. Is it like, you know, we have reached, you know, or completed that program in terms of investment in SG&A? Is it that, you know, we view that the macro is challenging, and that's why we are driving this SG&A rationalization? How should we read the, you know, the SG&A rationalization? Thank you for taking my questions. Sure. Thanks, Abhishek, I'll answer the second part, request Prabhakar to answer the first one. The second one, whatever investment that we wanted to make towards growth in terms of sales and technology and digital investments, they continue to be there. We will continue to make those investments, which are very critical for our journey for the next three to five years. That is absolutely intact. As you remember, we did an Industry Day sometime in November 2022, Krishna did talk about how we wanted to look at some of the spend that we have on G&A related to the buildings and computer hardware, software. We made certain investments around COVID, and some of them are not necessary. For example, everybody had two laptops, one in the office, one at home. Some of them are getting rationalized in terms of what we wanted to do. That exercise has begun almost eight months ago. They're starting to see results, in terms of the output, from Q1 onwards. Abhishek, your question on the gross margin movement, right? Yeah. The gross margin movement. Yes. Thank you, Abhishek. The gross margin movement between two quarters is because of primarily two reasons. One is the merit increase that we had in Q1, and also an unfavorable revenue mix in the current quarter that we expect to normalize in the next three years. Okay, okay, that's helpful. Thank you for taking my question, and best wishes for 2024. Thank you, Abhishek. Thank you. The next question is from the line of Mihir Manohar from Carnelian Asset Advisors. Please go ahead. Hi, thanks for giving the opportunity. First, I largely wanted to understand on the aero side, I mean, are customers talking about any major programs being undertaken or any major developments or any major upgrades happening? Just wanted to get an understanding around that on the aero side. Mihir, I think, I'm sure the entire industry is waiting for upgrade of what is called as the Single Aisle program. Both A320 and 737 from Boeing, I think both are almost 25, 30 year old platforms, they both need upgrade. Interestingly, what I was hearing from some of our customers I met in the last eight or 10 weeks, they were really looking for a decision around the sustainability initiative that is going to impact the commercial aerospace industry. Whether it is using more of sustainable air turbine fuel, or whether it is about hybrid, whether it is electric or hydrogen. Some of those bigger decisions have not been made, that is one of the reasons why the programs are getting delayed. We do believe it's a matter of time in the next couple of years, that there will be an announcement around new programs. The super cycle, which happens once in every 10 years, is likely to kick in anytime between 2024 to 2026. Both the platforms definitely require significant upgrade, and I'm sure it's a matter of time before both of them will come forward with upgrade programs. Like what I also mentioned, this is the first time many of the customers are seeing the reverse demand coming from both commercial and different type. This is something they always manage, one being on the high, one on the lower end, they can really manage the demand. Now they've definitely seen significant demand on both different as well as on the commercial side. Just to put things in context, if you really look at the F-35 program launched by Lockheed Martin. They are coming up for MRO now. In the next five years, there will be at least about 500 to 600 aircrafts will come up for maintenance, repair, and overall. That's the level of demand that is coming from different side, on top of some of the new programs that are being announced to upgrade F-35 over the next five to seven years. If I may just add, going back to 2007, 2008 time frame, that was the start of a super cycle, essentially, in the aerospace and design business, and we're seeing a lot of the signs of that now happening. I think, this time there's also a bit of a happy convergence in the sense that both defense, to Karthik's point about F-35, the tanker, mid-range transport, et cetera, happening. Also in the commercial side, they're teeing up for some of the new programs. We're quite confident that the aerospace sector will go through that super cycle in the coming years. I'm sure. Yeah, that's very helpful. Thank you very much, sir. Thank you. The next question is from the line of Dipesh Mehta from MK Global. Please go ahead. Yeah, thanks for the opportunity. Two questions. First of all, just want to understand the new breakup which you provided. What Cyient others include? If I want a Cyient DET, Cyient DLM, there is some gap. If you can provide some things about it and why we are keeping it separate. Second question is about on New Growth Areas. I think some of your peer indicated some kind of recovery is playing out. If you can provide some things about how you expect high-tech recovery to play out over the next few quarters. Semiconductor side, I think earlier you indicated second half of recovery. Any tangible kind of things, or it is more hope than tangible kind of outcome which you are expecting? Thanks. I'll answer the first part of the question before handing over to Karthik. Basically, if you look at it, there are two sectors are clear. One is DLM, which is design and manufacturing. The second thing is DET, which is digital engineering and technology, which is essentially the services type of businesses that we have. The other is basically to look at the side DLM business. There is one business within that, which is a tool manufacturing business, primarily centered in North America, which is about $10 million yearly run rate, slightly lower than that, but about there, which does not fit into the DLM framework, nor within the DET framework. We've kept it as Cyient others, because we did not want to put it in either organizations, because obviously, we need to first figure out where that fit is and strategically what we want to do with that business. It is potentially a business that we will consider for a for a carve out or a sale in the next few quarters. We are evaluating the options for that. When we acquired the business, there was a certain hypothesis around design of tools and manufacture of tools, which has not played out. When we did this split, we found that it didn't really fit into either business in the split, and therefore, we held it for, held it in a different unit, to figure out what the options for that business are. Sure, Dipesh, to answer your second part of the question, in the new growth areas, I think your question was on two parts. One is the high-tech, we do expect high-tech to be flat and soft throughout this year, we don't expect that to really recover back based on the customer profile that we have and the pipeline that we see. As for semiconductor is concerned, we do see momentum from semiconductor for automotive and driven by significant demand on ADAS and the electrification. We are seeing, we have won one of the large deals that we announced last quarter, and that is ramping up. We have seen softness from consumer and data center part, but we do expect the automotive business to be the most during the rest of the year. We have seen momentum from some of the pipeline that we have seen and how they are moving through the decision making cycle, and we are confident that that should probably bounce back, during the H2 of this year Thank you. The next question is from the line of Prolin Nandu from Goldfish Capital. Please go ahead. Yeah. Hi, team. Thanks a lot for taking my question. Couple of questions. Again, continuing with the previous question on New Growth Areas. The reason we have probably put in this as a New Growth Area is this is something which we are venturing into. Then when we talk about some of these macro weakness, I mean, I'm just trying to figure out whether there is a scope to gain market share here. Again, I mean, as some of the larger peers have mentioned, that high-tech is probably recovering and that we have seen in some of the high-tech stocks as well, and we are still guiding for a flat kind of year. Just, on overall basis, can you just comment on, you know, I mean, is there not a scope to gain market share? I mean, will the macro weakness continue to hit us for the entire year across all the different four New Growth Areas? Yeah, I think, Praveen, like what we mentioned, I think automotive business is on a very strong growth momentum that we have seen over the last 18, 24 months. We continue to see momentum there. Like what we talked about, two of the last big 50 announcements quarter come from automotive, and especially on software-defined vehicle for a commercial truck, as well as the autonomous perception system development for a construction equipment major. That indicate the robustness of growth that is seen from automotive. Healthcare and life sciences, like what I mentioned, it has seen a softness in Q1. We expect that to recover in the second half of this financial year. Semiconductor, which has shown a muted growth in degrowth in Q1, expect to recover again in the H2 of this year, aided by automotive and artificial intelligence, edge compute-based silicon that need to be built up, and that's driving the growth during the H2 of this year. Hi-Tech is one of the four businesses in NGA. We expect that to be soft during the year. When we talk about Hi-Tech, just to remind you that this is part of the SY, the geospatial business, and we are also wanting to really not focus significant amount of growth in that area. While we want it to drive more around, customers, from utilities and communications and, mining, and how do you think we are able to, cross-sell and drive growth in those segments, and starting to see that as an horizontal and more than a vertical moving talk. Yeah, thanks a lot. That clarifies the Hi-Tech part. Second is on this legal charges, right? Sometimes as I mean, what I understand is that one of the cases is over, one of the cases is still going on. How do we see this legal charges panning out for the remainder of the year? Do we see them coming down significantly, or do we still need to incur the kind of legal charges that we have incurred this quarter and in the last financial year as well? If you look at the two elements of that case, there was a criminal element and a civil element. The more sort of risky one and the more sort of serious one was the criminal case. The criminal case is the one where again, Cyient was never charged, or Cyient Inc. was never accused on anything. It was one of our executives, but that's been cleared. That takes out a humongous risk from the business, and therefore, it also gives us a much stronger basis to fight the civil case. From a risk perspective, I want to say, you know, the matter is closed, and we find ourselves in a good spot for this. The matter was not just closed, but it was closed very strongly in our favor by the judge, even dismissing the case. Coming to the civil matter, it will take another quarter or two to resolve. We will have some legal fees still for the next, we believe, for the next, two quarters. That's for Q2 and Q3, at a level that is lower than what we've seen in the past. We are working on expediently resolving it, but I want to say we don't anticipate, one, any great risk, because all the that element of the case has been completely solved. Also, we don't anticipate any very large quantums of legal fee for the foreseeable future. It will continue for another quarter or two at least. Cool. Thanks a lot, and all the best. Thanks a lot, Deep. Thank you. The next question is from the line of Chirag Kachhadiya from Ashika Institutional Equities. Please go ahead. I have one statistical question. After this corporate event, like we listed separately, the DLM vertical, what growth areas and the long-term strategy and place to grow this Cyient Limited business? Doesn't that we have a presence in the high growth areas, be it aerospace, automotive, defense and all? From long-term perspective, like let's say three years, four years down the line, when this cyclical sector starts getting flat growth on growth side, how we should see this company as a standalone entity? Are you talking about Cyient or Cyient DLM? I am talking about the Cyient, this, current name, yeah. Sorry? The Cyient Limited. Okay. Cyient. Okay, see, I think, the idea that we had is that there are two elements to our business. There's the manufacturing element, and again, not to talk about that here, but that's poised for some good growth. It finds itself in a good spot. The market that it operates in is going through quite a transformation, and we want to make sure it has its capital structure and ability to grow. Coming to the Cyient business, I think, the key element, if you look at it, there is the way that we've classified the business is Digital, Engineering and Technology. Engineering is the core to what we do. That is what we do well, be it mechanical engineering, electronic, network design, etc. We do various elements of engineering well. The two elements that are converging with engineering are the digital. Again, you may have heard a lot of technology speak like an IoT or machine learning, et cetera, but really there is a lot more there in terms of the application of technology and how it converges with engineering and the product. That's the whole digital play. Then, of course, the putting all this together is the technology play, which is pointed solutions that we can take to the customer. I think Karthik briefly talked about. We won our first deal for a very large perception management solution. This is taking all these skillful technologies that we have. On one side, there is the whole engineering piece that we brought to the table with mechanical, embedded software, et cetera. On the other side, we brought the digital piece to the table with elements like artificial intelligence and connected devices and so on, so forth. Technology really brings the digital element, the digital and engineering elements together. Net-net, you know, while we're in various industries, and all of them go through their various trajectories, these industries are seeing a very significant convergence of digital, which is the technology piece with engineering, which is the core of what they do. We've been very strong at enabling the convergence between digital and engineering. If I were to summarize it, I would say this convergence is what we're accelerating. You know, okay, pure engineering might go up and down, technology might go up, or digital technologies might go up and down, but this reality of convergence between digital and engineering is only going to accelerate, and that's what we do for our customers. Therefore, we're quite confident in the next four, five years, as more and more technology convergence happens into products and networks, we are very well positioned in that convergence. Thank you, Mr. Kachhadiya. Request you to join the queue for any follow-up. Also, participants are requested to limit your questions to one per participant. The next question is from the line of Vikram Gupta from ICICI Prulife. Please go ahead. Hi, good evening. Am I audible? Yeah, please. Yeah. I just have a couple of questions. The first one is on the wireless or rather the wireline part of our connectivity portfolio. As per my understanding, at least in US, it seems like the fiber rollout targets sort of peaked out in calendar 2022, and they seem to be getting revised downwards, at least by the major telcos over the last three months. If you could provide some color, whether my understanding is correct and what you are seeing on the ground. Secondly, what would be your geographic exposure within the wireline portfolio? Are you seeing the same tailwinds that you're seeing in US, maybe also in other geographies, your major geographies? Yeah, those were the two questions. Thank you. Thanks, Gupta, for putting these questions. To answer your first question, what we have seen is the fiber penetration today in North America is about 50 to 55%. What is happening with cable and media, plus the wireless connectivity enabled through 5G, all of them need fiber as a backhaul for the last mile. That's going to be critical. Three, enabled by the rural connectivity initiative from the US government, along with rural plus the urban low-income area, which is covered through the BEAD program. These are government-funded programs, these are going to be awarded to many companies beyond the large telcos, based on the location that they operate in, they go through a bidding process, that is underway as we speak. That's likely to drive this penetration of 50%, 55% to probably 65%, 70% over the next two, three years. Interestingly, we are also seeing similar initiatives across U.K., Germany and Netherlands, even in European geography. This is going to be a global initiative in terms of increasing the fiber rollout. As you cannot really say whether it is wireline versus wireless, I think you need both, even for wireless to be successful. With cable and media companies trying to ride on the streaming initiatives through wireline, I think it makes a lot more important across all the geographies. Everyone realizes on the critical infrastructure cannot function just through wireless, and they definitely want to depend on creating redundancies with wireline as well as wireless. We do believe this would probably run for a few more years before it really runs out of steam. Also there is a significant initiative around replacing copper with fiber optics. That's something which is like a legacy modernization, which is happening even within the existing fiber, which has been done over the last 15 years, would need an upgrade, and that's another cycle that is happening across many of the geographies. Thank you. The next question is from the line of Nitin Sharma from MC Pro Research. Please go ahead. Yeah, hi, thanks for taking my question. Can you please help understand if you're seeing any deal closure delays in any of these segments? Sorry, can you repeat those deals in any of the segments? Deal closure delays. Yeah, no, I think that's going to be a start stop, right? What we also looked at was out of our top 40 customers, there are five or six of them are going through some unique issues, which are not necessarily industry specific, but it is customer specific. Some of them, we do see delays, and we started seeing better decision-making maybe in the last four weeks or so, as compared to what we have seen in the initial part of Q1. Again, this is too difficult to generalize across all segments. In some segments, like what we have seen on aerospace, automotive, energy, I think they definitely have a compelling reasons for them to invest. Some of the discretionary areas where they can disperse, and we have seen some delays and not necessarily, significant delays. Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for the closing remarks. Thank you. Over to you. Thank you very much. Thank you for joining the call this evening. It has been a very important quarter for Cyient. As we've talked about, we've been able to list the DLM business and now have a clear focus in both our businesses, on this side with Digital Engineering and Technology, and on the other side with manufacturing. We're very excited about where things stand. We had a good start to the quarter. The revenue moderated a bit, but that was expected, but we're still holding to our guidance from the revenue perspective and also the 50 pipes or so increase in guidance from a margin perspective. We are very confident where things stand. Thank you for the support and we'll again speak next quarter. Thank you. Thank you very much. Ladies and gentlemen, on behalf of Cyient Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.