Ladies and gentlemen, good day, and welcome to Tata Elxsi Limited 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 the conference call, please signal an operator by pressing star zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from Christensen Investor Relations. Thank you, and over to you, sir. Thank you, Lizanne. Good afternoon to all the participants on this call. We'll be discussing the Q3 FY21 results. 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. It must be viewed in conjunction with our business risks that could cause future result performance and achievements to differ significantly from what is expressed or implied by such forward-looking statements. To take us through the results and answer your questions today, we have the senior management of Tata Elxsi represented by Manoj Raghavan, MD and CEO, Nitin Pai, Chief Strategy Officer and Chief Marketing Officer, Muralidharan H.V., the Chief Financial Officer, and G. Vaidyanathan, Chief Investor Relations Officer. We will start the call with a brief overview of the quarter gone past given by Manoj, which will then be followed by a Q&A session where all the members of the management will take part in answering the questions. We would appreciate your cooperation in restricting yourself to two questions in the first go and follow on to the queue to allow other participants an opportunity to interact too. I now hand over the call to Manoj. Over to you, Manoj. Thank you, Diwakar. Good afternoon, everybody. Thank you for joining us today and hope you and your families are safe. I take this opportunity to wish you all a very happy and healthy 2021. As you may have read the results, I am happy to report that we have delivered a superlative quarter all-round performance. Our revenue from operations grew by 10.9% quarter-on-quarter and about 12.7% year-on-year. Over 90% of this growth was volume led, the sequential growth. Our constant currency growth quarter-on-quarter was 10%, and year-on-year was 7.5%. This top-line growth was driven by strong performance in both our key divisions, the Embedded Product Design division, EPD, which is the largest division. It grew by about 9.3% quarter-on-quarter and 14.5% year-on-year. Our industrial design and visualization business also posted a smart growth of 37.5% quarter-on-quarter and 7.1% year-on-year. Our PBT, profit before tax, grew by 33.1% quarter-on-quarter and 33.4% year-on-year. The PAT for the quarter stood at INR 105.2 crore, reporting a growth of 33.3% QOQ and 39.5% year-on-year. This PAT is the highest for a quarter, exceeding INR 100 crore for the first time. Within EPD, if you look at it, the performance was all around with growth across regions and industry verticals. I think for once all cylinders were firing. All the verticals performed exceedingly well. All the geographies also performed exceedingly well. Healthcare, as I have been communicating regularly continues to grow faster than the rest with about 24% growth quarter-on-quarter. Media and communication again delivered another steady quarter with 8% sequential growth. Excuse me. We are seeing sustained recovery in the automotive market for the second consecutive quarter. Our transportation vertical grew 7.9% quarter-on-quarter. We are seeing some new deals, some OEM deals, OEMs restarting some of the key R&D programs as well as new opportunities with the suppliers. I'm also particularly pleased with the recovery in our design business. For the first time, we have seen an uptrend in growth on a year-on-year basis. This has been the focus for the management to really cross-sell design and design-led engagements into our existing accounts. I'm very happy to report that we have been pretty successful in this initiative. We have some large deal wins to report. We are hoping that we will be able to keep this momentum going forward, right. As I said during the call last quarter, we are back to our pre-COVID momentum and growth rate. I strongly believe that we will continue this momentum. As we enter the next quarter, the Q4 and the new year, we have a strong belief and confidence in the strong deal pipeline that we carry across markets and across industries. I strongly believe that there's a lot more to come as an organization. With that I hand it over to the Q&A session. We can take questions. Diwakar, over to you. Yeah. Thanks, Manoj. Thanks for that brief update. As mentioned earlier, I think we would request participants to stick to only two questions per participant. I think Lizanne will moderate it, I'm just requesting you because we have a huge number of people on the queue. Lizanne, please go ahead. Thank you very much. We will now begin with the question- and- answer session. Anyone who wishes to ask a question may please press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while 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 Apurva Prasad from HDFC Securities. Please go ahead. Thanks for taking my question and congratulations on the numbers. Manoj, my first question. It appears that the strong growth, substantial shift to offshore, both have led to margins expanding significantly above the targeted band of 20%-24% PBIT over the last few quarters. One thing I'm unable to reconcile is the increase in revenue productivity to the shift in offshore mix. Despite that, revenue productivity is up significantly. I'm assuming there is a fair bit of IP revenue in the mix. My question is twofold. First is, what's the IP component in the revenue, as we have seen some announcements around FalconEye, and how do you see that progressing? The second question is on margins and your outlook. Where do you see the offshore mix normalizing over medium term? Would you like to revise your PBT margin outlook now that we are substantially above that? Yeah. IP revenues, I don't think there's anything major to report. This growth that we're showing is not significantly led by any IP or one-time revenues, right? It's a volume-led revenue increase that we're showing. I think, if I'm not mistaken, IP revenues have been lower than the last quarter's revenue. To that extent, it is purely volume-led. Regarding margins, yes, we have been able to show much higher margins than what we have been aiming for. These are really unprecedented times, right? If you look at it, we have really used a lot of levers. For example, move to offshore, right? Traditionally, we were in that 50%-55% range, and now it's almost 67%-68% offshore. We believe this is the right sort of plus or minus 1% or 2%. I think we would be in this corridor. I think the major lever that we have used is the utilization. Our utilization rates have gone up. We have, of course, done hiring this quarter, but a lot of the revenues, we were able to deploy our internal resources and up the utilization. That is also another reason why you see a sharp uptick in our profitability. Of course, the other thing is also that Q3 typically, especially if you look at last year and so on, quite a few customers used to have furloughs around the December, New Year or Christmas time and so on. This year we've not seen furloughs to that extent. We were able to book healthy revenues even during the last month of the quarter. I think a combination of all of this and, of course, growth in our medical business, right? I've always been telling you that our medical business comes at a higher margin. The more and more the growth in our medical business continues, I think we're able to really move our overall margins in a positive direction, right. All of these factors combined together has resulted in this performance. Manoj, just one more if I can squeeze in before I get to the queue. You mentioned continuity of momentum in the near term. Any outlook on growth can you provide for the next few quarters based on the wins that you've already secured and conversations with clients around their R&D pipeline? Apurva, you know that we don't give guidance. I can say that I am pretty bullish. If I look at the order book and the deal pipeline and so on, I think we have never been in a healthy scenario like this before. I think that should give you enough confidence. Thanks. I'll get back in the queue. Thank you. The next question from the line of Vimal Gohil from Union Mutual Fund. Please go ahead. Yes, sir. Thank you for the opportunity, and congratulations on very strong numbers. Sir, my question is a follow-up to Apurva's question on margins. If I were to say that, would you expect the margins to remain at these current 30% levels? Or there are some costs at the operating level that could sort of come back once things normalize in terms of travel costs or anything else? And if you could just give a bit of perspective on your gross margins as well. If you could just give both these perspectives. Thank you. These are unprecedented times, right? It's very difficult for us to really visualize how the next six months or next 12 months is going to be. Our extraordinary profitability that we've shown, of course, is because if you have seen a lot of our travel and visa-related expenses, a number of those expenses literally come down drastically. As the markets open up. Though we have pivoted the business model to not offshore, and many customers have figured out the benefits of really doing it. We have sort of proven that, look, even with an offshore delivery model, we will be able to satisfy our customers. In all likelihood, we may not go back to the earlier situation where 50% of our revenue could come from on-site or so. I would still guess there will be a few customers who would want to have the comfort of engineers being near to their location. I would say we would be somewhere in between, right? To that extent, I would say definitely our margins will improve, but whether we will be able to keep it at the 30% and so on in the mid to long term, at this point of time, it's very difficult to tell you. We may not go back to that 10%-20%, we may be somewhere in between. That's the guess that I could hazard. Fair enough. One question on your communications vertical. One of your larger peers has been expecting the semiconductor business to be impacted. Do we have any sort of revenues coming from the semiconductor industry in our communications vertical? No. I think about three, four years ago, we exited the semiconductor space. Even though we have a few customers in the semiconductor space, we're not actively pushing that business. It's more legacy business that's continuing. Due to certain reasons, we actually had exited that space about four years ago. Right. Fair enough, sir. Thank you so much, and all the best for the rest. Thank you. Thank you. Thank you. The next question is on the line of Bharat Sheth from Quest Investment Advisors. Please go ahead. Hi, Manoj and Nitin. Congratulations on stellar performance. Thank you, sir. Manoj, I just want to understand in this our all cylinders are firing, and whether it's a vertical or geography or everything segment within that onshore, offshore mix, just want to get sense and now whatever efforts you are doing since last couple of years, how are we seeing the really outsourcing opportunity in the space, which was earlier much people a lot of were doing in-house now, showing it to the kind of confidence that and delivery we are showing? Definitely, this space, definitely there's a lot of R&D happening and outsourcing will continue. There's no doubt about that. We used to be very niche and very focused on cutting-edge technologies, and as you know, we were a lot of products or a project-driven organization maybe two years ago, three years ago. What we have changed is we have really looked at, yes, a portion of our business will still come from those leading-edge, cutting-edge product developments. That is how we build our technology capability, motivate our employees, and so on, right? At the same time, for really growth of our business and so on, we have sort of pivoted to really look at push customers, to really look at long-term engagements, multi-year engagements, and so on. I'm pretty bullish about the way we have really moved the needle from where we were about two, three years ago, and pivoted to a situation now where, if I look at the CRM that I have, and if I look at the order book that I have, and a lot of that business is multi-year, long-term engagements, multi-million dollar engagements, and so on. That really gives me a confidence that we are on the right path. Now continuing on this segment, geography-wise, a decade back, Japan was a major market for us. How are we really exploring that market, and are we seeing that opportunity from Japanese side? Japan market is a very traditional market, and I've worked for five years in Japan, so I know in and out of Japan, right? It is definitely a market that has huge credentials, but decisions are very slow, especially in this situation. The natural tendency for Japanese customers is not to outsource, but to really use their own workforce, right? They do not let go of people. Whenever any such thing happens, they would really in-source everything or they will really want to use their workforce, right? Correct. It's an important market. We stay invested. We look at opportunities that come our way, especially we have increased our focus on the medical business in Japan right now. However, growth for us will come in from both U.S. and Europe. Last question on with that in the growth perspective. Once we had an aspiration of pure growth of the mid-single digit to high single digit, with the kind of deal pipeline we have already won, and it is there. This is the beginning of that kind of your aspiration and reaching, say, almost INR 3,000 crore to, I mean, half of billion revenue in three years' timeframe? Little broader, without factoring quarterly aberration. Sure. We have huge aspirations. We have short-term and long-term aspirations on where we need to take this company. We definitely want to keep up these growth rates, not just for keeping investors happy, but internally also, we have our own aspirations that we want to achieve. Yes, we definitely would like to grow much faster than in the previous years. Thank you. The next question is from the line of Naveen Batra, an individual investor. Please go ahead. Congratulations to the team for the all-around excellent performance. Good afternoon. Thank you. Yeah. For achieving highest ever revenue and century of a PAT in a single quarter. Coming up exciting times ahead, much better times, as you have already said in your opening remarks. My question is regarding; our company has now become subsidiary of Tata Sons. Earlier also, investors as well as all the things were known that our company is promoted by Tata Sons. This is just a documentation of consolidation and all these things. How the management sees our company becoming subsidiary? Are we going to benefit strategically from this becoming a subsidiary? Because it is said that in this decade, AI is going to be a much larger scale, and especially ethical AI. How do you see this development along with the AI and 5G opportunity, which is 5G, which is going to increase the AI and all these things? If you can tell us about this one. Yeah. I think the shareholders have actually approved Tata Elxsi being a subsidiary of Tata Sons, I think with effect from December 1st. I think it's good for Tata Elxsi because it shows the commitment of the Tata Group, and Tata Sons towards Tata Elxsi. There is a lot of exciting work happening within the group, as you said, whether it is on the AI side, whether it is on smart manufacturing, whether it is on 5G, there are a number of things that are happening, and Tata Elxsi is increasingly getting involved in some of these new initiatives. I think, wherever there is technology-led development within the group, we stand a good chance to really support the group in their initiatives. From that extent, yes, it's a good step, and I think it is positive for the investors and the shareholders. Okay. Second question is regarding the, again, coming to the capital allocation in the earlier con calls also and in the AGM also. The subsequent call after the AGM, you said that company management is in discussion with the board, and we will soon come out with a revised capital allocation policy very soon. Where do we stand now? Management and boards, how these are progressing, if you can tell us about that one. Yeah. I think we've had multiple discussions with our board also. As you know, usually such announcements are made in the Q4 results, right? I would request you to be a little more patient. You would get to know maybe in the next call, how we are going to proceed. Thank you. We'll move on to the next question. That is from the line of Hiren Ved from Alchemy Capital Management. Please go ahead. Yeah. Hi, Manoj and Nitin. Congratulations. Hi, Hiren. Congratulations for industry-leading growth and margins. Great work. I just have two questions. One is that in your presentation, you mentioned that you started working with a leading EV player from North America. I just want to understand the quality of work and the kind of work that we are doing with them. What areas are we working with them? Do you see this as a start of a long-term relationship? Hiren, hi. This is Nitin here. Maybe I'll take that. Sure. Yes, we have started working with that customer from this quarter. Obviously, that is in the technology space, so we're working with them in the connectivity and infotainment domain. With regard to whether it's long-term and so on, I think that's an aspiration. I think we are being very conscious about the fact that any new customers that we add, we want to make sure that there is a pathway to both the longevity of the relationship as well as the scale of revenues. The hope is definitely that yes, we can continue to grow our engagement over time. This is an initial start, so we just about started with them this quarter. Secondly, TCS just announced sometime back that they launched Autoscape, which is a solution suite for autonomous and connected vehicle experiences. I was wondering whether this would be competing with us or is there a collaboration on this? Because we also have a platform, right? Autonomai. Right, Hiren. Just to clarify, because, of course, I will not have first-hand knowledge of TCS Autoscape, but I have looked at what all material is available publicly. To my mind, that is more of a service framework. It is not really a product or a platform. It's really, to my mind, a collection of services, capabilities, and some IP that they have, that they have built or put together as a combined offering for the automotive market, supporting autonomous and connected use cases. In some sense, it neither conflicts nor contradicts what we offer. We are very clear that we are offering a fully packaged software platform for autonomous driving very specifically. Separately to that, we have a connected vehicle platform, which as you know, we had licensed to Tata Motors and so on. In that sense, we have two distinct platforms, two distinct use cases, and of course, you can do a lot more on top of that in terms of services. At this time, we see neither contradiction nor conflict. Got it. My last question is that you mentioned you're seeing a sustained recovery in the automotive vertical. In your opinion, are these projects more a resumption of projects that possibly your customers put on hold because of the tough conditions that they saw in the early part of the year because of COVID? Or are these people starting completely new projects as well? Yeah. It's a mix of both, Hiren. It's also a new set of customers that they've onboarded, a new set of projects that they're starting, and a few projects with our existing customers that are put on hold that have now we have restarted. It's both. Thank you. The next question is from the line of Ravi Menon from Motilal Oswal AMC. Please go ahead. Hi. Thank you for the opportunity, congrats on a really good set of numbers. I just want to understand your top two to five and non-top 10 client revenue addition. I think non-top 10 is probably the best quarter ever. I think you added nearly $5 million quarter-on-quarter. Is this from one or two new customers, or this is very broad based? That's the first part. In the top two to five, are we seeing more of a recovery or is this new set of programs? It is broad-based. It is not just one or two new customers, or one or two new additions. I think beyond the top 10 customers, we have been successfully able to ramp up customers in different revenue brackets. $1- $ 5 million bracket, moving up to $5- $ 10 million bracket, and $ 10- $ 20 million bracket, and so on and so forth. We have been able to really transition a few of the customers from a lower bracket to a higher bracket. Of course, we have also added a few new customers. I would say it's a broad-based growth. I think that's positive for us. Sir, the top two to five customers, should we think about this as a resumption of a lot of programs that were put on hold during probably the Q1, or are these new programs that have been initiated? Yeah, if you really look at it's only the automotive customers that have held back. Whereas the media communication and the healthcare, we never had any. That was really one positive for Tata Elxsi. We were not dependent on any one sector for growth. We had multiple sectors that were firing for us. Yes, while automotive skid a bit, the growth really happened from media communication and the healthcare vertical. Yes, so there we don't see any holdup. In automotive, yes, there were a few programs that were put on hold that are now starting back. Now that you're operating comfortably above the target margin band, do you think that you take this opportunity and invest in more sales and marketing or something to accelerate growth? We are already doing that. We didn't want to waste this crisis. While we are pretty confident, because we have other segments of the industry vertical that were firing well for us, we were able to confidently take those decisions, move ahead, invest in sales and marketing, invest in industry consultants, invest in good delivery folks, and so on. In the last two quarters, we have done all of that. Thank you. The next question is on the line of Harit Shah from KRChoksey Shares and Securities. Please go ahead. Thank you for the call, congratulations to the management on a very good set of numbers. Just want to get a sense, can you give any data relating to what percentage of your work that you do would be design related work? Any kind of color on that front? Sorry, your voice is very difficult to catch. Is this clear, sir? Sorry to interrupt. Mr. Shah, can you use the handset mode while speaking? We're not able to hear you clearly. Yeah, sure. Is it better? Yes, it is. Yeah, sure. Okay. Congrats to the management on a very good set of numbers. Just wanted to get a sense, sir, in terms of what percentage of the work that you. Sorry to interrupt, Mr. Shah. Sir, we are not able to hear you clearly. Your voice is breaking up. Is it better now? No, sir, your voice is breaking up. Yeah. Is this better? Yes, sir. Sir, we would request you to speak slowly. Yeah, sure. Okay. Congrats on a good set of numbers. I just want to get a sense, what percentage of the work that you guys do would be related to design for us? Any kind of color on that? Numbers you are willing to disclose that? We don't disclose that. Again, if you look at our design business itself, it's about 9% or so is design business. That is a component of how design and design-led thinking and design-led businesses really affect our other embedded product design business also. Maybe Nitin would like to add something on that. Yeah, no, I just wanted to add that we don't want to go down that path of calling out the equivalent of digital revenues and then taking a bucket of water and putting a drop of color in it and calling the entire bucket digital, right? I think you end up with the same kind of error in how you look at quality of revenues and judge what is design-led. I think we are confident of the fact that design is a force multiplier. That when you start and lead engagements with design, one, it adds greater value to customers in terms of impact. And two, it creates greater demonstration of capability to implement with our customers. I think at this time, the focus is on making sure that we're able to cross-sell design and lead with design and use the growth and the resultant growth as a measure, rather than looking at how much of revenue is exactly coming from design or how much of it is influenced from design. If you get what I'm meaning, I'm going exactly in the direction of this whole business of calculating digital revenues and then companies dropping off this whole calculation because it's not a very clear, quantifiable measure. Sure. Okay, that's helpful. Secondly, what will be the impact of your in this particular quarter? Could you call out the potential impact? Sorry to interrupt, Mr. Shah. Sir, we were not able to understand your question. Is this better? Is it clearer now? Hello? Hello. Oh, hi. Sorry. Yeah. The line for the current participant has dropped off. We will move on to the next question. That is on the line of Malhar Manek, an individual investor. Please go ahead. Hello. Around 88% of revenue is from export. Clearly your revenue is quite susceptible to exchange rate fluctuation. What measures do you take to reduce it? Thank you. We of course hedge our Forex. Maybe our CFO can give a brief idea about our Forex policy. Hi, Murali here. Let me take this question. We have a natural hedge against the Forex volatility because we do have foreign expenses to be incurred into a portion of that takes care of it. Remaining, we have a policy to cover through both the options and forward cover. Depending upon the volatility and the market scenario and how the exchange rate movements happen, we do take the forward covers and options and trying to protect our inward rates. Okay. I have just one follow-up question. Also, your top five customers are around 38% of revenues. What steps do you take to reduce the customer concentration? I don't think we take any steps to reduce the customer concentration. I think it is a very positive sign that we're not a large company. Of course, companies like us would depend on the top 10 customers for a significant portion of the revenues. At the same time, as we said earlier, we are adding a number of new customers, and these are all multi-year long-term customers. They may not show up within the top 10 this year or maybe next year. As we mine that account and as we grow our business in a few years from now, many of those customers that we open up today would eventually come into the top 10 list. I think we are pretty covered there. I don't think we have a concern there. Yeah, we are only trying to make sure that the top customer concentration is a little lesser in the sense that we don't want to stop growth there, but we want to make sure that we are adequately protected against any upward or downward movements. For the rest, I think we are on right track. Thank you. The next question is on the line of Sangeeta Purushottam from Cogito Advisors. Please go ahead. Yeah. Hi, good afternoon and congratulations for a great set of numbers. I just wanted you to spend a little bit of time just taking us through the long-term structural drivers that you're seeing come through in your business, which gives you the confidence that growth is now here to stay for the next two to three years. If you could just spend a little bit of time giving a top-down view on that, please. I think when we look at our business and how we have been operating, I talk about how we have moved from a project-based business to more of a long-term, sustainable, multi-year sort of a business, right? That's been the focus for us. If you look at three years to five years down the line, we operate in three clear verticals, which is the automotive industry, the media and communication industry, and the healthcare industry. Yeah. What we have consciously done is, we have looked at adjacencies within each of these businesses. For example, within automotive industry, instead of depending all of your returns from the automotive industry, we looked at what could be the adjacencies which we can look at which utilize almost a similar skill set and resources can be easily fungible and so on. We really looked at rail and off-road vehicles and commercial vehicles and so on, so that we de-risk ourselves from a passenger car, any uncertainty. As you know, passenger car industry is a very cyclical industry. Right. That's one of the measures that we have taken. Similarly, in our broadcast and communication business, we really looked at media and new media, right? We were traditionally on the set-top box, on the video side, on the broadband side, and so on. As you know, during pandemic everybody started using OTT services and so on. We have been looking at OTT for the last two or three years. Right We have invested ahead of time, and we are well-entrenched. When the OTT wave really hit us, then we were the first to encash on it, right? Right. We really looked at that new media as an adjacency because every large company wants to get into this new media space, right? That is our other adjacency. Similarly, in the medical side, as we looked at it, we looked at the pharma industry as an adjacency for the medical business that we have, so that we can have a complete healthcare segment. Right. Our thought process is, moving down the line, about 20% of our revenues in a three-to-five-year timeframe will come from adjacencies. Right now, if you look at it, quite a few adjacencies, we've already reached 10% of that particular business. Right. We are on the right path there. I think that will help also give sustainability to our business. At the same time, de-risk the main verticals. Of course, we always keep also looking for new verticals to enter and so on. That's something that we keep dabbling in and, as and when we firm up a question, we will definitely let you guys know. Right. Is there any operating leverage levers that you have in these businesses? Once you've reached sort of stable state margins now, it's going to be at similar levels. What I'm trying to say is there any kind of platformization or product-led revenues which are possible, which could give you some additional kickers in the margins? Yes. There are opportunities, there are platforms. We have already invested in a few of them. A few of them are showing good results for us, especially on the media and communication side. Some of these platforms actually help us gain new customers. These are entry points for us to really get into some large customers and so on. Platforms definitely are there. There are innovations in business models, alternate business models. There are a number of things that we are looking at, so that we continue to show our growth, both in our revenues as well as in our profitability. Yes, there are different possibilities and the management is really working on many of these at this point in time. Thank you. The next question is on the line of Anish Moonka from JST Investments. Please go ahead. Thank you for the question. My question would be, given that the last few quarters' growth, we have continued to gain market share, given that our listed players have de-grown, other listed competitors have de-grown. What would you attribute this to? Is it just due to verticals mix like broadcast, healthcare, or would you ascertain that to some competitive advantage of ours? What would that be? Thank you. Sure. Unlike many of our competition, we are a very focused player. We are a focused engineering player, we are focused in a few niches, and we want to be the best in those niches, right? We don't really go for market share, or we don't really drop our prices and so on and go after volume. Where there is a very clear opportunity where we believe we are the best player, we really go all out. As Nitin said earlier, our design-led initiative is what that really differentiates ourselves from competition. With these design-led proposals, we can go right up to the CXOs in our customer organizations and really pitch in a much larger way than a lot of our competition can. In essence, what we're saying is we can change the game, right? We don't play the same game. We try to change the game. That's how we gain market share and we grow. Sir, is it trying to create more niche categories and basically defining new categories so that your customer can get better experiences or better products, something related to that, creating new products type of a thing, platforms? Yeah, this is Nitin here. Maybe I'll take that. At this time, I think it's clear that customer growth, irrespective of which segment they operate in, is driven by customer experience for them, their end customer experiences. Two, we are also realizing that the moment you get products connected and so on, you're able to mine a lot more data, you're able to deliver experiences on a more continual basis than just one-time delivery of a product or a service. I think those are the intersections that we are really focusing on, which is how do you help customers build that differentiation to start with. Two is how do you build those hooks into the products and services that you deliver so that you can continue to innovate on them. You can continue to deliver new features, new services, correct things that are not done too well. I think that is really the journey we are on. Thank you. The next question is on the line of Pritesh Vora from Mission Holdings. Please go ahead. Sir, first of all, very congratulations. My question is about the margin improvement. We have seen that a couple of questions came on the margin. The first two questions. My real question was, how do we see going forward? Because the YOY revenue growth is not much. The leverage we have already exhausted or do we have some more lever to see further margin improvement? Yeah. Margin improvement, I think I've answered that question. We are at about 95% utilization rate, right? If you ask me, is there option to really up that utilization? We can definitely go up a few more points, right? That's not an issue. Can we move a lot more of our business to offshore? Maybe 1 or 2% more, so that is also possible. Definitely there are levers to improve margins. Of course, our business models also, that is another way where we can improve our margins, by really looking at some outcome-based models and so on. There are a few of them that are still available that they have not fully exploited. My next question is sir. Somebody asked the question, the product or platform-based revenue. Do we have, what percentage of those product or platform-based revenue as present in present revenue streams? What percentage it has? We've not calculated that as yet, but maybe we'll have that calculated for the future. Yeah. The platform itself will not really bring us significant revenues. The platform will enable us to get into new opportunity areas and new deals, where that deals can be much bigger than what the standalone platform licenses for, right? That's how we look at our business. Again, we really don't want to be building products that conflict with our customers, so we are very careful about that. However, at the same time, we build our own intellectual properties and products that usually are building blocks for our customers, on which they can license it from us, and they can build on top of it. We'll get back to you on that number. That number will be not just an IP or a product revenue, but IP-enabled also. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to one per participant only. The next question is on the line of Kaushik Dhanuka from Dhan Commercial Private Limited. Please go ahead. Yeah. Hi. How ingrained is Tata Elxsi in JLR EV initiative? We are definitely ingrained in JLR's EV initiative. This is a pretty confidential information. I'll not be able to share too much about it, but we are there. Both for Tata Motors and JLR, both? Yes. Okay. You cannot share as to what kind of business you are doing? Not at this point in time. Okay. Another thing, the government is laying a huge thrust on the electronic sector, development of various, trying to get chip manufacturing, semiconductor, et cetera, mobiles, and even, I think medical devices. Various PLI schemes have been announced and some are expected. Do you foresee any benefit which Tata Elxsi can derive with this ecosystem developing because of this? This is Nitin here. We are examining that. In general, you would note that we operate in the product development space. To that extent, manufacturing is the end result of the product development cycle. While there is some assistance that we typically provide as manufacturing support for whoever is going to be manufacturing, whether it's a contract manufacturer or ODM or their own factories or the customer, that service is not very scaled, right? However, I think the real opportunity for us would be in two parts. One, does design or the product get localized from both component and manufacturing process perspective as well as design perspective for the country? Two, whether there are opportunities to adapt and innovate for the local markets. I think that is really where we would find revenues for us at scale, and not just because manufacturing has moved to India. Thank you. The next question is on the line of Harish Kawalkar, an individual investor. Please go ahead. Hi, good afternoon. Good afternoon. Sir, congratulations to you and your team for navigating this company in these difficult times and delivering extraordinary results. I have two simple questions. First one is, where do you see Tata Elxsi over the next 5- 10 years perspective? Second question is, where you see the difficult challenge in any segment of Tata Elxsi business? We do have our own stated goals for the next five years; we have not looked at 10 years. However, that is internal to us, and these are very aspirational goals that we have put in place and something that we are working on from a growth strategy perspective. Yes, you would see us in five years to be a much larger organization. We hope to do things much differently. We hope to innovate on business models. We hope to really open up new segments. There are a number of things that are there in plan, but I think that's something that we will let you guys know over a period of time. Challenge? Yes, there is always challenge. External environment, there is country-specific risk, there is visa regulations. There is a number of all of that, right? I think talent, and that's really not a risk because we believe we have good leadership development capabilities, good hiring plans and training plans. We have already built all of that to really help us scale our business. Challenges would be external, would be any specific industry risk that happens or any event like COVID happening. I don't think there's any specific challenge only for Tata Elxsi. Let me put it that way. Thank you. The next question is from the line of Dipesh Mehta from Emkay Global. Please go ahead. Yeah. Thanks for the opportunity. Sir, first, about the demand is very strong. How you think supply side situation playing out? Do you find any difficulty, and what would be the attrition rate currently going on? Second question is about sales effectiveness. In earlier part, we have faced some difficulty to sell to new clients. How you think that is playing out for us now? Thank you. Attrition is about slightly above 6%, so attrition is not a concern for us. Regarding hiring people and so on, I don't think we have an issue, especially in the high-growth market that we are playing in. Tata Elxsi has a name for itself, and in the areas that we operate in, getting talent is not an issue. Of course, we look at internally the resource pool that we have, and we plan our hiring and accordingly at the junior level as well as at senior levels, on need basis we hire. I don't see that being an issue. What was the other question? Considering work from home and remote working kind of environment, particularly to new client. No. Additional new clients, no. In fact, we have seen accelerated As I said in the earlier question also that we have not let waste this crisis, right? We have been investing in our sales team. We have been investing in consultants and industry veterans, and we have done a number of things, and that has actually resulted in really a good inflow of new customers and new prospects and our deal pipeline is again on all-time high and so on. I think, again, that's not an issue, and I think internally the team is also very motivated looking at these results that we can really aspire to grow in these terms, right? I think we have a very motivated team there. We have added new sales folks in the team. I think we are good there. We don't have an issue. Thank you. The next question is from the line of Rohan Samant from Multi-Act. Please go ahead. Yeah. Sir, thanks for the opportunity. Sir, my first question was, if you look at the onshore-offshore mix year- on- year, offshore has gone up from 59.7% to 67.8%. This should have meant that revenue per employee should have been under pressure, but that has actually grown. Does that mean offshore billing rates have gone up significantly or maybe that some employees are actually working offshore but billed like at onshore rates? No, it is a mix of that is something to do with our pricing and how we do, right? You need to link it to the fact that we are also looking at our utilization has increased, so that automatically our revenue per engineer would go up. Of course, you cannot generate these profit margins if you have a depressed rate, right? There are differentiated services that we offer that we are able to charge customers based on the value that we provide to the customers. I think that has helped us really maintain our revenue per engineer ratios. Thank you. The next question is from the line of Dipan Mehta from Elixir Equities. Please go ahead. Yes. Congratulations on a very good set of numbers. In the earlier question, you had referred to maybe new verticals which you would look at. Can you tell us which are the new verticals which would interest you and why, because of your special kind of strengths which may be there or skill set. Which are these specific verticals, and do they have the scope to be as large as the current verticals in the share of your revenues over the next, say, three to five years or so? Yeah, this is Nitin here. Maybe I'll take that from a strategy perspective. I think Manoj has already articulated the fact that we are expanding our footprint in our existing verticals. We're looking at adjacencies directly to our current verticals, including off-road and rail. We have looked at new media, which requires skills and capabilities that are a little different from what we traditionally use in broadcasting video. Equally, pharma, which is a completely new space for us in the healthcare industry. I think at this time, we have our hands reasonably full. I think we have a journey to do, even in the current adjacencies that we have called out in achieving depth, scale, deep capability differentiation. I don't think we would want to be distracted so soon with addition of new verticals in a hurry. At the same time, from a strategic perspective, of course, I have to do my job. We continue to look at which are those verticals that represent reasonable opportunity, not just for the short term, but has to be sustained. The market has to be big enough as we grow. Lastly, we should have reasonable capability to execute, even to start with. That is the way we would look at it. I don't believe we are in a hurry to either adopt new verticals or declare new verticals also. Thank you. The next question is from the line of Madhu Babu from Canara HSBC. Please go ahead. Yeah, sir. On the broadcast and communication, could you talk about the sub-segments? One part on the set-top boxes and all, is there a decline or stagnant growth there? On the OTT, are we seeing higher growth? Can you talk about the sub-segments, because now that is the largest vertical. Maybe I'll take that. We really classify that business into three broad pieces. One is the vendors who supply boxes and equipment into that industry. We would call them equipment vendors or CPE vendors, whichever way you would like to call it. The second is the operators, the pay TV operators or the telecom operators who then deploy these boxes as part of their services. If you look at Airtel or Tata Play and so on, they would traditionally count as the operator set. There is a third set, which is the studios and the broadcast channels themselves, the ones who develop content but deliver it via the pay TV operators. In general, for us, the OEM segment or the box segment has always remained steady. Over a period of time, we expect it to mature and that will not grow as much. We really expect the others to. Work that we do with operators, which has always been increasing over the last seven, eight years now. That has also led to growth. The second piece, I think, is the media, new media, really the broadcasters, the content creators, who are also now going direct to consumer with OTT, that we expect as the real accelerators to growth. From our perspective, we really classified into three broad sets. Equipment vendors, operators, and broadcasters/media companies. Thank you. The next question is on the line of Ankit Shah from White Equity. Please go ahead. Thank you for taking my question. Sir, can you share the utilization level for the current quarter and the previous quarter, please? Utilization level. I think we were at 76% this quarter. The last quarter was- Seventy. Seventy. Okay. We are up by 6%. Got it. Thank you, sir. Thank you. The next question is from the line of Umang Shah from Ambit PMS. Please go ahead. Hi, sir. Sir, from what I understand, auto companies have multi-year development cycles. Will it hold true for the other two divisions also? Sir, in that case, could you give a short qualitative statement on how much would be the one-time revenues and if there is any implementation or maintenance revenue subsequently? Thank you. Both in the medical healthcare space and in the media and communication space, as I explained earlier, we have moved into multi-year larger deals rather than doing one-time projects and so on. In fact, the message to the sales team and the business team is that we really need to focus on those customers that can give us these multi-year deals and larger deals. Over a period of time, most of our at least new customer additions has been multi-year deals. That I guess would continue. Thank you. The next question is on the line of Kanwalpreet Singh from Ambit Capital. Please go ahead. Thank you for taking my question. I wanted to understand on the healthcare segment, if you can almost do like a past, present, and future on that, because that segment is growing very strongly. I would like to understand when you started adding clients here, what your aspiration was. Today, like you say that the margins are higher. Maybe if you cannot quantitatively give what margins are like in this segment, but why are they higher compared to the other segments? Do you see potential for this segment to be 25%-30% of your overall revenue somewhere down the line, let's say three to five years down the line? Thank you. You're talking about the medical segment, right? Yes. Maybe I'll take that question here, this is Nitin. One, we started in the medical device space about three, four years back now. Formally calling it out a vertical and then investing in that domain specialist that we need, a set of doctors, for example, that we would want to onboard so that we could provide true domain expertise, PhDs who come with the relevant background and so on. We've invested in building that core team and then having relevant product engineering services, whether it comes from electronics or software packaged around that core team. The intent has been very clear that we wanted to start with classic product development or new product development for medical devices. Over the last three, four years, what I think we have done is, one, made sure that we acquire marquee customers. We focused on very leading customers in the space in terms of their industry presence and size so that we could grow along with them. The second was to make sure that even as we engage with them in product development, we go downstream in terms of what else can we do for them through the development life cycles. You would know that in the medical space, regulatory compliance and filing is equally important and merits as much spend as in the core new product development part itself. I think what we've really done is a wonderful job in developing that end-to-end capability. That is not only delivering us larger deals, but it's also differentiating us in the market, that we can take that responsibility end to end. In many ways, we are bringing a lot more certainty to outcomes of product development than maybe many of our competitors are able to do. Why? Because we're able to see further ahead in terms of risks of compliance, risks of regulatory, and as best possible, navigate through those right in the design phase. As we go forward, I think like Manoj called out, we're looking at what comprises healthcare as an industry. When you look at that, of course, you have other pieces there, including the pharma sector. We already know that there are certain capabilities that we have built for medical devices that are as relevant to pharma. We'll start with those, and then we'll expand capabilities further. I think in terms of a view of the industry, I think we have a very clear view of how we want to be end to end in medical devices and how we want to be far more fulfilled in the larger healthcare space. That's as far as industry goes. As far as margins go, I think I already called it out. The fact that we deliver an end-to-end service, we're able to deliver far better outcomes, and we are able to project far better outcomes because of our end-to-end view of development and regulatory and compliance, I think naturally deserves better margins. Thank you. The next question is from the line of Vidhi Devia from Braeden. Please go ahead. Hi, good afternoon, sir. Greetings for the New Year. Sorry to interrupt, Vidhi. There's a lot of disturbance from your line. Hello, now am I audible? Yes, much better. Thank you. Thank you. Good afternoon, sir. Greetings for the new year. I just want to know liquidity position for Tata Elxsi. Could you state the cash on books? Cash on books. The number for cash on books, yeah. Yeah, it's around INR 900 crores now. All right. Thank you, sir. Thank you. The next question is from the line of Satain Jane from Invesco. Please go ahead. Yeah. Has the company given wage hike this year? Yeah. We have given wage hike from October first. Okay. Any plans for the next year, or will it be in line with the normal year, or any views there? It should be in line with the normal year. Unless the world changes suddenly. Thank you. The next question is from the line of Karan Uppal from PhillipCapital. Please go ahead. Yeah, thanks for the call, Sandeep. Two questions. First on the top line, it was flat this quarter. What was the outlook here? Secondly, what is the overall outlook on the transportation vertical? Do you believe that the recovery which we have seen in the last two quarters is sustainable? I have one more follow-up. No, I didn't get the first question. The second question is about transportation vertical and recovery. Yes, we talked about it last two quarters. We have been showing growth and recovery. I think it's an ongoing process. The industry is still not out. There are customers that are still struggling with COVID and all the changes that are happening. However, we are pretty confident that we are on a growth path. I didn't get your first question. The first question was on the outlook on the top line. Outlook on the top line. Yeah. I think we will continue to grow and definitely exit the financial year. Though the year started on a bad note in Q1, we hope to exit Q4 with a bang. Thank you. The next question is from the line of Mithun Aswath from Kivah Advisors. Please go ahead. Yeah. Just more on the transport sector itself. Sorry to interrupt, Mr. Aswath. Your voice is breaking up. Is this better? It's slightly better. Please go ahead. More on the transport sector. We've seen some sort of recovery emanate over the last couple of quarters, but still, we are way off in the auto cycle. Just wanted to understand from your own perspective, do you see really this is just the beginning of an auto revival? Since that's the largest portion of your revenues, do you see overall growth on the top line increasing quite appreciably going forward? The largest segment of our revenue right now is media and communication and not auto. That is number one. Auto, I would still be a little cautious, even though we have seen the growth coming in. Whether it'll lead to superlative growth or not, I think it's still too early. The large automotive customers and the suppliers, I think we would need to give it may be at least a couple of more quarters whether we can confidently say that this growth can continue, right? We have seen some good green shoots, some new projects, some large engagements that we signed on. That is definitely positive for us. Our top customer has been flat. As you would have seen, the OEMs, typically that business has been pretty flat. We hope that in the next two quarters, that will recover. Right. Thanks. Thank you. The next question is from the line of Ritesh Rathod from Nippon Mutual Fund. Please go ahead. Yeah. Hi, Manoj. Can you give us some outlook on pricing for next year, particularly on the new technology as well as the legacy business? How are things panning out, given if there is supply side pressure in coming six months, can you go back and ask to a client for pricing? We don't really work on, what you say, legacy projects. A very small percentage of the service that we deliver is really on the low end of the spectrum, right? Most of the services that we offer are on the upper end of the spectrum, and it is more value selling that we do. We rarely compete on pricing and so on and go down, right? We really tend to look at the value that we provide to our customer and accordingly price the services that we have. Will there be price pressures going forward? Yes. During COVID, we've had some price pressures. We had to give some temporary concessions and credit terms and so on. I think we're out of all of that and we have reverted back to our original rates and so far, things are going in the positive direction. Sorry. I think I have not put it correctly. My intention was would there be possibility of price hike if there are supply side pressures in coming six months? Can you go back to a client and ask for a price hike? That's always a very sensitive topic, right? Especially large customers, nobody will entertain a price hike, whatever you say. What is very essential is you don't end up signing a customer at a very low rate because you know that it'll be next to impossible to go back and get a rate hike. We have to manage our internal, through productivity gains, through the right size of the team, the right expense service of the team. We have to maintain our profitability. We can't go back to customers always. Of course, it's not that we don't go back and try, but once we arrive at a particular rate structure for customers, it's usually at least a three-year sort of a rate structure that we agree on. Given your business mix has changed in terms of vertical wise in last couple of quarters, particularly in last seven, eight quarters, has there been a meaningful change in the average or median duration of your project size or project length or project duration? Yes. As I've mentioned. Earlier, the average median about two years ago was about six months deals or eight months deals. Now it's definitely above a year or multi-year also. Yes, the average size of projects has increased. The duration has increased. The average revenue has also increased per customer. Thank you. The next question is from the line of Amar Maurya from Alfaccurate Advisors. Please go ahead. Hi, sir. Greetings for the new year and thanks a lot for the opportunity. My question is more on the offshore and onsite mix. First, on the medium term, do we see that this kind of ratio will be maintained for another two, three quarters? How do we see this ratio changing in a medium to long term? Yeah, I can take that. On one hand, I think, yes. A lot of this, like they say, digital was accelerated by COVID. I think this whole onsite-offshore mix change has also been accelerated by COVID. I think the big question remains how much of this is elastic in the sense that when things all become normal, how many of the customers will want to call back and still want that same onsite-offshore ratio that they were used to? Remember, they now got used to better cost structures, too. Obviously when you have less onsite, your overall projects also cost you less. Correct. You have to balance that against wanting people onsite and wanting greater control, visibility and so on. I think we'll most likely see that ratio change a little bit as markets open up and so on, but it is our intent very clearly to not let it change too much. Okay. Thank you. The next question is on the line of Amit Thawani, an individual investor. Please go ahead. Thank you. Thank you for taking my call. I think the panel made a great point that our order duration used to be maybe a couple of months, three months, and the order duration is going up, and that's because we are now catering not only on at the product launch phase, but I guess over the life of the product rather than maybe software updates across the life of the product. As someone said, filing of pharma. I just wanted to understand how do you see this pan out over the next few years? How much change could we see in the life of or the length of the orders going forward? We are probably at six months today. It will definitely help us in de-risking the company and making revenues less lumpy. How do you see this order over the life of the product panning out over the next three to four years? The revenue mix, how do you see the revenue mix changing there, sir? This is Nitin here. Maybe I'll take that. I think that is related to a fundamental nature of products changing the world. If you look at products, what were supposed to be one-time delivery to a customer, fill it, shut it, forget it kind of a model where you sell a car and that's the only revenue that the OEM will ever see in his lifespan from that car customer, unless he goes and buys another car. The same would have been true in a consumer product like a phone or even in a medical device. I think the simple fact is that the industry is reverting to the point that once devices are connected, once you're able to extract data, you can deliver a lot more services over that connection, and you can monetize the data in many forms. I think that also leads you to then requiring development that is not ending when the product is delivered. The software development actually continues. I think we've already seen that in media and communications, and that's why OTT is such an exciting segment for us because it's not just to do with launch of the OTT service. It's really the fact that the OTT service continues to evolve and improve, and you continue to add features and so on. We really expect that the fundamental nature of products and services will change to this model, where things are continuously updated, upgraded, experiences continue to change, and it's not that one big life cycle where you develop a product, launch it, and then there is a small maintenance team. I believe that's the real future of the world, and we hope that we're in the right place and with the right capabilities. Thank you. Ladies and gentlemen, due to paucity of time, that was our last question. I now hand the conference over to Mr. Nitin Pai for his closing comments. Thank you, Lizanne. I should first of all thank all the investors who joined us today on the call. I'm sorry that we ran out of time, and if any of you have questions further, please feel free to reach out to our agency, Christensen, or to write to our investor relations email ID. We'd be happy to take any further questions that we did not address. It was a wonderful quarter. I think we've capped it with the start of a new year that we look forward to. We hope you have a great year too. Thank you so much. Thank you. Ladies and gentlemen, on behalf of Tata Elxsi Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.