Conference Call with Tata Elxsi Management on Q4FY20 performance, outlook and COVID-19 impact. Listen in to the full transcript.
Call Participants: Mr. Manoj Raghavan (MD & CEO), Mr. Nitin Pai (CMO & CSO), Mr. G Vaidyanathan (Chief Investor Relations Officer)
Introductory Remarks from Mr G. Vaidyanathan, Chief Investor Relations Officer
Welcome all to the Q4 call of Tata Elxsi and hope you all are safe and healthy.
Insights from Mr. Manoj Raghavan, MD & CEO
I hope you and your family are safe during this unprecedented time. I am pleased to report that we have delivered another quarter of steady performance despite the current Covid scenario. In the past few weeks, we were forced to work in many new ways, operating at a large scale and at short notice.
We are adapting to the changes, more than 98% of our employees are working from home and it has not hampered any customer commitments. Our customers have come back appreciating us and thanking us for our efforts in ensuring minimum or no disruption whatsoever.
I will take this opportunity to thank my IT team and Admin team who have really worked around the clock to make this possible. I also want to thank all employees who continue to deliver and contribute to our success and of course to all our customers who stood with us in this very difficult situation. We were able to deliver and keep up our commitments.
Last but not least, I would also like to thank my senior management team who really over the last 4-6 weeks have been working tirelessly to ensure that we are able to deliver this performance.
Our revenue for the quarter grew by 3.6% QoQ and very credible 8.3% YoY. Actually, if you look at it, the volume growth is almost two-third and about 2.3% QoQ and 5.5% YoY. Our PBT also grew by 7.5% QoQ and 2.8% YoY.
Our two main divisions EPD and IDV, both of them showed good growth. EPD, our largest division that contributed over 87% of our revenues this quarter, grew by about 4.1% QoQ and 10.6% YoY.
Industrial Design and Visualization grew 7.6% QoQ and 5.4% YoY. Our System Integration business is impacted this quarter because of nationwide lockdown and if you understand the business, we get revenues when we really ship the hardware and software for customer plays and install them. But because of the lockdown, we were not able to ship any of the hardware and this therefore, had an impact on our revenue recognition.
Within EPD, the growth was driven by media and communication vertical in Q4, we had 8.6% QoQ growth. Our medical business continues to be steady. Although last quarter was flat it has delivered 60%+ YoY growth. So, that vertical continues to grow at a rate that is faster than the company. In the automotive segment, we are seeing soft demand. We do anticipate delays and deferments of deals from the automotive suppliers as well.
The third quarter was significantly affected for other market reasons.
In Q1 last year, we had a significant budget cut among customers but we have managed to recover strongly over the next three quarters to finish the year with a small but positive growth. Automotive now contributes less than half our revenues. While the market remains uncertain and the full impact of Covid on industry, markets and business for us in the third quarter and beyond is still not clear.
But having been through this over the last year and having recovered well, I have the confidence in my capabilities and my people to meet this challenge too. So we are right now focused on building a platform for growth and aim for performance and growth in every quarter.
As far as when businesses will see a recovery from the pandemic, your guess is as good as mine. Most of the major European markets whether it is Germany, UK, France, Italy, Spain, the US and Japan have not yet reopened. China is not yet fully opened either so it is very difficult to give commentary on whether the automotive industry would recover and how quickly that recovery would be.
We are hopeful that over a period of time we will see some economic recovery. We expect maximum impact of Covid-19 in Q1 and hoping in Q2 we should see the economy gradually recovering and by Q3 & Q4, we will get back to our growth rate and so on.
View on Healthcare and Media & Communication Verticals as it was expected to be less impacted
There is less impact on Media & Communications business as well as Healthcare business, and if you see last quarter, significant growth in the organization has been pushed in Media & Communication.
When we look 2-3 quarters back, from our mid-term to long-term strategy in terms of diversification, I feel more certain that all the decisions that we have taken in terms of really pushing our investments in the Media Communications side and Healthcare side have been the right decisions.
More importantly, the sub-segments that we are focusing on are all right decisions, which will really help the company in this financial year and the coming financial year. In Media&Communications, it is not to say there is no impact, there will be some impact but we hope to recover, cover up that impact and even grow in this particular vertical.
In the Medical vertical also, what is happening is most of the medical equipment manufacturers are reprioritising all their R&D expenses into Covid related spend. So, typically in any hospital, they make a lot of money on non-essential surgeries and a lot of manufacturers make money by selling equipment for all of those surgeries.
Now, with Covid all of the other surgeries have been put on halt and the entire thing is focused on Covid. So, for the later half of the last quarter and even in Q1, we do not see the situation changing.
All hospitals will be busy with Covid and Covid related issues and on top of it if you realise, a lot of our revenues come from the regulatory work that we do for our customers. Now, what has happened in this Covid scenario is many governments in Europe have really pushed the regulatory timeline. They have relaxed the regulatory timeline. The customers are now able to have a breather and spend some of that money on Covid activity. But, having said that, it is a very very temporary part of the situation.
We expect our medical business to aggressively grow in the way that we have anticipated. It's just that this Covid related scenario is putting some amount of caution in the way we project our revenues. Otherwise, I still strongly believe that the Media Communication and Medical would be the saviour for this particular company in this financial year and the next year.
We have got enquiries for designing ventilators specifically for India. Infact, our Prime Minister has requested Indian companies to come forward and do what we can for ventilators so along with other group companies, we have been involved and we have done some studies on how we can have our own ventilators in India.
Conference Call between Management and Analysts on Infosys Q4FY20 and Full Year Earnings and Outlook. Listen In to the full earnings transcript.
Key Highlights - Management Comments
- The Financial Year that ended was an exceptional year for us, we did very well. Grew 9.8% in constant currency and delivered 21.3% in operating margin.
- Grew our digital revenues by 28% and Q4 digital revenue has become 42% of overall business.
- We did $9 billion of large deals for the full year. EPS grew 8.3% in dollar terms, we had the highest cash collection for the quarter and full year in our history.
- In Q4 we grew our business 6.4% YoY in constant currency and 21.1% operating margin with $1.6 billion in large deals, some of which happened in the last two weeks of the quarter. Share of new deals increased to 56%. Won 12 large deals in Q4 (7 from the Americas and 5 from Europe).
- Volume growth for the year was 8%. Communications, Energy, Manufacturing, HiTech and LifeSciences recorded double digit growth in the financial year in constant currency.
- We close the year with an extremely strong cash position of $3.6 billion dollars and no debt on the balance sheet.
- We have focused on financial security, and a strong cash position. We anticipate near term challenges across the whole set of industries.
- Suspending providing guidance on revenue growth and operating margin for FY21.
- Utilization fell sequentially to 83.5% partly due to covid related constraints.
- Attrition on a standalone basis slightly higher at 18.2%.
- Final dividend at Rs. 9.50 per share. Total dividend for FY at Rs. 17.50 per share.
- We see increased client interest in cloud, digital transformation, and cost savings. - The impact of covid is significant and we have activated our business continuity plan.
- Sectors significantly impacted by Covid: Financial services, Banking, Insurance, Retail (especially apparel, lifestyle, logistics), Energy, Media and Entertainment. Reduced travel will affect aerospace.
- Relatively stable: Communications. Spends on 5G and new tech may get delayed.
Earnings Call Transcript of the Conference Call between HDFC Bank Management and Analysts on Q4FY20 Earnings. Listen in to the full transcript here.
Key Highlights
In Q4FY20, we are positioned to gain strong market share. Liquidity is strong, LPR ratio is 132%. Incremental credit to deposit ratio is 78% on average. Capital adequacy ratio is at 18.5%, significantly more than the regulatory minimum of 11.08%.
Our CET1 (measure of bank solvency) at 16.4%, is high compared to the regulatory minimum of 7.58%.
We have sufficient provisions totalling to Rs. 4,447 crore built over time. We have tightened credits, so there are more rejects of applications.
Provision coverage ratio across the board stands at 142%. The net interest margin has been stable historically in the range of 4.1%-4.5% and is currently at 4.3%.
Impact in latter half of March in loan origination, collections, and so on. Waiving of certain fees has also been implemented as per RBI mandate. There was good demand from customers prior to lockdown.
Net revenues grew by 18.2% driven by an advances growth of 21.3%, deposits growth of 24.3% and other income growth of 23.8%.
Net interest income for the quarter was Rs. 15,204 crore, up 16.2% YoY and grew 7.3% over previous quarter.
Net interest margin was in the historical range, for the quarter the margin was 4.3%. For context prior year was 4.4%, prior quarter 4.2%
We build on deposits to ensure liquidity surplus. The excess liquidity position impacts current NIM by about 10 basis points.
Other income - fees and commission (70% of other income) grew by 14.6% over previous year to reach Rs. 4,201 crore. Of this retail constitutes 93% and wholesale 7%.
The lockdown has impacted various aspects of fees and commission by around Rs. 350 crore.
Our card spends saw March average lower than January and February by around 21%. The second half of March was particularly impacted where the average spend was 35% lower compared to January and February.
Fx and derivatives income grew by 24% over previous year to reach Rs. 501 crore. The growth was granular, primarily by retail customers constituting two thirds of total. Trading income was Rs. 565 crore for the quarter.
Other misc income Rs. 766 crore includes recoveries and dividends from subsidiaries.
Operating expenses for the quarter was Rs. 8278 crore, and increase of 16.3% YoY. Added 313 banking outlets over the year. Staff count increased by 2919 during the quarter.
Cost to income was 39% and has remained in the stable range.
PPOP: Pre provision of operating profit grew to 19.5% to Rs. 12,959 crore. Adjusted for the covid impact, that would have been at 22%.
Asset quality: Asset classification remains at standstill during the moratorium period for customers granted moratorium. GNPA, NNPA and Annualized Core Slippage Ratio has been lowered by 10 bps, 6 bps and 40 bps respectively. GNPA ratio was 1.26% of gross advances as compared to 1.42% in the prior quarter and 1.36% last year. GNPA excluding agriculture NPAs was 1.1%, NNPA was at 0.36% of net advances compared to 0.48% in the previous quarter and 0.39% in the previous year. Annualized Core Slippage Ratio was 1.2%, compared to 1.7% in previous quarter and 1.4% in previous year.
Provisions: Total provisions was Rs. 3,784 crore, compared to Rs. 3,044 crore in previous quarter. Coverage ratio at 72% compared to 67% in prior quarter and 72% in prior year. Including contingent provisions related to covid, the coverage ratio is at 96%.
Contingent provisions at the beginning of the quarter was Rs. 1,457 crore. At the end of the quarter it is at Rs. 2,996 crore. Floating provisions at Rs. 1451 crore and general provisions at Rs. 4438 crore. At March end all total provisions was 142% of gross non performing loans.
Banking is an essential service and has been exempted from the lockdown. By and large branches remain open for customers - 95% of bank branches are operational with limited activities, as are 93% of ATMs. Deployed mobile atms in select cities. We have encouraged online banking so that people transact from home. 200,000 customer engagements on a daily basis.
On the wholesale front we are 100% work from home. Handling all processes digitally. 35,000 customers have been called and feedback taken on Covid impact and their welfare.
Earnings Call for TCS - Management and Analysts discuss earnings performance for Q4FY20 and full year. Listen in to the full transcript here.
Key Highlights
- Q4 Revenues grew 3% YoY on constant currency basis. INR revenues saw 5.1% growth YoY for Q4. See the full financials for Q4
- Full year revenues grew 7.1% in constant currency and 7.2% in INR.
- In the worst case scenario from covid, TCS says, "we should be able to grow from Q3 FY21."
- All verticals are affected, all consumers are affected by coronavirus shutdowns and quarantines, says TCS. That said, there are opportunities emerging in the shift to digital and ecommerce enabling solutions. But there is reduced spending and caution overall.
- The long-term profitability goal remains unchanged at 26-28%. Operating margins in the fourth quarter stood at 25.1%, more or less unchanged QoQ.
