ONWARD TECHNOLOGIES
Annual Report 2024 Highlights:
Revenue 472cr (+7%), PAT 34cr (+200%), EBITDA margin 11%. Split between ERD and Digital
was 65-35.
Top-25 clients contribute 84% of total revenues with 13 having annual billing of over USD 1
million
Declared final dividend of INR 5/share, 9th consecutive year of declaring dividends
‘40 of the 84 clients we serve have R&D budgets of >500mn USD, translating into enormous
growth potential for our services’
‘This year, we do not expect to make significant new investments and will instead focus on
consolidating our existing advancements’
The traditional low-margin IT services business has been gradually phased out as was
planned with share in revenue declining from 21% in FY21-22 to just 2% in FY23-24
Share of overseas income has increased from 46% to 51% in the same period whereas share
of income from top 5 customers has increased from 31% to 50%.
Q2’FY25 Presentation and ConCall Highlights:
Q2 update: Revenue 125cr (+4.6% QoQ. +2.3% YoY), PAT 3.6cr (-50% QoQ, -62% YoY),
EBITDA margin 6.4%.
H1 update: Revenue 240cr (+0.3% YoY), PAT 10.7cr (-48% YoY), EBITDA margin 8.1%.
Digital (high margin business) share fell from 39% in H1’24 to 22% in H1’25.
Massive slowdown in Automotive companies’ projects reported
Active clients – 82. Top 5 contribute 51% revenues. “It had several Tier 1s and smaller
company’s transactions that we were part of, that we exited, largely due to geopolitical
challenges in the US and Europe”
Net new hires 133 for the quarter across geographies. Stable employee number to be
around ~2700 going forward (2600 currently).
Goals: Achieving significant revenue milestones with either 10 customers contributing $10
million each annually or 20 customers contributing $5 million each annually, through a blend
of offshore and onsite services
Guidance: “We are aiming to close this financial year between INR 490 crores and INR 520
crores in terms of revenue. In terms of the bottom line, we still believe we can achieve an
EBITDA margin between 9% to 11% for the year.”
Expect robust growth in GCC business (low margin than offshore on-site business abroad)
going forward to fuel revenues.
Q3’FY25 Presentation and ConCall Highlights:
Q3 update: Revenue 124cr (-0.1% QoQ. +6.5% YoY), PAT 6.0cr (+67% QoQ, -11% YoY),
EBITDA margin 9.1%.
9M update: Revenue 364cr (+2.8% YoY), PAT 16.7cr (-38% YoY), EBITDA margin 8.5%.
Digital business contribution – 29% in Q3 vs 22% in Q2, 23% in 9M’25 vs 40% in 9M’24.
Expected to come back up to ~40% in the next 2-3 quarters.
Active clients – 80; Top 5 customers contribute 51% revenue. Clients continue to be dropped
as they want to reach that goal of 10*$10m or 20*$5m and focus on a limited number of
very large good quality clients.
“Q3 despite being a weak quarter with a lot of holidays in India, North America and Europe
and, of course, a big impact of furloughs. Otherwise our numbers would have been much
higher (+3-3.5cr). We continue to believe that we will meet guidance for the year of revenue
of INR 490 crores to INR 510 crores for this financial year and EBITDA margin of 9% to 11%,
and we have good visibility going into Q4. And this continues to be again from our existing
clients.”
Started new ESOP scheme approved by board, currently zero employees but covers all 2500.
Earlier stock was granted at fixed rate INR10/20 per share, now it’s discount to market price.
More US companies are opening GCC offices in India which earlier were billed in $ now get
billed in INR – share of foreign revenue falling
“The GCC model has changed massively and so has clients’ treatment towards it. So the GCC
attrition rate, which used to be about 30%, 40%, 50% just a few years ago, I think it's down
to single lower digits for everybody now. Obviously, we are growing at low single digits this
year. But we want to grow in U.S. and we do believe Onward Tech’s future growth continues
to be if you are successful in the U.S.”
“We took a lot of our internal systems that were outsourced with other very high-end
expensive things which were not catered to the ER&D industry. We have built our own OTL
apps that all integration is going on beautifully and that cost also comes down drastically, I
think from March itself”
My understanding:
Management seems very hopeful of closing the year around ~500cr this year and doing
~600cr next year
They’ve taken all necessary steps to ensure proper training for engineers and salespeople
abroad, reduce culling/firing, and focus on creating high value for top clients
They are getting good feedback from clients, and conversations that were earlier merely
sales pitches are now meetings about RFQs and value adds
Health is being billed as a big bet, with slowdowns in automotive and digital space to
recuperate going ahead.
