Summary of Key Financial Performance
Consolidated Performance (Q3 FY25):
- Revenue: INR 281 crores, down 6% year-on-year (YoY) but up 8% quarter-on-quarter (QoQ). Adjusted for gross value of certain contracts (INR 32 crores in Q3), revenue grew 13% QoQ.
- EBITDA: INR 19 crores, down 33% YoY, with margins at 6.9%. Margins were impacted by losses in the Canadian subsidiary and lower utilization in France due to project delays.
- Net Loss: INR 19 crores, attributed to an exceptional item (provision for receivables from an associate company).
Consolidated 9 Months FY25:
- Revenue: INR 787 crores, down 1% YoY. Gross value adjustment (INR 71 crores) implies 6% YoY growth.
- EBITDA: INR 55 crores, down 19% YoY, with margins at 7%.
- Net Loss: INR 24 crores, again due to the exceptional item.
Standalone Performance (Q3 FY25):
- Revenue: INR 181 crores, up 2.5% YoY and 8% QoQ.
- EBITDA: INR 21 crores, down 5% YoY but up 3.4% QoQ, with margins at 11.79%.
- Net Profit: INR 9 crores, down 16% YoY and 5.2% QoQ.
Standalone 9 Months FY25:
- Revenue: INR 480 crores, up 3.5% YoY.
- EBITDA: INR 55 crores, down 9% YoY, with margins at 11.49%.
- Net Profit: INR 23 crores, down 16% YoY.
Order Book:
- As of December 31, 2024, the order book stands at INR 1,675 crores, reflecting a strong pipeline for both Build-to-Spec (BTS) and Electronics Manufacturing Services (EMS) in the standalone business.
Other Updates:
- Centum received an Export Award for FY23-24 as the Best Performing Electronic Hardware Exporter from STPI in Karnataka.
Management Commentary on Growth and Outlook
Nikhil Mallavarapu (Executive Director):
- Q3 Performance Highlights:
- Revenue declined YoY due to net accounting of certain contracts but showed QoQ growth. Adjusting for gross value, growth was positive.
- EBITDA margins were pressured by subsidiary losses (Canada) and delays in new project starts (France).
- Strategic measures are being considered for the subsidiaries, with announcements expected in upcoming quarters.
- Growth Outlook:
- Optimism for Future Quarters: Nikhil expressed confidence that revenue and margins will improve in the coming quarters, driven by the high-margin BTS business within the standalone entity. Q4 FY25 is expected to see a significant revenue boost from BTS, particularly in defense and space.
- Standalone Business: The pipeline remains robust for BTS and EMS customers, supported by tailwinds in defense and space sectors. The company anticipates continued strong growth in this segment.
- Space Sector: Highlighted a major order in 2024 for satellite payloads (military applications), marking a first-time realization in India. Successful execution could lead to repeat orders for satellite constellations. Additional opportunities in situational awareness, debris tracking, and full satellite manufacturing are being pursued with ISRO and private players.
- Subsidiary Challenges: Losses in Canada (passenger information systems for railways) and lower utilization in France (engineering services) are drags on consolidated performance. Strategic decisions are imminent to address these issues.
- Key Takeaways:
- The standalone business is the core growth driver, with Q4 expected to reflect this strength.
- Subsidiary turnaround is a priority, with a focus on fixing Canadian losses and improving French margins.
K.S. Desikan (CFO):
- Financial Details:
- Confirmed the financial figures and emphasized the exceptional item’s impact on net profit/loss.
- Standalone growth aligns with expectations, while subsidiary underperformance (especially Canada) has lowered consolidated results.
- Outlook:
- EBITDA Guidance: Revised FY25 EBITDA target to INR 100 crores (down from INR 130 crores) due to subsidiary challenges, buoyed by a strong Q4 standalone performance.
- FY26 Expectations: Standalone margins expected at 13-14%, with subsidiaries targeted at 6-7% EBITDA once Canadian issues are resolved (targeted by June or September 2025).
- Fundraising: Board approval for a potential QIP or other fundraising reflects confidence in growth opportunities, particularly in the standalone business.
- Subsidiary Strategy:
- Efforts to shift Canadian work to India and negotiate variation orders with customers are ongoing. Strategic decisions are expected by mid-2025 to stop the “bleeding” from Canada.
Question-and-Answer Session Highlights
The Q&A session featured queries from analysts and investors, focusing on subsidiary challenges, growth prospects, and financial projections. Below are the key exchanges:
- Harsh Mehta (Perpetual Capital Advisors):
- Issue: Difficulty contacting the IR/CS teams.
- Response: Nikhil apologized and promised follow-up.
- Query: Roadmap to make international business profitable and long-term margins.
- Response:
- Canada: Losses stem from high engineering costs not offset by revenue. Work is being shifted to India, and customer negotiations are underway. Strategic decisions expected in 1-2 quarters.
- France: Breakeven currently; aim to improve margins to 7% short-term (by Q4 FY25) and 11-12% long-term via better utilization with clients like Airbus and Thales.
- Acquisition Rationale: Aimed to add engineering services to EMS and BTS offerings, but Canadian product business has underperformed post-COVID.
- Onshore/Offshore Split (France): ~65% onshore, 35% offshore.
- Response:
- Issue: Difficulty contacting the IR/CS teams.
- Ankit (Subhkam Ventures):
- Query: Revised EBITDA target for FY25 and assurance on Canadian subsidiary not dragging post-June 2025.
- Response:
- FY25 EBITDA revised to INR 100 crores due to subsidiary underperformance. Q4 standalone growth will help.
- Canada fix targeted by June (best case) or September (worst case). No firm commitment on exceptional losses yet, as decisions are pending.
- FY26 EBITDA: Standalone 13-14%, consolidated 6-7% assuming Canadian resolution.
- Response:
- Query: Revised EBITDA target for FY25 and assurance on Canadian subsidiary not dragging post-June 2025.
- Chirag (Ashika Institutional Equities):
- Query: Standalone growth on gross accounting basis for FY25 and turnaround lag.
- Response:
- FY25 standalone growth expected at ~26% (similar to FY24).
- No 1-year lag on standalone; growth has been strong since FY22. Subsidiary issues are isolated, with focus on fixing margins rather than growth.
- Response:
- Query: Standalone growth on gross accounting basis for FY25 and turnaround lag.
- Raman K.V:
- Query: Revised revenue guidance for FY25 and FY26; EBITDA margins by division.
- Response:
- FY25 consolidated revenue growth revised to 13% (from 18-20%) due to subsidiary drag. FY26 guidance deferred pending Canadian decisions.
- Margins: BTS (18-20%), EMS (11-13%), Engineering (1.5-2% now, with France at ~4% pulled down by Canada).
- Response:
- Query: Revised revenue guidance for FY25 and FY26; EBITDA margins by division.
- Yash (Shareholder):
- Query: Market cap potential (INR 10,000 crores) and revenue of INR 2,500-3,000 crores in 4-5 years; QIP plans.
- Response:
- No specific market cap/revenue targets given, but confidence in defense/EMS growth. Subsidiary drag masks standalone value.
- QIP approval secured for growth capital; details to follow.
- Response:
- Query: Market cap potential (INR 10,000 crores) and revenue of INR 2,500-3,000 crores in 4-5 years; QIP plans.
- Pranav (Individual Investor):
- Query: Time wasted on subsidiaries vs. focus elsewhere; Space sector plans.
- Response:
- Subsidiaries (since 2014) are under serious review at the Board level. Canadian actions prioritized, with synergies acknowledged but insufficient.
- Space: Major 2024 order for satellite payloads; opportunities in constellations, debris tracking, and full satellites with ISRO/private players. Centum positioned as a key electronics partner.
- Response:
- Query: Time wasted on subsidiaries vs. focus elsewhere; Space sector plans.
- Rohit (Individual Investor):
- Query: Canadian drag and exceptional item recovery.
- Response:
- Canadian losses account for most of the consolidated-standalone gap.
- Exceptional item (Ausar Energy): Full provision made, but partial recovery hoped for as four parties bid on the company.
- Response:
- Query: Canadian drag and exceptional item recovery.
Key Takeaways
- Growth: The standalone business (BTS and EMS) is a bright spot, with strong Q4 FY25 expectations and a robust order book. Space and defense sectors offer significant upside.
- Challenges: The Canadian subsidiary is a major drag, with losses overshadowing French breakeven performance. Strategic fixes are in progress.
- Outlook: Management is optimistic about standalone growth and aims to resolve subsidiary issues by mid-2025, targeting improved consolidated margins.
- Investor Sentiment: Frustration over subsidiary performance is evident, but confidence in standalone potential and Space opportunities persists.