What's In Store For MapmyIndia & Tega Industries? | NDTV Profit
Transcript
00:00Hello and welcome to NDTV Profit. My name is Rucha Somaiya and today we are going to
00:13talk about MapMyIndia, which reported its Q1 numbers. Now, talking about the numbers,
00:19it was largely soft quarter revenue below estimates up about 13.5%. However, margins
00:24were on a beat on estimates, came in at about 43% versus 42% on a year-on-year basis. But
00:34today we have with us the CEO and Executive Director of the company, Mr. Rohan Verma.
00:39Hello and welcome to the show, sir. Good morning.
00:43Good morning. What is your first take on the Q1 numbers, largely soft quarter?
00:49It was a good quarter. The year has gotten off to a good start. We crossed 100 trolls
00:55in revenue, about 13.5% growth. See, we have always explained we're an annual business.
01:02Quarter by quarter can be lumpy. And if you look at our open order book that we started
01:07the year with, 1300 trolls, we're well on our track to the milestone that we have guided
01:13for, which is 1,000 trolls plus by FY27, FY28. So I think all in all, across A&M, across C&E,
01:21the kind of adoption we're seeing of our solutions, be it in EVs, or for ADAS, or for video telematics,
01:29or for e-commerce, or credit assessment, or 3D digital twin mapping, I mean, we're quite happy
01:35with how the business is going. And we'll see as the year progresses,
01:39us kind of work towards that milestone. Sure, Mr. Verma. But you also mentioned
01:44about some of the ramp down of old auto OEM programs in the Q1, and deferral of revenue
01:51to, say, Q2 or Q3. So can you give us some more highlights on this?
01:56Sure. See, in our business, which is based on our previous open order book, when you look at
02:01the automotive side, it is always that some programs that we signed up with earlier, they
02:07ramp down, the new programs ramp up. So this was expected, and we had been talking about it for a
02:12few quarters, that certain of our old OEM programs will be ramping down. But already they've begun,
02:19the new programs have begun to ramp up in Q2. And so that's one of the reasons why Q1 revenue
02:26showed up how it did. Right. Okay. So talking about the IoT-led
02:31business, which is the major focus of the company, IoT-led business in terms of revenue grew
02:37about at 3%. So don't you think that is like a muted start to the IoT-led business?
02:43Sure. I mean, there are two big legs to our business, actually, Map-led and IoT-led. Map-led
02:48grew heavily, and the margins were also about 50% plus. IoT-led business, if you look at actually
02:55the SaaS income, the higher margin SaaS income, that has actually grown 90% year on year. And
03:01that's kind of what the focus was in Q1. In general, Q1 and Q2 are slow for IoT because of
03:09various reasons in terms of kind of new hardware sales. And what you've seen actually is new
03:14hardware sales, which have fallen in Q1. And that's something that, you know, will pick up,
03:21I mean, significantly actually in the second half of the year. So in that sense, you know,
03:29this ability for us to increase our margins based on high margin SaaS revenue, and you're seeing the
03:35kind of, you know, EBITDA of the IoT-led margin also grow significantly to about 15% in Q1,
03:43if I'm not wrong, versus, you know, the full year of 6% last year. I might have got the numbers
03:50somewhat wrong, but it's in that order. That shows that, you know, the strength in the IoT-led SaaS
03:57business and new hardware sales is something that we control, we calibrate. Last quarter was something
04:03that the focus was on high margin SaaS, but, you know, the opportunity is so large with so many
04:09fleets and so many vehicles on the road, which can take our GPS devices. And like I said, video
04:15telematics solutions, or, you know, a large mining company monitoring their fleet, or employee
04:21transportation for a metals company, or just schools and other governmental fleets, you know,
04:26are adopting our solutions. And so, besides the consumer side of our gadgets business,
04:32where, you know, there's increasing distribution, increasing marketing. So, I mean, we're quite
04:36bullish about this in the long term, both the map-led and the IoT-led business.
04:41Right. So, the sale of hardware, as you mentioned, will pick up in the second half. So, do you expect
04:46the second quarter to be weak a little bit in terms of hardware internally in the IoT-led
04:52business? Like I said, you know, we don't, we definitely don't give quarterly guidance,
04:57and we're also not a quarter business. I mean, we're trending towards what this milestone that
05:02we have. And in that sense, you know, things are going well. I don't want to speak to specific
05:08quarters. I just wanted you to know that Q1 seasonally is low for IoT. Right. Okay. Got that,
05:18Mr. Varma. So, okay, let me move on to the 400 crore contract, which you had got last quarter
05:24from Hyundai India. So, are you expecting that to ramp up in the revenue from quarter two,
05:31or has it already started showing up in the revenue? Yeah, Hyundai Kia is a super exciting,
05:37you know, opportunity for us. They're a great customer. They're one of the most advanced,
05:41if not the most advanced auto companies in India when it comes to tech. And they've leaned in fully
05:47when it comes to connected vehicles and embedded navigation or connected services, online search,
05:53real-time traffic, and they're planning to do more. So, we have a very close partnership with
05:58them. We are very grateful that, you know, they imposed so much trust in us. India is a very large
06:04market for them. And actually, over the course of, you know, the last month or two, you know,
06:12all Hyundai Kia cars in India, you know, have switched over to using Mapadhyas. That's the
06:19existing roads on the vehicles. And you saw some announcements from them in that regard,
06:25even the companion app that people have for the connected vehicle started to use Mapadhyas or
06:31Maples Maps APIs and SDKs. So, that ramp up is happening as we speak. And you'll start seeing
06:39new Hyundai Kia vehicles also having the latest generation of or the latest program of navigation
06:46and connected services based on Mapadhyas starting Q2 itself. Right. Okay. Got that point.
06:55One more question from my side, talking about the technical outsourcing expenses, right,
07:00the technical services outsource, it almost grew 50% on a year-on-year basis. So, what is the nature
07:07of these expenses and how do you expect the growth in this kind of expenses to affect the
07:12margin going ahead? Sure. I mean, if you look at it, our margins are quite strong, 42%, like you
07:21mentioned, EBITDA margins I'm talking about. So, I mean, the cost increase in technical services
07:29outsourcing is certain activities we want to outsource, especially when it's somewhat revenue
07:35linked and it's things in the field, et cetera, for certain types of customers, certain types of
07:40projects. And it's very much linked to revenue. So, it's better sometimes to have that type of
07:50expense rather than increase the fixed cost base unnecessarily for the company. So, it's
07:56calibrated and it's something that still keeps us in a comfortable mode for our margin structure.
08:03So, what kind of range do you expect this kind of expenses to be in the coming quarters? Will it be
08:10at around this level or will it come down going into the future? Again, it really depends on the
08:16kind of execution we're doing on the order book in that particular quarter, the kind of orders
08:22that we are executing and hence the kind of activities that it requires. So, I can't give
08:30you a specific number as to up or down, but like I said, it's linked to certain types of revenues.
08:38So, and it is well aligned with our kind of margin structure. Right. Okay, Mr. Varma got that. Okay,
08:46moving on to talking about the drones business, which is one of the biggest modes that you had
08:51mentioned about and also called out in the last quarter. So, can you give us some interesting
08:56updates on the drone business? What kind of revenue are you getting over here and what kind
09:01of progress from the last quarter are we seeing in the drone business? Sure, it's a very exciting
09:06space as we've said as a CMD and we've said over the last couple of years, drones are going to be
09:13the third pillar of our business. And in that sense, drone based 3D digital twin mapping is
09:22something that we have leaned in fully towards and a lot of the solutions that we're offering,
09:26especially around government and geospatial or even infrastructure for the private sector,
09:35besides the public sector, where we are able to leverage the power of our drone solutions
09:40to create these 3D digital twins, to give customers an idea, a full 3D idea at both
09:48an engineering level and a visualization level of the infrastructure. So, for example,
09:53one of the interesting projects that we won in one of the East Indian cities is around flood
10:00modeling and flood prediction and flood response for which we are having to do 3D digital twin
10:07mapping and drones are playing one interesting role in that, besides other solutions where
10:15for large warehouses or large campuses, our drone-based surveillance, drone-based inspection
10:22or even drone-based 3D mapping, so people can know what is where and in case some type of
10:28maintenance issues are required. So, very interesting use cases. It ties in very well with
10:34our map-led or 3D map-led business and our IoT-led, which is real-time, what we call 4D mapping
10:41business and so we're excited about it. It's a story that will keep building up,
10:46there's more and more announcements to be made and more and more growth to be had.
10:50You can see the way we've had an IoT-led journey, the drone-led journey will also
10:55kind of go through that. Right, got that. Okay, coming back to the IoT hardware business,
11:02you know, from my understanding, is this a kind of seasonal business where you expect the first
11:07half to be softer? Because the hardware IoT business is one of the biggest modes that the
11:12company has. I mean, there's many modes to our company and like I said, the core of our
11:20business is maps and that's not replicable. I mean, globally, you know, maybe hundreds or
11:26thousands of companies have tried to get into mapping over the last 20-30 years, but you can
11:32count on your fingers, literally, the companies that have succeeded or sustained even or
11:38succeeded and in India, it's pretty much we are that one, despite tens or even hundreds of
11:45people trying in the last 20 years or even the last few years. It's just a very difficult business
11:51and a very difficult product to make and update and then to expand in the advanced way that we
11:57are doing. In IoT, actually, there's many things to the mode. Hardware, good quality hardware,
12:05you know, plays one role and it's the SaaS that, you know, gives value to the customers,
12:11which can bring out the data and analytics from the device, from the sensors, so that customers'
12:16logistics, you know, costs come down, they get transparency when it comes to their supply chain
12:22or distribution or in the monitoring of safety of their employees or their staff or their vehicles.
12:29So, really, that's the solution is the mode and ability to deliver that through hardware, software
12:35and field operations. That's the mode. So, you know, once we've delivered our hardware, you know,
12:42the SaaS that we provide to the customer is the value also that we are giving and so, you know,
12:47there are two legs to the IoT business, the hardware and then the SaaS. And so, between the two,
12:53if we're seeing growth and the SaaS leading to higher margin, of course, you know, new hardware
12:58sales will generate more margin in the future. So, you've seen some stellar growth from us in the last
13:03year, I think almost, I mean, 90% or so growth, you know, in the IoT-led business. So, that will
13:13create good returns or good growth in the SaaS income in the future. And, I mean, we are still
13:18equally, like, bullish and focused on growing the hardware part of the IoT sales too. There is a
13:24seasonality angle, as you said, but it's, you know, and so second half will anyways be much, much better.
13:32Right. Got that, Mr. Varma, but because of crunch of time, maybe we'll have to wrap this conversation.
13:37But thank you so much for joining us today. So, that was Mr. Varma, the CEO and Executive Director
13:42of MapMyIndia. Well, today, we are going to talk to a very interesting management of Tega Industries.
13:49Tega Industries came out with its Q1 FI25 earnings, where revenue saw an uptick of roughly 27%,
13:55EBITDA was up around 63%, margins improved from 14.7% to 18.9%, and overall net profit improved
14:05by 72% YOY. Now, to discuss as to how the quarter has gone by and what FI25 looks like for the
14:12company, we're joined by Mehul Mohanka, Managing Director and Group CEO of Tega Industries. Welcome
14:18to the show, Mr. Mohanka. My first question to you is that the kind of revenue and margin growth
14:24you've seen is, you know, on account of revenue growth due to spillover from last quarter and
14:30also your other income is on a higher note. So, I want to understand that how sustainable this is
14:36in the next three quarters for FI25. Yeah, good morning. Thank you for having me on the show.
14:43So, as you rightly said, we had in our Q4 earnings call already mentioned the fact that we had some
14:48revenue spillover from Q4, which we were expecting to monetize in Q1, and a large part of that has
14:55played out. So, when we talk about, you know, almost close to a 27% growth in year-on-year
15:03for the quarter, that needs to be normalized for the spillover that we experienced from Q4 into Q1.
15:09So, we would still say steady state growth levels would be closer to about 15%
15:15as we've always guided the markets. Mr. Mohanka, hi. You have mentioned that you
15:22want to maintain a 15% of a growth guidance going forward, but, you know, there was an
15:26interesting point that was mentioned in the conference call about the significant growth
15:31that you're seeing beyond FI25. Can you expand more on that space? Where are you looking the
15:35growth levers coming in from? So, we've got some additional capacity coming through in the next
15:42year. As we mentioned that in around June 25, we're expecting our Chilean plant to be completely
15:48operational. And that would bring additional capacity, which will help us monetize some of it
15:54in the next financial year, moving on to the next few years from there on. So, that's something that
16:01will help us lever up our growth estimates going forward. Okay. So, Mr. Mohanka, then I want to
16:07understand, let's say from a long-term perspective for two years, what is the kind of capex that
16:12you're planning? And, you know, in your call, you've mentioned that your capacity utilizations
16:17are approximately 65%. So, where will these utilizations be at by the end of FI25 and also
16:24by the end of FI26? So, I mean, as you know, we've got the new capacity coming up in Chile,
16:31which is estimated to be around $30 million of spend for us. And we recently announced further
16:38expansion in our plant in the Hagen in India. So, that's going to come at a tune of about 30
16:44crores phased over two years. And that's the capex outlay for us over the next, I would say,
16:50two years from here on. And yes, we do operate at about 65% capacity utilization. And we see that
16:57holding steady at about 65% to 70% going forward, because as you know, I mean, quarter on quarter,
17:03we do, you know, hit certain peaks in our revenues, which is difficult to predict and plan
17:10for. So, we always keep some headroom to take care of these peaks that we experience during the
17:15quarter. So, that's an ideal level where we try and maintain our capacity utilization at.
17:21Okay, that's a fair level to look at. But now, what is the revenue potential that we are looking
17:26from this Chilean plant that you've mentioned? And also, are we looking at any funding requirements
17:30for the capex plants that you've outlined? So, Chile at full capacity would give us an
17:37incremental revenue of about 800 crores going forward. And the capacity expansion is largely
17:45being funded internally through internal accruals and some debt. That's how we're funding
17:49the capex. And the 30 crores that we plan to spend in India is primarily through internal accruals.
17:56And Mr. Mohanka, so, you know, with respect to your order book, if I also add the NMDC order,
18:04it's roughly around 650 crores. I want to understand that what will be the execution
18:09timelines for this entire 650 crore order book? So, you look at, say, if I leave alone the NMDC
18:18order and I leave the European contract that we have currently in execution, our total order book
18:25is roughly at about 560 crores as of June 24. And the NMDC order is going to be executed over a
18:33period of about 26 months. That's as per contract. And the European contract runs for the next six
18:40years. So, the 560 crores order book that we have ex-NMDC and the European contract will be monetized
18:48during this financial year itself. Okay. So, 26 months for the NMDC order that we are looking at.
18:55But now onto the integration of the Tega McNally plant. What's the status here? How's the progress
19:00going on on this front? And again, last year, if you see the incremental margins that we have
19:04looked at 5% to 10%, what's the outlook in terms of margins? What are more synergies that we are
19:10looking at going forward for this one? So, the McNally Saagi business is integrating well. As
19:17you know, we've renamed the company into Tega McNally Minerals now. And it's on track. We
19:23continue to be very, very bullish about our growth plans with the equipment business.
19:31We've again mentioned in my on-team forums that we're looking at a 15% growth in the OEM business
19:37as well. And last year, we ended at about 10% EBITDA levels. We're expecting it to be
19:44in about 200 to 300 basis points above that in this fiscal year. Got it. Mr. Mohankar,
19:50so I want to understand that since you said that you're targeting a 15% growth in your OEM and
19:55also you're very bullish with respect to your equipment business. Right now, the share of
19:59equipments to the total revenue is roughly 11%. And in terms of margins, I want to understand that
20:07when it comes to the consumables business, it's around 20% to 22%. But for equipment, it is
20:13roughly 10% to 11% and plus the growth that you've guided. So, I want to understand that then where
20:19will the blended margins be at overall? So, the blended margins will be roughly at about 21% to
20:2622%. And the margin profiles of the two segments are completely different. So, in the consumables
20:32business, the margin levels are higher. And the equipment business, it's a bit moderated given
20:36the fact that it's more capital equipment intensive. So, at a blended level, we're still
20:42looking at about a 21% EBITDA margin overall. Okay. And coming to the outlook on two of the
20:51sectors they have, you've mentioned that 70 or 5% of your business comes from the copper and gold
20:55minors. What's the outlook on these industries going forward? Are we looking at a 2.2% of
21:01compared to the 2.2% growth that we saw the coppers? So, the metal markets are growing at about
21:072.5% to 3%. But our business, as you know, is growing at about 15% if I look at annualized
21:12return. And that's primarily happening because of multiple reasons. It's market expansion,
21:18it's conversion, new products that we're putting out in the market. So, we feel that our growth
21:25rates will always be higher than the industry average or the growth rates of the metal industry,
21:31be it gold or copper. So, and gold and coppers are in a good place as of now and we feel that
21:37it's going to be sustainable going forward. You know, I want to understand in terms of,
21:42you know, your geographical expansion, Mr. Mohankar, that are you planning to explore
21:48any new geographies by the end of FY25? So, currently, we have our hands pretty much full.
21:55We ship to almost 96 countries today globally. And we have a physical presence in about 18 of
22:01them. And we continue to explore new markets, but more in and around where we're already
22:07based out of. So, we don't see any significant addition to any geographical territories that
22:14we have on board, but we continue to press ahead in the markets that we're already present in.
22:19Got it. Well, Mr. Mohankar, thank you so much for giving us those insights on Tega Industries and
22:24all the best for FY25. But with that, it's all that we have on the show for now. Keep watching
22:30NDTV Profit for more news and updates.