Interview with Shashidhar SK, CFO of AXISCADES Technologies Ltd

31 Aug, 2023

10 min read

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We are poised to continue this upward trajectory in the upcoming quarters, leveraging our strengthened client base and fortified industry positioning, addresses Shashidhar SK, CFO of AXISCADES Technologies Ltd.

 

What were the contributing factors for the company's performance in Q1FY24? 

The Q1FY24 performance is a reflection of our well-calibrated strategy and operational efficiency. Our revenue surge of 17% YoY to Rs 213.6 crore is the outcome of the execution of diversification strategy and delivery across sectors. Revenue from the automotive vertical doubled, while the energy vertical grew by 25%. Our Aerospace business has continued its growth momentum and grew by 29% year-on-year. We attribute this success to a rigorous focus on cost optimisation measures, operating leverage and an uptick in defence production revenue. which played a pivotal role in increasing the EBITDA margin by 300bps YoY. 

 

Your Heavy Engineering division showed minimal growth over the past year. Could you elaborate on the drivers behind this performance and share your projections for its performance over the next several quarters? 

The marginal growth of our Heavy Engineering division in the past year was influenced by macro-economic factors. To invigorate this vertical, we're embracing a digital-first strategy by onboarding specialists in digital and analytics. This strategic move is expected to drive growth in FY24. Our proactive investment in digital competencies reinforces our commitment to adapt to changing landscapes. As we pivot toward digital solutions, we anticipate a revitalized performance trajectory for the Heavy Engineering division in the upcoming quarters. Our strategic focus on boosting digital revenue from the US market aligns with our vision for sustainable growth. With these efforts, we're confident that FY24 will usher in a phase of renewed growth and value creation in the Heavy Engineering business. 

 

How does the recent acquisition of add solution, GmbH, fit into the long-term objectives of the company?  

The acquisition of add solution GmbH strongly aligns with AXISCADES' long-term objectives. add solutions has really good capabilities in wiring harnesses as well as software testing and these are the areas, which are growing rapidly in the automotive space. Software testing is really the area that is growing because most of the investment in automotive is happening on ADAS, is happening on connectivity, on infotainment. They work with the world's largest R&D automotive player and we are hopeful that with the work that they do with this client, we can offshore some of this and therefore grow the pie. They also have supplier codes with other big automotive as well as Tier-1 companies in Germany, this will help us to put in a sales effort, build out capability, be more aggressive and grow the business with the other clients as well.   

We have new relationships with several automotive OEMs and some of the work that they do in Germany is cutting-edge. So, it is relevant across legacy OEMs as well as some of the new-age OEMs, who sort of operate in the EV space. We are positive that we will be able to take our enlarged automotive capabilities global. This strategic move provides a foothold in the automotive sector, enabling firm contracts with leading automotive OEMs. This also unlocks significant offshoring opportunities and the technology synergy which our partnership will create will allow us to deploy them across customers, verticals and geographies, thereby creating a multiplier effect in this sector  

 

The automotive sector experienced robust year-on-year growth of 128.5%. Could you elaborate on the drivers behind this impressive growth, and what are your expectations for the future growth trajectory of this vertical in the upcoming quarters? 

The strong year-on-year surge of 128.5% in our automotive sector is a result of multiple pivotal factors. The growth is fuelled by the expansion of our recently onboarded clients in this vertical, showcasing the resonance of our offerings in the market. We are poised to continue this upward trajectory in the upcoming quarters, leveraging our strengthened client base and fortified industry positioning, with the synergistic benefits of the add solution GmbH integration at the forefront of our growth journey. 

 

Can you shed some light on the company's debt reduction plans?  

Recently, the AXISCADES Technologies has concluded the refinancing of Rs 210 crore in long-term debt raised for the Mistral acquisition. The refinancing will reduce the interest cost significantly from Q2FY24. The company has a comfortable debt-equity mix with a strong balance sheet with a consolidated net worth standing at Rs 326 crore as of June 30, with sufficient cash generation to comfortably service our debt obligations and generate free cash flows for the enterprise.    

 

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