TATA ELXSI LIMITED

Company Indexing & Ranking

Equentis Scale

1 2 3 4 5
Below Avg. Avg. Good Very Good Excellent

Sr. Rating
Remarks
No. (Score)

Overall score 4.4

1 Financial Ratios Index 4.1
5yr Revenue CAGR of 17% & Forward 5yr revenue CAGR maintained at 18% 3.0
5yr EBDITA CAGR of 37% & Forward 5yr EBDITA CAGR of 18% accompanied by stable
3.0
margins
5yr PAT CAGR of 62% & Forward 5yr PAT CAGR of 18%; stable margins and zero interest
3.0
payment due to debt free status
RoCE – 48.4% in FY18 & Forward 5yr Average RoCE at 46%. FY23 ROCE expected to be at
5.0
40.7% due to continuous accumulation of cash on books
RoE – 32.5% in FY18 & Forward 5yr Average RoE of 31% 5.0
D/E –Debt free company with strong cash of Rs. 3.9 bn in hand position 5.0
Free Cash Flow Generation – Cumulative free cash flow of Rs. 5.3 bn generated over the past
5.0
5 years.

2 Management Pedigree Index 5.0

Ownership: Promoters stake at ~45% 5.0
Ownership: FIIs & DIIs: institutional holding of over 17%, credible names like LIC, Motilal
5.0
Oswal and JP Morgan
Promoter Shares Pledged: Nil 5.0
Key Management Profile 5.0
Track record towards Capital Discipline, Acquisitions, Capital Expansions 5.0

Track record towards Accounting Disclosures & Corporate Governance 5.0

Track record towards Business Risk Diversification & Mitigation 5.0

Track record towards Business Performance Guidance vs. Actual Performance 5.0

Rewarding & Protecting interests of Minority shareholders 5.0

Business foresight & Prudence – successful scale up of operations 5.0

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 TATA ELXSI LIMITED
Company Indexing & Ranking

Sr. Rating
Remarks
No. (Score)

3 Opportunity and Growth Index 4.6

Global Reach: A global enterprise with well-balanced geographical concentration; Revenue mix
5.0
FY18: ~30% USA, ~44% Europe and 26% RoW.
High growth potential in key thrust area: Embedded s/w development market is likely to grow
5.0
at 9% cagr over 2018 to 2023, while other ITES segments may see a notable slowdown
Strong domain focus with attractive growth opportunity: Operations divided amongst three
sector verticals - Automotive, Telecom & Broadcasting, and Healthcare. Opportunity to gain 5.0
higher client wallet share and forge deeper relations with the clients.
Inorganic growth on the cards: Over Rs. 3.9 bn cash in hand and generating avg. Rs. 1.0-2.2bn
4.0
free cash from operations every year, mgt. is scouting for a suitable acquisition target
Forging alliance: Over the years TELX has grown by forging meaningful partnerships and has
4.0
also jointly developed solutions to grow its revenue.

4 Stakeholder Satisfaction Index 4.3

WC days: Net working capital days has increased in the recent past from 50 days in FY13 to
5.0
current 68 days. We expect the company to maintain WC days at current level going forward.
Debt-servicing: zero debt company with strong cash position. 5.0
Minority Interests: Dividend payout average maintained around 34% over FY14-18; Issued
1:1 bonus shares in November 2017. Not taken any decision which is against the minority 5.0
interest
Employees: Some of the key management personnel have been with the firm for over a decade
5.0
or have worked with the Group companies in different capacities
Regulatory: There are no pending litigations or criminal cases against the company or any of
3.0
its promoters. The company has proper board-processes and compliance mechanism In-place.
Auditors: Nil auditor qualifications 3.0

5 Threat Management 4.1

Geographical risk: Balanced revenue mix helps the co. to mitigate any adverse impact due to
5.0
policy changes and upheavals in any specific region.
Concentration risk: De-risking by creating strong verticals - automotive forms 60% of total
revenue, while Telecom, Broadcasting and other segments together contribute 40%. Share of 5.0
Healthcare segment is low but has immense potential to contribute significantly in the future.
Technological redundancy: TELX continuously innovates to introduce new solutions in order
to enhance customer experience and create visible product differentiation for the client, 4.0
example- autonomous /driverless cars

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 TATA ELXSI LIMITED
Company Indexing & Ranking

Sr. Rating
Remarks
No. (Score)
Client concentration: Top client JLR contributed 20% to FY18 revenue down from 25% few
years ago. Contri from top 5 and Top 10 clients stand at 44% and 57% respectively. TELX is 4.0
targeting to increase the wallet share with existing clients to grow its revenue in the near term
Currency fluctuation: Partially covers currency risk but impact in case of wild fluctuations, in
3.0
Brexit like events, is however unavoidable.
Policy risk management: TELX exposed to policy and regulatory changes in the host countries,
4.0
including changes regarding visa issuance, policy regarding minimum local hires, etc.
Employee attrition: Current attrition rate of 12% in FY18, in line with industry trend. 4.0

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