CE Info Systems Ltd Q2 FY2023 Concall Summary

Key Takeaways

• Revenue hit an all-time high, but PAT lagged: Q2 FY23 revenue reached INR 76 crores, up 35% YoY, while PAT grew only 8% to INR 50 crores because of lower other income and a higher tax rate.
• Gtropy acquisition is compressing margins by design: Consolidated EBITDA margin was 42.8% vs 50% for the core business, as Gtropy's device-led sales model front-loads lower-margin hardware revenue before high-margin SaaS kicks in.
• Management drew a hard line on profitability: The company committed to a 40% to 45% EBITDA range and will block device-only sales at Gtropy if they threaten that fiscal discipline.
• Order book and new OEM wins are building, but specifics were withheld: A top-four OEM was added and Gtropy brought in cement and dairy customers, yet management declined to quantify the new OEM's size or disclose H1 order bookings, calling those year-end disclosures.
• What to watch next quarter: Whether Gtropy's SaaS revenue begins to layer in and lift consolidated margins, the go-live timing of the new OEM win, and any quantification of the government and ULIP revenue pipeline.

Gtropy Acquisition & Margin Dynamics

• Acquisition framed as organic growth: Management explicitly stated Gtropy is "not an inorganic acquisition" but part of organic growth, so all consolidated financials should be read as organic.
• Device-sale margin drag: Gtropy's IoT-led model compresses initial margins because device sales carry lower profitability; SaaS revenue builds with a six-month lag and then delivers high EBITDA through operating leverage.
• Core business profitability remains strong: Excluding Gtropy, the core business generated EBITDA of 50% and PAT margin of 37%, demonstrating the base business's cash generation power.
• Gtropy revenue doubled QoQ: The business doubled in Q2 vs Q1, partly because MapmyIndia's existing IoT revenue was combined with it, giving Gtropy a base benefit.
• Margin recovery timeline is wide: Management expects Gtropy to reach EBITDA levels similar to the core business in a timeframe of six months to two to three years, and it is structurally bound to have slightly lower profitability than the core.
• Fiscal discipline is non-negotiable: If Gtropy's device-only sales threaten the 40% to 45% consolidated EBITDA range, management may block those sales.

Rakesh Verma: "If I can just say further, in the lighter vein, if we find that our fiscal discipline is not maintainable within that range of what I said in the morning, 40% to 45% because Gtropy grows and wants to sell devices only, probably we may have blocked that device kind of a sale."

Revenue Growth & Segment Performance

• A&M grew 45% in H1: Automotive & Mobility revenue growth was strong, roughly tracking passenger vehicle market growth of ~40%, and management expects continued sales momentum through the rest of the year.
• C&E grew 29% in H1 with lumpy booking: Consumer & Enterprise revenue can be lumpy quarter-to-quarter because it is a function of order book and go-live timing; management sees broad-based growth across consumer tech, traditional enterprises, and public sector.
• Platform & IoT surged 49% in H1: Growth was driven partly by the newly acquired Gtropy business, which doubled QoQ, and overall IoT revenue accelerated quickly in the first six months.
• Marketing expenses doubled QoQ: Sales and promotional spend was accelerated to build awareness of MapmyIndia and Mappls brands, staying within internally budgeted ranges calibrated to revenue and EBITDA targets.
• Product investment weighed on near-term margins: Investments in RealView and Metaverse 3D maps, described as next-generation maps beyond 2D, impacted near-term profitability but are expected to drive new customer acquisition and use cases.

Rohan Verma: "Our revenue every quarter is a function of our order book. So revenue, like we have said, in C&E especially can be a bit lumpy. So you have to look at what the order book that we have and when the go-lives of such solutions happen and then the revenues start kicking in."

Customer Wins & Strategic Investments

• New top-four OEM added: A new OEM in the top four was signed and is expected to go live in the next six months; management declined to provide specifics on size until the OEM launches.
• Gtropy brought new enterprise customers: Customers from cement, dairy, and other organizations entered MapmyIndia's fold through the acquisition, expanding the addressable base.
• Kogo investment opens B2C and travel commerce: A INR 10 crore investment for a 26% stake in Kogo, a gamified social travel commerce platform, adds capabilities OEM customers want for next-gen connected navigation and opens direct-to-consumer subscription opportunities.
• Government partnerships are deepening: Mappls is now the de facto official Swadeshi maps app for Uttar Pradesh Police, addressing 26 crore citizens, and the company is working with the Delhi Government on EV charge station site selection using geospatial analytics.
• ULIP embedding is strategic but revenue is premature: MapmyIndia is deeply embedded in the Unified Logistics Interface Platform as the Map APIs, but management declined to quantify revenue potential until the government finalizes policies and revenue models, as ULIP is still in beta.
• EV two-wheeler traction is building: The majority of EV two-wheeler OEMs are evaluating NCASE, and more have signed up with go-lives expected soon.

Rohan Verma: "We don't want to comment on the specific revenue opportunity till the government comes out with its specific policies and transactions and revenue models around ULIP. ULIP is still in beta phase. So I think it's a bit premature for us to talk about revenue, specifically that will come from it to us, but it's good that we are deeply embedded in the platform as the Map APIs."

Order Book & Revenue Visibility

• Order book started the year at INR 699 crores: Revenue is the outcome of working through that open order book plus new sales and new order wins, with the large majority of volume-based orders coming from automotive OEMs.
• Management withheld H1 order bookings: New order bookings and total order book as of H1 were not disclosed, with management calling it a year-end disclosure because order bookings can get bunched up.
• Fixed-price vs volume-based split: Fixed-price orders normally come from C&E and are use-case driven, while auto OEM business is mostly volume-based; API transactions are also volume-based but a smaller portion.
• Annual view preferred over quarterly: Management reiterated that performance should be seen on an annual or year-to-date basis, not quarterly, given the MaaS/PaaS/SaaS licensing and consumption model.
• Revenue doubling trajectory is open-ended: When asked whether revenue can double to INR 500-550 crore in 3-4 years, management said they operate within certain metrics and would strive for those metrics whether at INR 400 crore, INR 500 crore, or INR 600 crore revenue.

International, Consumer & Long-Term Optionality

• International presence is being built: Offices have been set up in Korea, APAC, the US, and the Middle East; management expects international results to unfold in the next one to three years and frames this as optionality beyond the core India B2B/B2B2C business.
• Consumer app is a 2-3 year growth engine: Management is keen on the Mappls consumer app as an additional growth engine, referencing the CCI judgment against Google on Android preloading as something interesting to track for indigenous apps.
• Advertising model is not ruled out but privacy-first: Management has not been in the advertising business but does not want to preclude it for the long term; they are strong proponents of user privacy and are not fans of the Google ad-targeting or mining route, believing it is getting tracked down upon.
• Map update cost efficiency is a structural advantage: MapmyIndia uses a network effect of data collection (tracking devices, API transactions, AI on 400 crore+ geotagged photos, panoramas, and videos) plus a fixed-cost team, making it more technology-oriented and cost-efficient than global peers who struggled with cost structure.

Rohan Verma: "We don't believe in this ad user targeting and mining, that's the Google route, which we are not a fan of. And we believe that it is getting tracked down upon."

Guidance & Commitments

Key Metrics