CE Info Systems Ltd Q3 FY2023 Concall Summary

Key Takeaways

• Strong quarter, broad-based growth: Revenue rose 56% YoY with EBITDA and PAT up 67% and 61% respectively, while both EBITDA and PAT margins expanded sequentially and year-on-year.
• IoT hardware mix masks future SaaS lift: High IoT device sales compress margins today, but the 9M FY23 SaaS subscription run-rate has already tripled year-on-year to ₹12.4 crores, signaling the recurring revenue build underway.
• C&E segment hits an inflection: Revenue reached ₹97 crores in 9M FY23, up 40% YoY, driven by a big-tech contract extension, new bank and fintech signings, and competitive displacements.
• The B2C opportunity is now a live option: Pro-competition rulings against Google by the CCI and Supreme Court have opened a path for the consumer app, though management is waiting for full implementation before committing to a go-to-market strategy.
• What to watch next quarter: Whether the consumer tech revenue lumpiness normalizes, the pace of IoT-to-SaaS conversion, and any dividend quantum set at the May board meeting.

Demand Environment & Segment Performance

• A&M outperformance: NCASE sales grew faster than the underlying automotive OEM volume, meaning the attach rate per vehicle continued to rise; a new 4-wheeler EV entrant, a large 2-wheeler OEM, and multiple 2-wheeler EV startups were all signed during the quarter.
• Auto seasonality: Q1 and Q3 are structurally lower than Q2 and Q4 because manufacturers build inventory for the festive season in Q2, so the sequential decline is a calendar effect, not a demand signal.
• C&E growth drivers: The 40% YoY expansion came from a mix of new client additions, higher volumes from existing clients, and a soft base in the prior-year Q3; management flagged that some contracts have deliveries concentrated in specific quarters, creating lumpiness beyond the base load.
• Consumer tech lumpiness: Quarterly revenue dipped below the ~₹30 crores average of the prior 7–8 quarters, but management attributed this entirely to timing shifts and pointed to the 9M YoY growth of 40% as the right trend to track.
• Mobility wins: Taxi-cab companies signed up for video telematics for cab safety, and high-value goods carriers adopted a combined fleet security solution bundling GPS, mobile DVRs, and electronic locks on the same vehicle.
• Government wins: Multiple Smart City and state government contracts were closed for drone data acquisition, enterprise GIS, command-and-control center integration, digital address systems, large-scale mapping, and ambulance monitoring for medical emergencies.

Rohan Verma: "The meaning of soft base was really that revenue is lumpy. Some of it may shifted one quarter here or there. That's why sometimes a quarter number might look weird."

IoT Business Model & Margin Dynamics

• Hardware today, SaaS tomorrow: High growth in the IoT segment compresses margins initially because device hardware carries lower gross margins, but each device deployed starts generating high-margin SaaS revenue roughly 12 months later.
• SaaS ramp is already visible: IoT-led SaaS subscription revenue reached ₹12.4 crores in 9M FY23, up from ₹4.1 crores in 9M FY22 and ₹6.5 crores in H1 FY23 alone, confirming the conversion curve is steepening.
• Operating leverage at work: Employee benefits expense is growing slower than revenue, providing operating leverage, while hardware-related material costs do not provide the same leverage, making the IoT mix shift a near-term margin headwind.
• Marketing calibration: Marketing expenses were deliberately reduced in Q3 after a heavier prior quarter, with management calibrating spend each quarter against both revenue growth and EBITDA goals; the prior quarter's spend generated benefits that were consumed this quarter.
• Nine-month milestone: Revenue of ₹209 crores and EBITDA of ₹88 crores for 9M FY23 have already surpassed the full prior-year figures of ₹200 crores and ₹86 crores respectively.

Rakesh Verma: "The high growth in IoT business compresses margins initially, as device hardware has lower margins, but starts creating high margin SaaS revenue in future, typically 12 months down the road."

C&E Segment: Wins & Competitive Momentum

• Big-tech renewal: A multi-year contract extension was signed with a large technology company, anchoring the base load for the segment.
• Financial services expansion: Two large banks and fintech companies signed up for workforce and workflow monitoring management automation solutions, a digital transformation platform play.
• Geospatial analytics adoption: A large F&B restaurant chain signed up for geospatial analytics to guide store expansion and planning, and an existing large marketing ad agency customer was upsold on a micro geo-demographic analytics dataset covering more cities.
• Competitive displacements: Multiple tech-enabled companies, including a used-car platform, a B2C meat and food delivery brand, and an enterprise CRM SaaS company, switched from competitors to MapmyIndia's APIs and SDKs.

B2C Strategy & The Google Ruling

• The regulatory opening: The Competition Commission of India issued an order in October against Google for anti-competitive activities, directing changes to its business practices; Google's appeals to NCLAT and the Supreme Court did not get relief, forcing changes pending appeal.
• Management's posture: The company wants to see all CCI directives implemented in full before committing to a B2C go-to-market strategy; for now, the core focus is ensuring the ecosystem opens up for consumer app alternatives, after which they will decide whom to partner with and how to proceed.
• Google's B2C dominance, not B2B2C: Management drew a distinction, noting Google is dominant in direct-to-consumer maps, not in the B2B2C segment where MapmyIndia operates, implying the ruling's impact is on a market the company could enter rather than one it already competes in.

Rohan Verma: "For now, core focus is to make sure the ecosystem opens up for consumer app alternatives."

Strategic Investments & Capital Allocation

• Indrones (drones): The board approved an investment of up to ₹7 crores for a 20% stake; drones are required for MapmyIndia's own mapping activities and are synergistic with the geospatial and IoT offering.
• Echargeup (EV energy and FinTech): Additional investment was made in this smart energy network and EV mobility financing company, which had received a small pre-IPO investment.
• Cusmac (AR/VR): Further investment was made in this immersive metaverse-based training and solutions company, also a pre-IPO investee.
• Dividend decision pending: A dividend will definitely be paid, but the quantum will be decided by the board at the May meeting, weighing three factors: cash needs for portfolio and strategic investments (Gtropy, KOGO, Indrones), additional investment opportunities in related areas, and normal business safety requirements.

Competitive Positioning & The Ola Question

• Ola relationship intact: Neither Bhavish Aggarwal nor Ola have communicated any intention to switch; the company has a contract and continues to work with them, and management noted that Ola's acquisition of a mapping company does not change the near-term reality.
• Barriers to entry: Management pushed back on the idea that maps are easy to build, stating they would like to see "the rubber meeting the road" on in-house navigation efforts, and emphasized the complexity involved.

Rakesh Verma: "As of now, neither Bhavish nor Ola have communicated anything to us. And we have a contract with them where we are working with them. So, they have acquired a mapping company. Let's see, let's watch out what happens as Rohan said, it's not that simple to make maps."

Guidance & Commitments

Key Metrics