CE Info Systems Ltd Q4 FY2023 Concall Summary

Key Takeaways

• 41% revenue growth, broad-based: Revenue hit INR282 crores, with C&E up 48% and A&M up 34%; the automotive business outpaced industry growth by more than 2x.
• IoT turned profitable in year one: The hardware-led IoT business reached 4% EBITDA margin in Q4 as SaaS revenue began to layer in, validating the model of upfront device cost followed by recurring subscription income.
• Open order book swelled 31% to INR918 crores: New order bookings of INR512 crores underpin management’s confidence, though subscription and transaction-based customer wins often bypass the disclosed order book.
• Profit growth lagged revenue growth: PAT rose only 23–24% against 40% revenue growth, as the higher-margin Map-led business grew slower while lower-margin IoT contributed more; management acknowledged the concern but gave no timeline for alignment.
• What to watch next quarter: Whether the 40% revenue growth guidance for FY24 materializes across both segments, the pace of IoT margin expansion as the SaaS base compounds, and any sign that profit growth is catching up to revenue growth.

Revenue Performance & Segment Dynamics

• C&E segment surged 48%: 250+ customers were added, though not all acquisitions reflect in the open order book because many deals are subscription or transaction-based without contractual volume commitments.
• A&M segment grew 34% annually: Q4 YoY appeared weak at 2% only because Q4 FY22 was artificially inflated by a semiconductor shortage in Q3 FY22 that pushed revenue into the subsequent quarter; management urged investors to analyze annual trends, not sequential quarters.
• Automotive attach rate has long runway: India’s attach rate for connected services is 9–10%, with MapmyIndia holding the majority share, versus 50–60% in developed markets like Korea and the US; upselling ADAS and connected services provides additional headroom.
• Quarterly volatility is structural: Q4 is seasonally weak for Automotive, and the IoT business model creates lumpiness because hardware cost is recognized upfront while SaaS revenue kicks in six to twelve months later.
• Customer concentration is improving: 54 customers now form 80% of revenue, up from 35 and 25 in prior years, demonstrating broadening diversification.

Rohan Verma: "In international markets like Korea or US or wherever, the attach rate of this category of stuff is like 50%, 60%. In India, we ourselves are at 9%. So, you can see, and we are the majority of the market. So, you can see, what our upside can be."

IoT Business Model & Economics

• Hardware-led, SaaS-fueled: Devices are either sold (with SaaS bundled free for one year, then charged) or rented (SaaS starts immediately, device recorded as a fixed asset); in both cases, the upfront hardware cost depresses near-term margins while building a recurring revenue base.
• 1.9 lakh devices sold in FY23: Volume more than tripled year-on-year, driven by a large addressable market of 20–30 crore vehicles; the acquihire of Gtropy (INR13 crores, 125 people) added management bandwidth to scale.
• Margins are a function of growth ambition: EBITDA margin improved from 1% in the first nine months to 4% in Q4 as past device deployments began generating SaaS revenue; management calibrates IoT growth with fiscal guardrails, choosing to balance growth with margins rather than pursuing maximum expansion.
• Churn rate undisclosed: Management declined to provide a specific churn rate for the IoT business when an analyst estimated 15–20%, calling it a number they did not want to comment on.
• Gtropy integration deliberate and successful: The 15-month integration was methodical, with the CEO personally focused on enabling it; moving IoT hardware operations to Gtropy freed management bandwidth at the parent, and the unit has been turned around as planned within the first year.

Rakesh Verma: "If I give the hardware today, the cost comes today, definitely, but the SaaS kicks in maybe six months later, a year later. And then for the years to come you start, you have done two good things. One, you acquired a customer, whether the customer is a B2B or a customer is a consumer. And then you keep earning, reaping in the SaaS revenue from him for a long time to come."

Order Book & Revenue Visibility

• Open order book at INR918 crores: Grew 31% from INR699 crores, with INR512 crores in new order bookings; execution period spans 3–5 years, with roughly half of annual revenue coming from the open order book and half from new orders.
• Not all customer wins are captured: Subscription and transaction-based deals lack contractual volume commitments, so new customer acquisitions (250+ this year) often do not appear in the disclosed order book; revenue materializes as customers consume APIs and subscriptions.
• Order booking aspirations are “much higher” each year: Management expressed confidence in sustaining and growing the pace of new bookings, though no specific target was given.

Margins & Profitability

• EBITDA margin remained above 40%: Management is not optimizing for quarterly EBITDA, noting the company is already among the highest in its peer set; the priority is investing for growth while maintaining fiscal discipline.
• Profit growth lagged revenue growth: Revenue grew 40%, EBITDA 37%, but PAT only 23–24%; the delta stems from the high-margin Map-led business growing slower (standalone revenue up 28%) while the lower-margin IoT business contributed more to the mix.
• Employee cost leverage is structural: Employee cost as a percentage of revenue declined from 29% to 24% YoY; management expects it will not grow proportionately to revenue because the company is a product and platform business, not a services firm.
• Capex rose as devices shifted to rental model: Purchase of property and plant investments increased from INR4 crores to INR15 crores because some IoT devices are rented out on an opex model and recorded as fixed assets rather than sold upfront.
• Management acknowledged the profit growth concern: When pressed on when profit growth would sync with revenue growth (e.g., 30–35% vs 24%), the CFO said “Your point is well taken… we’ll also do some calculation to figure out” and “you have opened my eyes, so we’ll look into that,” but provided no timeline.

Rohan Verma: "I don't think we are optimizing for quarterly EBITDA. I think we are already one of the highest in the peer set of technology or otherwise also, 40% plus EBITDA margin, I'm not sure how many technology companies at least in the peer set."

New Initiatives & Strategic Bets

• Mappls Gadgets publicly launched in February: Had already been selling through distribution networks (retail outlets, car showrooms, accessory shops); management plans to expand visibility, reach, and sales significantly in FY24, with brand promotion and online marketing starting to kick in.
• Drone business incubation underway: Company has built full-stack capability (drone hardware, services, data analytics) both organically and through inorganic investment; already winning drone business in a fast-growing market.
• Consumer app gaining regulatory tailwind: The Competition Commission ruled against Google Maps’ preloading practices; management believes regulatory change plus increased brand visibility will have a positive knock-on effect on the Mappls App business.
• New EV platforms in pipeline: Multiple new EV platforms from large four-wheeler companies have started work and will go live next year; two-wheeler customers are also going live with solutions.

Rohan Verma: "I think anybody using Mappls App will say it is much better than Google Maps. The only thing was Google Maps went preloaded, but now the Competition Commission has also ruled against them, that regulatory change is going to happen plus by creating more brand and visibility for us, it will have a positive knock-on effect on our business."

Capital Efficiency & People

• Ex-cash ROCE at 122%: Only INR124 crores raised in company history; cash grew from INR381 crores to INR485 crores, providing ample dry powder for organic and inorganic growth.
• Attrition well-controlled at 16.9%: Headcount management remains stable as the company adds higher-skilled technical people and some sales staff.
• Operating leverage is a core thesis: As a product and platform company, employee costs will not grow proportionately to revenue; the business model inherently delivers margin expansion as revenue scales.

Rohan Verma: "It won't move proportionately to growth in revenue for sure, we are product and platform... it will obviously not grow as fast as the revenue and that's the operating leverage in the company."

Guidance & Commitments

Key Metrics